Economic Development (Part 1) PDF

Economic development (Part 1) Contents 1. Understanding poverty 2. What is development? 3. Some development indicators. 4. The inequality problem. 5. Future projections. • 1. Understanding “poverty” Povery is a concept which is intuitively easy to understand and identify, but difficult to o...

Economic development (Part 1) Contents 1. Understanding poverty 2. What is development? 3. Some development indicators. 4. The inequality problem. 5. Future projections. • 1. Understanding “poverty” Povery is a concept which is intuitively easy to understand and identify, but difficult to operationalize, as it is multidimensional: 1. Material deprivation 2. Low standard of living 3. Cargando… Suffering from lack of resources (hunger, disease , thirst,... ) ….. Many possible approaches! 1. Understanding “poverty” “While there is world-wide agreement on poverty reduction as an overriding goal of development policy, there is little agreement on the definition of poverty.” 1. Understanding “poverty” Four commonly used approaches to the definition and measurement of poverty: • Monetary approach: a shortfall in consumption or income 1. Understanding “poverty” Four commonly used approaches to the definition and measurement of poverty: • • • • Monetary approach: a shortfall in consumption or income Capability approach approach (inspired by the work of Amartya Sen): the deprivation of a person’s capabilities to live the life they have reason to value Social exclusion approach: the ordinary They are all constructions of reality, exclusion involving from numerous judgements, patterns, customs and activities of society / alienation or which are often not transparent disenfranchisement of certain people within society Participatory approach : lack of opportunity to participate in decision making / having a voice in society 1. Understanding “poverty” Four commonly used approaches to the definition and measurement of poverty: • • • • Monetary approach: a shortfall in consumption or income Capability approach (inspired by the work of Amartya Sen): the deprivation of a person’s capabilities to live the life they have reason to value Social exclusion approach: exclusion from the ordinary patterns, customs and activities of society / alienation or disenfranchisement of certain people within society Participatory approach : lack of opportunity to participate in decision making / having a voice in society They are all constructions of reality, involving numerous judgements, which are often not transparent 1. Understanding “poverty” Four commonly used approaches to the definition and measurement of poverty: • • • • Monetary approach: a shortfall in consumption or income Capability approach (inspired by the work of Amartya Sen): the deprivation of a person’s capabilities to live the life they have reason to value Social exclusion approach: exclusion from the ordinary patterns, customs and activities of society / alienation or disenfranchisement of certain people within society _________ approach : lack of opportunity to participate in ____________________ / __________________ in society They are all constructions of reality, involving numerous judgements, which are often not transparent 1. Understanding “poverty” The different methods have different implications for _________, and also, to the extent that they point to Policy different people as being poor, for _________. targeting Empirical work in Peru and India shows that there is significant lack of overlap between the methods Hence, the definition of poverty does matter for poverty eradication strategies 1. Understanding “poverty” A first distinction: objective vs subjective • “Objective” poverty: • Absolute poverty: the situation where lack of resources prevents access to __________________ basic needs • Relative poverty: clear disadvantage with respect to the in society of __________________ poor reference comparision Cargando… - • Temporary vs. permanent poverty: key element is social __________________. mobility Not • “Subjective” poverty: poor poor mu permanent situation temporary paverty ↓ high social mobility • Subjective poverty refers to how the individual understands or perceives his own situation. • Influencing the needs that the person has, the resources available to him and the reality that surrounds him. 1. Understanding “poverty” A first distinction: objective vs subjective • • “Objective” poverty: • Absolute poverty: the situation where lack of resources prevents access to basic needs • Relative poverty: clear disadvantage with respect to the society of reference • Temporary vs. permanent poverty: key element is social mobility. “Subjective” poverty: • Subjective poverty refers to how the individual understands or perceives __________________. • Influencing the needs that the person has, the resources available to him and the reality that surrounds him. 1. Understanding “poverty” Other alternative: absolute vs relative poverty • • • Are used for developing countries. __________________ value of the resources required to maintain a minimum welfare, given in absolute terms: $ 2,15 a day (updated from $1,90 in Sept 2022), for example. • • • • Absolute poverty lines: Relative poverty lines: Are often used in developed countries. Monetary value defined with respect to a reference value: median of the distribution of household income (adjusted for household members ) In the European Union a person is considered to be poor if her income is below 60 % of the median. 1. Understanding “poverty” Other alternative: absolute vs relative poverty • • • Are used for developing countries. Monetary value of the resources required to maintain a minimum welfare, given in absolute terms: $ 1.90 a day, for example. • • • • Absolute poverty lines: Relative poverty lines: Are often used in developed countries. Monetary value defined with respect to a reference value: __________________ of the distribution of household income (adjusted for household members ) In the European Union a person is considered to be poor if her income is below 60 % of the median. 