Publication: How Much Does Reducing Inequality Matter for Global Poverty?
Date
2019-05
ISSN
Published
2019-05
Author(s)
Abstract
The goals of ending extreme poverty by
2030 and working toward a more equal distribution of income
are prominent in international development and agreed upon
in the United Nations' Sustainable Development Goals 1
and 10. Using data from 164 countries comprising 97 percent
of the world's population, this paper simulates a set
of scenarios for global poverty from 2018 to 2030 under
different assumptions about growth and inequality. This
allows for quantifying the interdependence of the poverty
and inequality goals. The paper uses different assumptions
about growth incidence curves to model changes in inequality
and relies on the Model-based Recursive Partitioning
machine-learning algorithm to model how growth in GDP is
passed through to growth as observed in household surveys.
When holding within-country inequality unchanged and letting
GDP per capita grow according to International Monetary Fund
forecasts, the simulations suggest that the number of
extreme poor (living below $1.90/day) will remain above 550
million in 2030, resulting in a global extreme poverty rate
of 6.5 percent. If the Gini index in each country decreases
by 1 percent per year, the global poverty rate could reduce
to around 5.4 percent in 2030, equivalent to 100 million
fewer people living in extreme poverty. Reducing each
country's Gini index by 1 percent per year has a larger
impact on global poverty than increasing each country's
annual growth 1 percentage point above the forecasts,
suggesting an important role for inequality on the path to
eliminating extreme poverty.
Citation
“Lakner, Christoph; Mahler, Daniel Gerszon; Negre, Mario; Prydz, Espen Beer. 2019. How Much Does Reducing Inequality Matter for Global Poverty?; How Much Does Reducing Inequality Matter for Global Poverty?. Policy Research Working Paper;No. 8869. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/31796 License: CC BY 3.0 IGO.”
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