Economics of Development: Poverty Analysis

Questions and Answers

Which region experienced the most significant reduction in the number of people living in absolute poverty from 1990 to 2012?

South Asia

East Asia and Pacific (correct)

Latin America and the Caribbean

Sub-Saharan Africa

What was the global poverty rate in 2012 at the poverty line of $1.90 per day?

18.8%

37.1%

7.2%

12.7% (correct)

As of 2012, which region had the highest poverty rate among its population?

Europe and Central Asia

East Asia and Pacific

Sub-Saharan Africa (correct)

South Asia

In which region did the poverty rate increase from 1990 to 2012?

Middle East and North Africa Signup and view all the answers

How many million people were living in absolute poverty in South Asia in 1990?

575 Signup and view all the answers

Which region had the least amount of absolute poverty in 1990?

Europe and Central Asia Signup and view all the answers

What was the percentage of the population living in poverty in Latin America and the Caribbean in 2012?

5.6% Signup and view all the answers

What was the change in the number of poor in Sub-Saharan Africa from 1990 to 2012?

Increase of 101 million Signup and view all the answers

Which region had the highest poverty gap percentage at $1.90 a day in 2012?

Sub-Saharan Africa Signup and view all the answers

What is the poverty gap percentage for low-income countries at $1.90 a day in 2012?

18.6% Signup and view all the answers

What is the Sustainable Development Poverty Reduction Target focused on?

Eliminating extreme poverty by 2030 Signup and view all the answers

According to the World Bank approach, what is one major aspect of promoting opportunity for the poor?

Increasing return on assets Signup and view all the answers

What measures does the World Bank suggest for enhancing security for the poor?

Providing insurance against economic shocks Signup and view all the answers

Which income group had the lowest poverty gap percentage at $1.90 a day in 2012?

Middle income Signup and view all the answers

Which region had the lowest poverty gap percentage at $1.90 a day in 2012?

Europe and Central Asia Signup and view all the answers

What factor is critical for determining the growth rate needed to meet the Sustainable Development Target?

Initial poverty rate and elasticity of poverty rate Signup and view all the answers

What is most associated with sustained growth in successful countries according to the World Bank Commission on Growth and Development?

High savings and investment rates Signup and view all the answers

Which theory emphasizes technological progress as a key factor for growth in developed countries?

Neoclassical growth model Signup and view all the answers

What is a defining characteristic of the Solow neoclassical growth model?

It treats factor supplies as exogenous. Signup and view all the answers

What aspect does the 'new' endogenous growth theory primarily address?

The reasons for differences in living standards across countries Signup and view all the answers

Which of the following is NOT a focus of the empirical studies using the production function?

Macroeconomic policy effectiveness Signup and view all the answers

What did Harrod contribute to the field of economic growth?

The foundational growth model in 1939 Signup and view all the answers

What is a primary concern of classical economists regarding growth?

There are varying degrees of optimism and pessimism about growth. Signup and view all the answers

What principle does the growth diagnostics approach focus on?

Identifying binding constraints on growth. Signup and view all the answers

What does the Neoclassical growth model suggest will happen in the long run according to the natural rate of growth?

Economies will converge on a natural rate of growth Signup and view all the answers

Which scenario would occur if capital grows faster than labor in the Neoclassical model?

The growth rate of capital will be lowered Signup and view all the answers

What is a key prediction of the Neoclassical growth model regarding per capita incomes across countries?

Diminishing returns to capital lead to convergence of incomes Signup and view all the answers

What does the production function approach primarily analyze in terms of economic growth?

The contribution of labour and capital inputs to growth Signup and view all the answers

What does early studies applying the production function to developed countries suggest about technical progress?

Technical progress is the most important factor explaining growth Signup and view all the answers

In studies of developing countries, which factor is found to be most important in explaining growth according to the production function?

Capital input Signup and view all the answers

What is the impact of adding growth-inducing variables to the production function?

It allows for measurement of elasticity and rate of return Signup and view all the answers

How does the Neoclassical growth model view the relationship of capital and labor in growth?

