Inequality, Poverty and

Development

Chapter Five
“Development must be redefined as an attack on the chief
evils of the world today: malnutrition, disease, illiteracy,
slums, unemployment and inequality. Measured in
terms of aggregate growth rates, development has been
a great success. But, measured in terms of jobs, justice
and the elimination of poverty, it has been a failure or
only a partial success.”

PAUL P. STREETEN
 Introduction
• Fair distribution of income and wealth is one of the
concerns of development economics.

• Policy makers are worried about the distribution of

income for various reasons.
– Inequality is important because it has an impact other
economic features. For example,
• inequality in wealth and income might lead to reducing the
possibility of overall growth, such as, by increasing Violence and
Crime.
• If we reduce inequality in education and heath then the quality of
labor force may improve. This will increase productivity and growth.
• So, Development economics is interested not only how
much people earn, but how do people earn it and the
distribution of overall income.
 5.1 Income inequality and Development

There are basically two types of income distribution:

I. Personal (size) distribution of income

II. Functional distribution of income
I. The personal or size distributions of
income
• This simply deals with individual persons or households and
the total incomes they receive.

• The way in which that income was received is not considered.

• What matters is how much each earns irrespective of whether

the income was derived solely from employment or came also
from other sources such as interest, profits, rents, gifts or
inheritance.

• Moreover, the location (urban or rural) and occupational

sources of the income (e.g. agriculture manufacturing,
commerce, services) are neglected.
• Suppose the society is composed of ‘n’ number of
individuals indexed by I (where i=1,2,3,……,n).

• An income distribution is a description of how much

income Y is received by each individual

i:I(Y1,Y2,Y3……,Yn ).
There are four properties of measuring income inequality. These
are described as follows:

i. Anonymity principle: It says that from ethical point of view, it does

not matter who is earning the income .A situation Kebede earns x
and Abebe earns y is identical to a situation Abebe earns x and
Kebede earns y. formally, this means the income can be arranged so
that Y1<Y2<Y3<……<Yn.
ii. Population principle: It says that the duplication of the entire
population or income should not change the inequality. That is for
every distribution of I(Y1,Y2,Y3,….,Yn),I(Y1,Y2,Y3,….,Yn) =
I(SY1,SY2,SY3,….,SYn).
iii. Relative income principle: It says that relative income should matter
and the absolute level of this income should not.
iv. Dalton’s principle: It states that if one income distribution can be
achieved from another by constructing a sequence of regressive
transfer, then the former distribution must be more equal than the
latter.
 II. Functional distribution
• This one is sometimes referred to factor share
distribution of income.

• It explains the share of total national income that each

factor of production (land, labor and capital) receives.

• Instead of looking at individuals as separate entities, the

functional distribution inquiries into the percentage that
labor receives as a whole and compares this with the
percentages of total income distributed in the form of
rent, interest, and profit (i.e. the returns to land and
financial and physical capital).
 5.1.1 Measurement of Income Inequality

In development economics, income inequality can be

measured in various ways.

However, the most commonly used measures are the

– forty-twenty principle,
– the Lorenze curve and
– the Gini Coefficient
A. Forty-Twenty Principle
(Size Distribution of Personal Income)

Arranging all individuals by ascending personal

incomes and then divide the total population into
distinctive size or groups.

In this method, the common approach is to divide the

population into successive quintiles (fifths) or deciles
(tenths) according to ascending income levels and then
determine what proportion of the total national
income is received by each income group.
• This ratio is often used as a measure of the degree of
inequality between the two extremes

• Kuznets ratio – ratio of income received by top 20%

and income received by bottom 40%
 B. Lorenz curves

• Graphical representation of the Size Distribution of Personal

Income.

• Shows the actual quantitative relationship between the percentage

of income recipients and the percentage of total income they
received during a given year.

• With the percentage of income on the Y-axis and the percentage

of income recipients on the X-axis, the diagonal represents
perfect equality.

14
 Percentage of National Income

0
10
20
30
40
50
60
70
80
90
100
0
5.0
10 0
.0
15 0
.0
20 0
.0
25 0
.0
30 0
.0
35 0
.0
40 0
.0
45 0
.0
50 0
.0
55 0
.0
60 0
Lorenz Curve

.0
65 0
.0
70 0
.0
75 0
.0
80 0
.0

Percentage of Income Recipients

85 0
.0
90 0
.0
95 0
10 .00
0.0
0
15
 Lorenz curve

- If the Lorenz curve overlaps with the diagonal line, there is

perfect income equality.

