Lecture 2-2 Defining and Measuring Poverty

Lecture 2-2 Defining and Measuring Poverty - Lecture 2-2...

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Unformatted text preview: Lecture 2-2 Defining and Measuring Poverty Instructor: Dr. Jin Wang Feb 16 th , 2011 Poverty and Growth ¡ Some believe that Economic growth is the best way to reduce poverty, so by focusing on economic growth, we can eradicate poverty. ¡ Other argue the opposite, economic growth does not benefit the poor ¡ Who is right? Is Growth Good for the Poor? ¡ We need to start with some definitions... ¢ What is Growth? Growth of what? ¢ What is “good”? What is GDP and What is Growth? ¡ GDP is the market value of all final goods and services produced within a country in a given period of time . ¡ The GDP is measured in the National Account Statistics of all the countries. ¡ Economic growth is measured by the growth of the Gross Domestic Product (GDP), divided by the number of people, i.e. the growth of per capita GDP (inflation adjusted). An Example on GDP and Growth ¡ The expenditure method: ¢ where did those goods go? ¡ GDP= Consumption + Investment + Government Spending + (Exports - Imports) ¡ ¢ PGDP: GDP/population, i.e. Per capita GDP ¡ Next, we will use HK as an Example to calculate GDP and growth 1 1 − − − = t t t PGDP PGDP PGDP Growth Example: What is the GDP for HK? Source: http://www.censtatd.gov.hk/ What is the Growth Rate from 2008-2009? Source: http://www.censtatd.gov.hk/ What is “good”? ¡ Dollar and Kray (2002) find that Growth increase the income of the poor on average equi- proportionally to that of every one: ¢ when GDP per capita increase by 10%, the income of the poor increase by 10%. ¢ e.g. if GDP was 1000 dollar per capita, and the poor were getting on average 200 dollars per capita, if GDP increases to 1100 dollars, the income of the poor will increase to 220 dollars. Do the poor benefit from rises in income proportionally? Source: Dollar and Kray (2002) Do the poor benefit from growth proportionally? Source: Dollar and Kray (2002) Interpretation and Caution ¡ The fact that this is true on average does not mean that this is always the case: there are large variation from countries to countries, and period to period: ¢ To take India for example, growth did not lead to a significant reduction of poverty in the 1990s. ¢ The rapid expansions in high-tech industries is likely to disproportionately benefit the well-educated. ¢ Growth in agriculture on which most poor people depend has been less rapid. What is “good”? ¡ When GDP increases by 100 dollars, the Poor’s quality of life, access to services, does not necessarily increase. ¡ for example the rate of child mortality reduction was much lower in the 1990s than in the 1980s, despite the fact that (income) poverty reduction was more rapid in the 1990s than in the 1980s....
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This note was uploaded on 02/14/2012 for the course ISOM isom111111 taught by Professor Hong during the Spring '11 term at HKUST.

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Lecture 2-2 Defining and Measuring Poverty - Lecture 2-2...

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