Evan Hillebrand University of Kentucky Rome, 2009 1
Percent of world s people living below $1 a day absolute poverty line 120.0% 100.0% 80.0% 60.0% 40.0% Bourguignon/Morrisson Chen/Ravallion Hillebrand 20.0% 0.0% 1 1000 1500 1700 1820 1980 1992 2005 Rome, 2009 2
Poverty and Non-Poverty Headcounts 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Millions of people below $1 a day Millions of people above $1 a day Rome, 2009 3
Index number problem Purchasing power parity or not Household surveys or National Income Accounts Revisions to the data Rome, 2009 4
GDP per capita in 2005, in 2005 PPP dollars 7000 6000 5000 4000 3000 old estimate new estimate 2000 1000 0 China India Rome, 2009 5
2008 World Bank Estimates of Poverty Headcounts and Poverty Ratios 2500 2000 1500 1000 1896 million 42% 1377 21.3% Poverty Headcount (millions of people, in blue) Poverty headcount ratio in red 500 0 1981 1987 1993 1999 2005 My estimate for 2008: 1149 million, 17.2% Rome, 2009 6
Change in Poverty Headcount, 1981-2005, millions of people 400 200 0 200 China India Other Asia Sub Saharan Africa 400 600 800 See appendix table 1 for country details Rome, 2009 7
10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1.0% China India Other Asia Sub Saharan Africa Rome, 2009 8
China became more unequal. India apparently cut the share of national income going to consumption. Sub-Saharan Africa cut poverty by 74 million due to higher consumption rates and slightly more equitable distribution. World impact of growth four times the impact of Gini changes. (table 5) Rome, 2009 9
Huge rise in income gap in absolute terms GDP per capita, 2005 PPP dollars 40000 35000 30000 25000 20000 15000 OECD non OECD 10000 5000 0 1820 2008 Source: Maddison, revised and extended by author Rome, 2009 10
0.8 0.7 0.6 0.5 0.4 0.3 Bourguignon Morrisson (2002) Hillebrand (2009) 0.2 0.1 0 1820 1970 1980 1981 1987 1992 1993 1998 2002 2005 Rome, 2009 11
Huge drop in poverty ratios since 1820 Large drop in absolute poverty headcount and poverty ratios since 1981 Most early gains in OECD, later gains in China Most poverty reductions stem from economic growth Still, a huge number of very poor people World income inequality is huge Growing in absolute terms Maybe leveled off in Gini coefficient terms Rome, 2009 12
Mostly about forecasting growth Growth = f (L, K, technology, convergence) Technology = f (R&D, incentives, trade) Convergence = f (Washington Consensus ideas) Poverty = f (economic growth, sectoral shifts, distribution shifts) Rome, 2009 13
Strong technological change in OECD Strong catch-up growth in much of non-oecd High investment Improved governance for incentives Expanded trade and financial linkages Rising investment in human capital Better non-oecd growth than last 25 years 3.8% per capita vs. 2.8% (table 8) Rome, 2009 14
Millions of people with consumption less than $1.25 a day 1400 1200 1000 800 600 400 200 0 21.3% 13.3% 2.5% World China India Sub Saharan Africa 2005 2015 2050 (appendix table 2) Rome, 2009 15
Yes Poverty reduced tremendously Poverty headcount at $2.50 down 2 billion people World Gini down from 68.4 to 64.8 No its distribution neutral within country. Could do scenarios with favorable distribution changes But the theory and empirics are weak on how do this Pro-poor growth needs to take into account shifts in Consumption/GDP ratios too Rome, 2009 16
Same growth trajectory as last 25 years. No improvements in governance in lagging countries. Less favorable global economic environment. Global poverty still falls China and India Slow-growth regions worse off 2005, Markets First Africa the worst (see tables 10 and 11) Rome, 2009 17
Millions of people below $1.25 a day 1000 900 800 700 600 500 400 300 200 100 0 51.2% 11.7% 2005 Markets First 2050 Trend Scenario 2050 53.1% Huge increases in poverty from 2005: Congo DR, Cote d Ivoire, Madagascar Still reducing poverty: Mozambique, Ghana, Uganda (appendix table 3) Rome, 2009 18
Difference between OECD and non-oecd GDP per capita, in 2005 base year, PPP dollars 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2005 Market First 2050 Rome, 2009 19
China and India and other Asia slow down. Limits to Growth books agricultural collapse Market collapse Wallerstein or Rejection of market model Ian Bremer Rome, 2009 20
The free-market tide has now receded. In its place has come state capitalism, a system in which the state functions as the leading economic actor and uses markets primarily for political gain. Foreign Affairs, May/June 2009, pg 41 Rome, 2009 21
Scenarios, not forecasts, are appropriate for policy analysis. Economic history suggests market-oriented policies best for economic growth, and economic growth is best for poverty reduction. Theory and history more clear on how not to be on a high growth path than on how to get onto a high-growth path. Resource constraints and/or adverse policy choices could make even the Trend Scenario seem too optimistic. Rome, 2009 22