- If the Lorenz curve overlaps with the bottom horizontal or

right vertical axis, the whole income is received by one
person.

- Because no country exhibits either perfect equality or

perfect inequality, the Lorenz curve will lie to the right of
the diagonal line.
16
The Further the Lorenz Curve is Away from the Diagonal, the
Greater the Degree of Inequality

17
 Gini Coefficient
• The Gini coefficient is calculated by taking the area between
the Lorenz curve and the diagonal and dividing it by the half-
square area in which the curve lies.

• So, a Gini coefficient of 0 would mean perfect equality, and a

coefficient of 1 would mean perfect inequality.

• Coefficients between 0.50 and 0.70 are considered to mean a

highly unequal distribution of income.

• Coefficients between 0.20 and 0.35 are considered to

represent relatively equitable distributions of income.

• Since we are dealing in percentage terms, we can compare

Gini coefficients across countries.
18
 5.1.2 Inequality And Economic Development

• Does economic growth by maximizing GNP tends to

improve, worsen, or have no necessary effect on the
distribution of income and the extent of poverty in
developing counties.

• An Economist called Simon Kuznets suggested that in

the early stages of economic growth, the
distribution of income will tend to worsen,
while at the better stage it will improve.

• His observation can be characterized by the inverted

”U” Kuznets curve.
• They almost always relate to the nature of structural change.

• Early growth may, in accordance with the Lewis model, be

concentrated in the modern industrial Sector, where
employment is limited but wages and productivity are high.

• The income gap between the modern and traditional sectors

may widen quickly at first before beginning to converge.
Inequality in the expanding modern sector may be much
greater than inequality in the stagnant traditional sector.

• Income transfers from the rich to the poor and poverty-

reducing public expenditures are more difficult to undertake
by governments in very low income countries.
Whether an economic growth benefits the country in
terms of reduction in inequality or not depends on the
nature of the development process.

This is to mean
– How economic growth is achieved
– Which sectors are given priority
– What institutional arrangements are designed and
emphasized, etc. Which determine the degree to which
that growth is or not reflected in improved living
standards for the very poor? Clearly, it is not the more
fact of rapid growth that determines that nature of its
distributional benefits.
• What you should take from the above discussion is
that there is a need to re-orient development
priorities.

• The re-orientation may be away from an exclusive

preoccupation with maximizing rates of GNP
growth and toward broader social objectives such as
the eradication of poverty and the reduction of
excessive income disparities.
5.1.3 INEQUALITY, SAVING, AND ECONOMIC GROWTH
The connection between inequality and income is given by the
relationship between inequality and saving rate:

there are two opposite critical arguments regarding the

relationship between saving and inequality.

1. The first view is that moderate or high inequality in income

distribution concentrates money in the hands of the people who
are willing to save, accumulate wealth, and invest this by
boosting economic growth.

This argument was used by some government not to have

redistribute income through taxation.
25
2. The second view in arguing that certain degree of
redistribution actually can enhance saving and push
up growth rate.

Which argument to follow depends on the relation

between marginal saving rate (MSR) and level of
income?

26
27
28
29
▪ If MS rate is increasing, reduction in inequality

reduces volume of saving in the economy.

▪ If MS rate is decreasing, reduction in inequality

increases volume of saving in the economy.

30
1. Saving in case of subsistence need:
At the foundation of our economic liver, our need is food, clothing
and shelter.

For developed countries those needs are often not a concern.

For millions of people in developing countries however such

considerations substantially dictate the current expenditure.

Although everyone would like to save for the future for many of
the people the need of present prevents from saving.

Therefore people may not be able to afford saving on the average

or at the margin.
→ Low saving and low marginal saving)

31
2. Conspicuous consumption:

At the other end of the spectrum are the ultra (extreme) rich
in developing countries.

This rich people are eager to reach the consumption level of

the world rich people and their consumption is pushed to a
higher level so the average saving rate of the ultra rich in
developing countries may be very low, and their propensity
to save out of the margin increases in income may be low as
well.

→ Low saving and low marginal saving

32
3. Aspiration and saving:(Heddle class)
These are groups of people who just get out of poverty but they are
yet at substantial distance away from the economic comfort
enjoyed by the very rich people.

Those people are the middle class and just poorer than that.

Those people are molded by the aspiration of a better economic

life. People in these groups are building their lives of their children
and their grand children.

