Poverty and
Inequality
Lesson Objectives:
[Link] the basic concept of poverty.
[Link] the impact of inequality.
What is poverty?
Poverty is general
scarcity, death, or the
state of one who lacks a
certain amount of
material possessions or
money.
In development economocs, it is defined as
the inability to access resources to enjoy
minimal or acceptable standard of living.
At the subsistence level, means identifying
In boarder sense, means the inability to access the poor based mainly on a universallu
for a minimal or acceptable standrad of living. accepted benchmark of physiological,
evonomic and social requirements for
survival.
POVERTY
What is
inequality?
Economic inequality, also
known as income inequality
and wealth inequality, is the
difference found in various
measures of economic well-
being among individuals in a
group, among groups in a
population, or among
Poverty
Headcount Ratio Measures
Poverty Gap Ratio Income Gap Ratio
(HCR) (PGR)
PGR = (p - y)
(IGR)
HCR= q/n IGR = (p - y)
nm p.q
q = number of
individuals below poverty p= poverty line p= poverty line
line (p) y= each poor person’s q= below poverty line
income
n= total population
n = total number of This formula tells the
m= mean income
individuals or household total income needed to
in the population. remove poverty
This formula gives the
relative to the total
ratio of total income
This formula determines income of all poor if
transfer necessary to
the proportion of poor eliminate poverty to gross
they are all raised to
people in the population. national income or GNI. the point where they
escape poverty.
ECONOMIC INEQUALITY
Is the unequal distribution of income and opportunity
between different group in society. It is a concern in
almost all the countries around the world and often
people are trapped in poverty with little chance to
climb up the social ladder. But, being born into
poverty does not automatically mean you stay poor.
Education, at all levels, enchancing skills, and
training policies can be used alongside social
assistance programs to help people out of poverty
and to reduce inequality.
Extreme poverty is becoming more concentrated in
sub-saharan africa
Unlike most of the rest of the world, the total number of extremely poor
people in sub-saharan africa was home to 27 of the world's 28 poorest
countries and had more extremely poor people than in the rest of the world
combined. Nigeria is expected to pass india as the country with the most
people living in extreme poverty, if it hasn't already. While the average
poverty rate for other regions was below 13% as of 2015, it stood at about
41% in sub-saharan africa. According to poverty and sharec prosperity 2018,
the factors behind the higher levels of poverty in africa include the regions
slower growth rates, problems caused by conflict and weak institutions, and a
lack of success in channeling growth into poverty reduction.
In the table above, we report the results of the headcount ratio, the poverty gap
and the FGT for developing countries considered in this paper for the years 1992-
2010, using a poverty line of $1.25/day ($38/month), a value proposed by the
world bank to measure ADBI Working paper 468 Chotikapanich, griffiths, Rao, and
Karunarathne 12 extreme poverty.
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