Links Between Growth, Inequality, and Poverty: A Survey

By Valerie Cerra, Ruy Lama, Norman Loayza

March 12, 2021

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Valerie Cerra, Ruy Lama, and Norman Loayza. Links Between Growth, Inequality, and Poverty: A Survey, (USA: International Monetary Fund, 2021) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Is there a tradeoff between raising growth and reducing inequality and poverty? This paper reviews the theoretical and empirical literature on the complex links between growth, inequality, and poverty, with causation going in both directions. The evidence suggests that growth can be effective in reducing poverty, but its impact on inequality is ambiguous and depends on the underlying sources of growth. The impact of poverty and inequality on growth is likewise ambiguous, as several channels mediate the relationship. But most plausible mechanisms suggest that poverty and inequality reduce growth, at least in the long run. Policies play a role in shaping these relationships and those designed to improve equality of opportunity can simultaneously improve inclusiveness and growth.

Subject: Economic sectors, Financial crises, Income, Income distribution, Income inequality, National accounts, Poverty, Poverty reduction

Keywords: Economic Development, Family income, Global, Growth, Growth breeds poverty, Inclusive Growth, Income, Income Distribution, Income inequality, Inequality, Poverty, Poverty headcount ratio, Poverty ratio, Poverty reduction, Poverty-reducing effect, Public goods, Unbalanced growth

Publication Details

Pages:

54
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/068
Stock No:

WPIEA2021068
ISBN:

9781513572666
ISSN:

1018-5941

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