Such individuals typically save large fraction of their income both

on average and at the margin.

→ High saving and high marginal saving

33
34
As individual income increases total saving is initially zero
or negative.

At some break even point turns positive and rise thereafter.

This is income zone where economic aspiration surely
maters.

Then we enter in a region of high income over which

saving continuous to rise but marginal saving rate starts to
decline. Because the aspiration effect wears thin.

35
1. In an extremely poor country:-
▪ redistribution policies may bring down the rate of saving and the rate
of growth in the medium and the long run redistribution brings down
the national saving rate.

▪ Without redistribution there is a fraction of population although small

who possess the desire and the mean to accumulate wealth.

▪ With redistribution no person saves anything of any significance. The

deprivation and inequality of poor societies can provoke equalitarian
policies.

▪ But this kind of policy might bring down the rate of saving and
consequently the rate of growth. 36
2. For medium income countries:-
the implication may be dramatically different.

Redistribution policies may generate saving at national level because it

creates a large and ambitious middle class with international aspiration.

Redistribution in this situation raise in the average saving rate.

Because the relatively low saving rate of the poor and the rich are
transformed in to the high saving of those with aspiration.

37
 5.2 MEASURES OF POVERTY

• Poverty is a clear indicator of underdevelopment.

• Most people might say removal of poverty is

fundamental way of economic development.

• We do have a number of approaches to assess the well

being of individuals.

• Some assess it based on some elementary achievements

such as being able to be adequately nourished or clothed
while others use capability of individuals.
• According to World Bank, Poverty has four dimensions.

These are:
• Lack of opportunity - is measured by appropriate
measure of income or consumption,

• Low capability - is low achievement in education

and health

• Vulnerability (exposure to risk or low level of

security) and –

• Powerlessness and Voicelesness (low level of

empowerment)
 MEASURE OF INCOME POVERTY ( LACK OF
OPPORTUNITY)

We use income or consumption as a measure of poverty.

In developing countries consumption expenditure measure
is preferred because:
a) people underreport income
b) consumption is a smooth version of income and a better
indication of wealth.

Poverty line:- is a level of consumption below which a person

is considered to be poor.
Poverty line is the cost of bundles of goods deemed sufficient
for a basic need. (able to buy 2200k cal / day/ adult and
essential non- food expenditure).
40
To estimate the poverty line,
▪ first we have to define a representative basket of goods and

▪ then determine the amount of each good in the basket in

such a way that the total amount gives 2200k/calorie.

▪ After determining the amount of each good in the basket, then value
using appropriate price (local price). This gives the food poverty line per
day. ( X. 365 = Y amount per year)

▪ To get the total poverty line ( food + non – food) divide the food poverty
line by the share of food expenditure on total expenditure.
▪ Example;- If food poverty line = 647 Birr &Food share (%age) = 68%

647
▪ Poverty line = = 954.5 41
0.68
▪ Absolute Poverty: the number of people living below the minimum level of
income needed to satisfy basic necessities.

▪ International Poverty Line: $1 a day or $2 a day in PPP dollars.

▪ Half of humanity lives on less than PPP $2 a

day.

▪ A fifth of humanity lives on less than PPP $1 a

day.

▪ Millennium development goal to lower this.

42
▪ Headcount Index
▪ Total Poverty Gap
▪ Foster-Greer-Thorbecke Measure (FGT)

43
N = Total Population
YP = Poverty line income
H = number of people whose income falls below YP

Headcount index is simply H/N.

▪ Note that in each country, a local absolute poverty line will

need to be calculated, taking into account a local basket of
good which would meet basic nutritional requirements, etc.

▪ The headcount index does not measure the extent to

which the poor lie below the poverty line.
44
CONT….

45
Measures the total income needed to raise everyone
who is below the poverty line to that line.

Yi = poor person’s income

N = Population size
H = poverty headcount

H
TPG =  (YP − Yi )
i =1
46
▪ On a per capita basis, the average poverty gap (APG) To allow for

cross-country comparison is simply TPG/N.

▪ the average poverty gap can be normalized by the poverty line

income to give the normalized poverty gap, which is equal to

APG/YP.- also called Poverty gap Ratio(PGR).

▪ This measures the average income gap of the poor from the

poverty line.

47
A poverty measure is said to be decomposable if the
poverty measure of a group is a weighted average of
the poverty measures of the individuals in the group.