They substitute for each other, affecting long-term growth rates Signup and view all the answers

What condition must be met for per capita income (PCY) to rise if the population growth is at 2%?

g must exceed 2%. Signup and view all the answers

Which statement best describes the relationship between rapid population growth and poverty?

Poverty causes more children, which reduces income per head. Signup and view all the answers

What is one negative effect of countries relying heavily on primary commodities?

Balance of payments problems. Signup and view all the answers

Which factor contributes to slower growth in countries dependent on primary products?

Dutch disease due to overvalued exchange rates. Signup and view all the answers

What difficulty arises from rapid population growth in poor countries?

Environmental strain due to overcrowding. Signup and view all the answers

How does the net savings-investment ratio in China compare to other poor countries?

China's ratio exceeds 30%. Signup and view all the answers

What is a common trait of weak institutional structures in developing countries?

High levels of corruption. Signup and view all the answers

What aspect does Engel's Law refer to in the context of primary commodities?

Income elasticity of demand less than 1 for primary commodities. Signup and view all the answers

Study Notes

Global and Regional Poverty Data

Global poverty measured at $1.90 per day saw significant decreases from 1990 to 2012.
East Asia and Pacific reduced poor population from 996 million to 147 million, with poverty rate dropping from 60.6% to 7.2%.
Sub-Saharan Africa faced an increase in poor population from 288 million to 389 million, poverty rate rising from 56.8% to 42.7%.
South Asia reduced poverty rate from 50.6% to 18.8%, although the number of poor was still high at 309 million in 2012.

Poverty Gap Analysis

Poverty gap at $1.90/day in 2012 indicated significant disparities across regions:
- East Asia and Pacific had a poverty gap of 1.47%, while Sub-Saharan Africa faced a gap of 16.47%.
Low income countries experienced a poverty gap of 18.6%.
Lower middle-income countries maintained a poverty gap of 4.69%.

Sustainable Development Goals

Target to eliminate extreme poverty by 2030 hinges on growth rates aligned with initial poverty rates.
Growth rate exceeding 2% required if population grows at 2% to improve per capita income.

Tackling Grassroots Poverty

World Bank strategy emphasizes expanding assets for the poor to enhance returns.
Focuses on empowering poor through participation, eliminating discrimination, and ensuring accountability of institutions.
Calls for providing insurance against economic shocks and disasters.

Population Growth Challenges

Rapid population growth (>2% annually) predominantly occurs in poorer countries, leading to various socio-economic issues.
Young age distribution adds pressure to economies, affecting food supply, employment, and resource allocation.
Cycle of poverty perpetuated by high birth rates and limited resources for upbringing.

Commodity Dependency Issues

Countries reliant on primary commodities face long-term trade deterioration and macroeconomic instability.
Such economies often experience balance of payments problems and economic slowdowns, otherwise termed the "curse of natural resources."

Institutional Weakness

Weak institutional frameworks are central to underdevelopment and high unemployment rates.
Structural unemployment can arise if growth mechanisms fail to harmonize.

Neoclassical Growth Model Insights

Solow's neoclassical growth model suggests economies will eventually converge towards a natural growth rate.
Models predict faster capital growth allows for more capital-intensive technologies, whereas faster labor growth leads to more labor-intensive ones.
Convergence in per capita incomes expected as poorer nations grow faster due to higher marginal returns on capital.

Production Function and Growth Analysis

Neoclassical production function connects output with labor, capital, and technical progress, revealing contributions of various inputs to growth.
Studies differentiate developed from developing countries, highlighting capital's more significant role in developing scenarios.
World Bank emphasizes that lasting growth in successful countries correlates with high savings, investment, and effective policies.

Learning Outcomes

Understand classical economist perspectives on growth.
Familiarity with Harrod-Domar and Solow models.
Comprehend the use of production functions in analyzing growth factors.
Recognize causes for diverging living standards based on new growth theories.

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Description

Explore the variations in income levels and their impact on food security across different countries. This quiz will draw on key statistics from the Economics of Development chapter, focusing on absolute poverty and related data from 1990 to 2012.