Poverty

1. Poverty African Economic Development Renata Serra – Jan 25th 2007

2. What you need to know: • Poverty is multidimensional • Data collection methods • Household surveys • Participatory poverty assessments • Income poverty and poverty lines • Income vs. consumption data • Poverty measures • Headcount, poverty gap and squared poverty gap • Extent of poverty in Africa • Difference between poverty and inequality

3. The causes of poverty • Unfavorable history and geography • Low economic growth (the pie is small) • Lower provision of essential services • Low institutional capacity • Corruption and bad governance • Conflicts, epidemics (HIV/AIDS) • Biased external factors (uneven trade regimes, inappropriate trade relationships) • Etc… all these factors will be tackled in this course

4. Growth and poverty traps • Q: Why do some countries exhibit stagnant growth and persistent poverty while others race on ahead? • Convergence theories do not hold empirically: The gap between rich and poor have increased over time!! → endogeneity and self-reinforcing mechanisms → path-dependence of outcomes • A growth/poverty trap is any self-reinforcing mechanism which causes low growth or poverty to persist

5. The growth-investment-saving trap Threshold GDP p.c. Increasing Returns Need for ‘Big Push’ Investment

6. The technology-export-growth trap

7. The population trap

8. The environmental-population trap

9. The ‘vicious circle of poverty’ No collateral No production improvements Exclusion from credit

10. The nutrition-poverty trap

11. The vicious cycle of corruption

12. What solutions? • Path-dependence can be broken only by exogenous factors: • Government intervention • Massive domestic or foreign investment • Changes in institutions and policies • But are institutions and policies really exogenous??

13. Millenium Development Goals • Adopted at the Millenium Summit (Sept. 2000) • Eradicate extreme poverty and hunger • T1: Halve between 1990 and 2015 the proportion of people whose income is less than $1 a day • T2: Halve between 1990 and 2015 the proportion of people who suffer from hunger • Achieve universal primary education • T3: ensure that by 2015 children everywhere, boys and girls alike, will be able to complete a full course of primary schooling • Promote gender equality and empower women • T4: eliminate gender disparity in primary and secondary education by 2005, and in all levels of ed. not later than 2015 • Reduce child mortality • T5: reduce by 2/3 between 1990 and 2015 the IMR5

14. MDGs (cont’d) • Improve maternal health • T6: reduce by ¾ the maternal mortality ratio • Combat HIV/AIDS, and other diseases • T7: Have halted by 2015 and begun to reverse the spread of HIV/AIDS • T8: Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases • Ensure environmental sustainability • T9: Integrate principles of SD into country policies and programs and reverse the loss of environmental resources • T10: reverse by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation • T11: Have achieved by 2020 a significant improvement in the lives of at least 100 millions slum dwellers • Develop global partnership for development