An important property of decomposable poverty

measures is that, ceteris paribus, a reduction in the
poverty measure of a subgroup always decreases
poverty of the population as a whole.

The Headcount Index and AIS are both

decomposable but fail the transfer and monotonicity
axioms. 48
 
H
1  YP − Yi 
P( ) =   
i =1 N  YP 

where  represents the degree of aversion to

inequality.

49
▪ when  = 0, P0 = Head count Ratio.

▪  = 1, P1 = Poverty gap ratio

▪  = 2, P2 = Squared poverty gap (FTG index)

50
CONT……

Example:

▪ Village-A= four people with income ( 1,2,3,4,)

▪ Village-B= four people with income ( 2,2,2,4)

▪ Let Poverty line = 3.

▪ Then calculate P0, P1and P2.

51
 CONT….
▪ HCRA
q = 3 = 0.75andHCR B = 3 = 0.75
n 4 4

PGR A =
((3 − 1) + (3 − 2) + (3 − 3)
andPGR =
(3 − 2) + (3 − 2) + (3 − 2) 1
= = 0.25
3 B
3 4
4 4
3
3 = 1 = 0.25
4 4

1  (3 − 1) + (3 − 2) + (3 − 3)  1   1  1   1   
2 2 2 2 2 2

SPG A =  andSPGB =
 +  + 
4 3  4   3  3   3   
▪ = 0.14 = 0.08
There fore, poverty is sever in village A (0.14).
52
REGIONAL POVERTY INCIDENCE, 2004

53
POVERTY INCIDENCE IN SELECTED COUNTRIES

54
POVERTY INCIDENCE IN SELECTED
COUNTRIES (CONTINUED)

55
 SECOND DIMENSION OF POVERTY:
Education And Health

Education:
Education is an input in to the material wellbeing of a
society. It helps people to earn more income.

Education is not an input only but by itself it is an

achievement because it allows individual to
participate in decisions that determines the
wellbeing of his society and himself.

Hence literacy enrollment rate are taken as indicator

of wellbeing.

56
▪ Literacy rate: measured above 15 years. ( a person who
could read and write is literate).

▪ Net primary enrollment ratio

= Total number of enrollment in primary education (7-12yrs) ×100%
Total number of children ( 7-12yrs)

▪ Gross enrollment Ratio =

The number of students in primary & SEC.education x 100
Total number of children between ( 7-18)

57
▪ Health status of a household can be taken as an indicator of
wellbeing. In addition to struggling on improving their per
capita income, many people in developing countries fight a
constant battle against malnutrition, disease and ill health.

▪ The health status of individuals can be assessed by :

▪ infant mortality rate and under 5 mortality rate(both measured out
of 1000 live births)
▪ life expectancy.
▪ Anthropometry Measures- used to asses nutritional status at
individual and population level .

▪ A decline in an individual’s anthropometric index from one point in time

to another could indicate illness and /or nutritional deficiency. At
population level, similarly it indicates the prevalence of diseases and
malnutrition.

58
CONT….
▪ To construct an anthropometric indices we need
weight , height and age of individuals.
▪ There are three measures.

1)Stunting

2)Wasting Children <5

3)Body mass Index

59
Vulnerability And Risk:
▪ is the probability of an individual being exposed to
various shocks that makes him to be poor.

▪ Poor are more vulnerable to shocks- both micro and

macro shocks

▪ At micro level the most important risk that affects

the poor are the risk of illness, death , injury,
disability, harvest failure and unemployment.

▪ At meso (community) level vulnerability includes

deforestation, harvest failure, soil degradation,
natural calamities such as earth quake, flood and
civil war.
60
▪ At Macro level: flood, drought, inflation, balance of
payment problem, etc could be some of the risk.

These sources of vulnerability reduce the capacity of

households to get out of poverty.

While the micro level risks can be off set by actions at

house hold level, the macro level risks require a public
action.

61
 ourth Dimension
▪ refers to lack of voice, power and independence as well as
humiliation, shame, exploitation by institutions of the state
and the society.
▪ Poor people are dominated and not free
▪ The absence of rule of law, lack of protection against
violence, lack of civility and unpredictability of public
officials are some of the indicators of voicelesness.
▪ Voicelessness in general means being prevented from
involved in decision making that affects his life.
▪ The solution for voicelessness is empowering people.
▪ Empowerment is an active process which occurs at different
levels.
62
Multidimensional Poverty Index

The Multidimensional Poverty Index (MPI) was developed

in 2010 by Oxford Poverty & Human Development
Initiative and the United Nations Development
Programme and uses different factors to determine poverty
beyond income-based lists.

