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The Poverty-Growth-Inequality Triangle

The Poverty-Growth-Inequality Triangle. Guanghua Wan Asian Development Bank. The Triangle. Inequality = f (growth, poverty ) => Kuznets hypothesis Poverty = f (growth, inequality) => the Datt-Ravallion decomposition (point 1)

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The Poverty-Growth-Inequality Triangle

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  1. The Poverty-Growth-Inequality Triangle Guanghua Wan Asian Development Bank

  2. The Triangle • Inequality = f (growth, poverty) => Kuznets hypothesis • Poverty = f (growth, inequality) => the Datt-Ravallion decomposition (point 1) • Growth = f (inequality, poverty) (point 2)

  3. Point 1: The Datt-Ravallion Decomposition • Useful, but not insightful enough => saying growth is good & inequality is bad for poverty reduction means little to policy makers • What growth and what to redistribute? physical capital, information, basic services, or …. • Wan (2008), Oxford University Press

  4. Point 2: Growth-Inequality Modeling • A serious and unsettled policy issue: does inequality hurt growth and in what time horizon? • A chicken-egg problem for policy makers => Simultaneous equations modeling • Time horizon (Wan et al, JCE 2006): Short-, Medium- and Long-run • What level of inequality is good???

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