Economic Growth and Poverty Alleviation

4151 Words Nov 5th, 2013 17 Pages
Does Economic Growth lead to Poverty Alleviation? Please compare and contrast very briefly the experiences of China, India and Brazil. What lessons can an African country of your choice learn from these experiences?

INTRODUCTION

The last few decades witnessed a rapid economic growth in developing countries. However, over 88% of the 1.2 Billion world poor (Olinto et al, 2013) live in these countries. (Appendix: Table 1.1) This phenomenon poses the question if the recent growth has been pro-poor .

This essay argues that growth output alone is not sufficient for poverty alleviation; rather complementary measures and policies need to exist to create sustainable pro-poor growth.

The essay has been organized as follows: First,
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In the Lewis Theory (Todaro and Smith, 2011), surplus labour from the rural subsistence sector is gradually transferred to urban industrial sector for higher productivity. The rural-urban migration, in the long run, may result in urban unemployment, wage decrease, loss of agricultural productivity, debt accumulation, monopolization, lack of access to credit and insurance, and social exclusion. Amartya Sen (1999) described economic growth as a crucial means for expanding the substantive freedoms that people value. But in reality, in India, more than 270,000 farmers caught in a debt trap have committed suicide since 1995. (Shiva, 2013; Sainath 2013)

According to Gini index , global inequality is 0.7 points today (Milanovic, 2005) while it is between 4.5 – 4.7 for developing countries that saw a proliferation of economic activities in the recent past (Appendix: Figure 2.4 and 2.5)

The Kuznet’s curve , on the other hand, tells a different story about inequality. (Kuznets, 1955; Appendix: Figure 2.6). The inequality seen in developing countries is part of the development and will phase out as more growth is achieved. However, The Kuznets hypothesis has been one of the most debated issues in development economics. Banerjee et al (2006) explains the reasons for the drop in inequality in industrialized countries during the 20th century was not related to the optimistic trickle-down process advocated by Kuznets
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