The MPI is an index of acute multidimensional poverty.

It reflects deprivations in very rudimentary services and core

human functioning for people across countries.

63
The MPI combines two key pieces of information to measure
acute poverty:
- the incidence of poverty, or the proportion of people
(within a given population) who experience multiple
deprivations, and
- the intensity of their deprivation - the average proportion
of (weighted) deprivations they experience.

▪ MPI = H * A
H: Percentage of people who are MPI poor (incidence of
poverty)
A: Average intensity of MPI poverty across the poor (%)
64
65
Ethiopia 2013- according to UNDP
▪ MPI = 0.564
▪ H=0. 873,
▪ A= 0.646

In Ethiopia , 87.3% of the country's population is MPI

poor (they are deprived in at least 33.33% of the
weighted indicators, by definition). Those who are MPI
poor suffer from deprivation in 64.6% of indicators, on
average.

66
▪ Poverty is associated with:
▪ larger family size,

▪ lack of ownership of assets,

▪ lack of education and nutrition.

This means it is very difficult to establish a causal

relation between these factors and poverty.
▪ Households who fall below poverty line tends to
have a larger family size. Poorer families often have
higher ratio of dependency. i.e. number of
dependent = high Family size
▪ Family size may be both a cause of poverty as well as
an effect. Poverty may actually feed on itself by
creating incentive to have large number of children.
67
68
▪ Poverty is highly correlated with the lack of ownership of
productive asset. In rural areas, poverty is related with
landlessness and, the amount of land and livestock is very
low. The poor also sell its labor outside its farm (causal
laborers)

▪ In urban areas, poverty also show the same mix of self

employment and wage labor, mainly the poor engaged in
informal sectors like petty trading, venders, shoe shining,
road side traders etc. casual wage employment, where
minimum wage rate do not apply.

69
▪ Poverty affects the access of the poor to various markets.
The ability to obtain credit, the ability to sell labor, to rent
in land is all affected by the level of poverty.
▪ Credit market

▪ Poor are unable to obtain loan that can be used to improve

their lives. The reason for this is that poor lacks the
collateral. Collateral helps to prevent unintentional default.
It also prevents intentional default.

▪ The incentive to repay for the poor is lower compared to the

rich. I.e. the marginal utility of money during the repayment
is high for the poor.
70
71
▪ Formal insurance companies do not provide full insurance
due to adverse selection and moral hazards.

▪ Under the conditions of poverty informal safety nets, works

better than formal insurance

▪ Informal safety net:-edir, labor sharing arrangements, ekub,

self help organization among neighbor etc.

▪ In developing countries formal insurance schemes are

relatively rare because the formal legal system is at low
level and limited power of verifying ability; it is difficult to
obtain formally verifiable account of incidents.
72
▪ There is a relationship between person’s nutrition
status and his capacity to do sustained work.

▪ This relationship creates a vicious circle of poverty

leads to under-nutrition and this leads to inability to
do sustained work leading to low income and low
income in turn leading to poverty.

73
74
 Economic Characteristics of Poverty
Groups
▪ Rural
Poverty
Rural poverty is usually deeper than urban.

◼Women and poverty

◼Ethnic minorities, indigenous populations, and

poverty

75
POVERTY: RURAL VERSUS URBAN

76
 5.3 Range Of Policy Options To Reduce Income
Inequality
We can identify four areas of intervention to reduce income
inequality in Developing countries.

1. Altering the functional distribution of income: Through

policies designed to change relative factor prices.

E.g. I) IF the price of labor is kept high because of strong labor

union or because of minimum wage legislation, government
can reduce the price of labor relative to capital through lower
wage in public sectors or public wage subsidies to employees

77
If price of capital in artificially low, below what supply &
demand indicator, through various policies (over valued
exchange rate, tax allowance subsidized interest rate).

So, if this price is corrected, the relative price of L will be

low. This creates a wage income for the currently unemployed
and underemployed workers.

This will reduce the income inequality.

▪ Avoid factor price distortions!

