Transcript The Poverty-Growth-Inequality Triangle

The Poverty-GrowthInequality Triangle
Guanghua Wan
Asian Development Bank
The Triangle
• Inequality = f (growth, poverty) => Kuznets
hypothesis
• Poverty = f (growth, inequality) => the DattRavallion decomposition
• Growth = f (inequality, poverty)
(point 1)
(point 2)
Point 1: The Datt-Ravallion Decomposition
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Useful, but not insightful enough =>
saying growth is good & inequality is bad
for poverty reduction means little to policy
makers
What growth and what to redistribute?
physical capital, information, basic
services, or ….
Wan (2008), Oxford University Press
Point 2: Growth-Inequality Modeling
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A serious and unsettled policy issue: does
inequality hurt growth and in what time
horizon?
A chicken-egg problem for policy makers
=> Simultaneous equations modeling
Time horizon (Wan et al, JCE 2006):
Short-, Medium- and Long-run
What level of inequality is good???