78
CONT….
2. Modifying the size distribution of income through
progressive distribution of the existing wealth.

In many LDCs high income inequality is associated with

unequal distribution of asset ownership such as land and
physical capital. - redistribute asset
. a) Land reform
b) To have public policy to promote wider access to
educational opportunities as a means of increasing income
earning potential of poor people. This policy must be
followed by more employment opportunities for educated
people
79
3. Reducing the size (personal) distribution of income at the
upper level through progressive income and wealth taxes.

Progressive taxes are aimed at redistribution.

- In LDCs we have regressive taxation in reality. == poor and

middle class peoples pay a larger proportion of their

income than rich. WHY?

80
4. Increasing the size distribution at the lower level
through direct transfer payment and public provision of
goods & services.

The direct provision of tax financed public consumption of

goods and services to the very poor is another important
instrument to reduce poverty

e.g. Public health protects in rural villages, school feeding

programs, provision of clean water & electrification of rural
areas & Employment generation schemes like food for work
program or provides the emergency for food aid to poor
areas.
81
What is pro-poor growth?
“…growth that leads to significant reductions in
(absolute) poverty”

The question is, “Should new growth benefit the poor

more, thus increasing their incomes and thus
reducing inequality, whilst the rest of society sees
little income improvement?”

This means that the incremental increase in the level

of income to the poor>incremental increase in the
level of income for all of society,

82
CONT….

(Yt − Y ) /(Yt − Yt −1 )  t −1
p p
t −1

▪ Where the numerator represents change in

income of the poor, the denominator is the

change in income of society and
represents the income share of the poor in
the last time period, t-1.

83
84
 Evidence of Pro-poor Growth?
White and Anderson (2001): find a negative relationship
between growth and income growth of the poor: i.e.
growth negatively effects the portion/share of income
the poorest of the population get.

Find that variations in the poor’s share of incremental

income (Dependent variable 1) is very large for growth
rates<4%..........some incremental shares are negative
and very large.

85
POLICIES FOR PRO-POOR GROWTH?

▪ Killick (2002) mentions a wish list that

would enhance pro-poor growth:
1. Land reform – NOT land grab.
2. Improved access by the poor to education and health
- public sector, or public-private partnership?
3. Micro-credit schemes targeted on the poor – charity
or public sector since is too risky for private sector to
invest in!
4. Adoption of labour intensive techniques in
production
5. Agricultural and rural development – very broad

88
6. Government expenditure on education and health -
public sector?

7. Avoidance of macroeconomic crises – external factors

that cannot be avoided, e.g. sustained food price
increases caused by emerging economies changing their
diet.

8. Investment in rural infrastructure – public sector, or

public-private partnership?

9. Labour-intensive industrialisation
89
According to World Bank:
For Agriculture:
▪ Investments in infrastructure to connect the poor, e.g.
telecommunications, roads, public transport.
▪ Strengthen property rights notably of women particularly
regarding land
▪ Create incentive frameworks that do NOT discriminate
against those economic activities the poor are already
undertaking
▪ Improve technology for food-producers so can protect
crop. Essential given urban food demand increases.
▪ Help poor households reduce and cope with risk which
could encourage greater risk with more high-yielding
crops – (Q). Are poor households risk-averse in gambling
when times are good and risk-taking when times are bad?
90
For Non-agricultural poor:
▪ Designing labour market rules and regulations that “balances
workers’ needs with employers’ needs”, – is an issue in many
Latin American countries where trade unions are strong, also the
case in South Africa.

▪ Access to secondary and girls’ education important for poor

households given the growing skill bias in non-agricultural
employment – “falling fertility rates and rising female labour
market participation is essential in a pro-poor growth strategy”

▪ Quality of investment climate (assumed to be determined by

macro and trade environment, as well as degree of labour market
regulation) determine quantity and quality of employment.

▪ Improved infrastructure for the poor.

91
▪ To sum up, the discussion of the economic lives of the poor
throws up three broad areas of study of micro-development
issues:

1. Design on anti-poverty programs. For the very

poor we need income support. The problem is
what is the mechanism for delivering it (to
prevent leakage, to make sure the non-poor
don't capture it, for example, make working a
condition for receiving transfers, as in the
National Employment Guarantee Scheme of
India)
92
2. Fixing market failure to enable the poor
greater access to markets, which will enable
them to pull themselves up from poverty.
(Microfinance, land reform, property rights
reform are candidate policies)

93
CONT….

3. Fixing government failure to improve public

service and infrastructure delivery to the poor.

▪ Should one involve NGOs?

▪ Should one have public private partnerships?

▪ Would decentralization improve the situation?

94
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