1. Understanding “poverty”: where do the poor live? https://ourworldindata.org/extreme-poverty 1. Understanding “poverty GNI per capita (current US$) and income thresholds, Log scale Source: World Bank 1. Understanding “poverty”: Which are the poor countries? • For the United Nations, the first quartile (the countries that occupy 25 % higher in the ranking) of HDI corresponds to the developed world. The rest are developing countries • LDCs: within this group, the UN separates the LDCs as «lowincome countries confronting severe structural impediments to sustainable development. They are highly vulnerable to economic and environmental shocks and have low levels of human assets” The LDC classification • • • Indicators used by the UN for the Least Developed Country list: GNI per capita HAI (human assets index) EVI (economic and environmental vulnerability index) CDP: Committe for Development Policy DESA: Department of Economic and Social Affairs UNCTAD: UN Conference on Trade and Development The LDC classification • • • Indicators used by the UN for the Least Developed Country list: GNI per capita HAI (human assets index) EVI (economic and environmental vulnerability index) The LDC classification • • • Indicators used by the UN for the Least Developed Country list: GNI per capita HAI (human assets index) EVI (economic and environmental vulnerability index) The LDC classification • • • Indicators used by the UN for the Least Developed Country list: GNI per capita HAI (human assets index) EVI (economic and environmental vulnerability index) 1. Understanding “poverty”: which are the poor countries? • • For the World Bank , countries are classified according to gross national income (or GNI, previously GNP) per capita. These thresholds are reviewed every year to account for inflation Classification 2013 2021 Low income <$1.035 <$1046 Lower middle income $1,036 to $4,085 $1046 to $4,095 Upper middle income $4,086 to $12,615 $4,095 to $12,697 High income >$12,615 > $12,697 In the latest update (July 2021) only 3 countries changed categories (Takijistan and Haiti went from lower-middle to low and Moldova from upper.middle income to lower-middle income) Source: The World Bank, 2013 and The World Bank 2021. • Some countries change categories in every update. In the latest one, (June 2024) because of Covid recovery, virtually every change meant moving up https://blogs.worldbank.org/opendata/new-world-bank-group-country-classifications-income-levelfy24#:~:text=The%20World%20Bank%20Group%20assigns,of%20the%20previous%20calendar%20year. Sustainable development goals Sustainable development calls for concerted efforts towards building an inclusive, sustainable and resilient future for people and planet. Economic growth, social inclusion and environmental protection are interconnected and all are crucial for the well-being of individuals and societies. Eradicating poverty in all its forms and dimensions is an indispensable requirement for sustainable development. Sustainable development goals We need to promote sustainable, inclusive and equitable economic growth. We need to create greater opportunities for all, reducing inequalities, raising basic standards of living, fostering equitable social development and inclusion, We need to promote integrated and sustainable management of natural resources and ecosystems. A brief history 1972, Stockholm: UN Conference on the Human Environment - Environmental problems are part of global affairs - 1972: Club of Rome: limits to growth GDP growth is not enough - 1980: World Conservation Strategy: Living Resource Conservation for Sustainable Development (Union for the Conservation of Nature) The term sustainable development is created - 1987: Brundtland report (Our common future) Sustainable development: needs of the present and future -revolucionary without compromising of the life future 1992: UN Conference on Environment and Development (Rio de Janeiro) - Agenda 21: a plan for countries to work together for sustainable development A brief history - 2000: Millenium Declaration Millenium development goals (MDGs, 8 goals for 2015) - 2002: UN World Summit on Sustainable Development (Johannesburg) Known as the Earth Summit MDGs, holistic conception of the 3 aspects of sustainable development - 2012: United Nations Conference on Sustainable Development, Rio+20 Launch process to determine the SDGs Green economy policies: document “The future we want” - 2015: UN Sustainable Development Summit (Agenda 2030) Sustainable Development Goals (SDGs) 5 Ps: people, prosperity, planet, peace, partnership Integrated approach, beyond the environmental focus Sustainable development goals General, but applicable to all sectors Example: real estate SDGs for sustainable business SDGs can provide a common language and agenda for both public and private actors to collaborate, facilitating buy-in from stakeholders SDGs can provide clear goals, targets and measurements, & allow for performance monitoring - Allows sustainability to become part of branding and positioning - Attract investment - Provides rationale for specific, clear, mandatory disclosure of metrics - Allow to focus policy on sustainable issues (ex: tax incentives, regulations could be tied to SDGs) - Encourage data generation with a focus on sustainability SDGs can provide a positive focus: not just «reduce the bad» but create positive value for communities The challenge more demanding consumers Globalization and increased reputation competitive differentiatio n emergence of NGO’s the importance of HR / talent dev Corporate Challenge s complexity of market & environment government policy & regulation capability competitio n The importance of supporting SDGs convergence & consolidation tightening of margin 6 8 Economic development (Part 2) NOVEMBER 9 Contents 1. Understanding poverty 2. What is development? 3. Some development indicators. 4. The inequality problem. 5. Future projections. 2. What is development? • Development: improvements in the standard of living (welfare) of a society and all the people who are part of it . • The problem of development exceeds the question of economic growth, which is necessary, but not sufficient. “Development is a multidimensional process involving changes in social structures, popular attitudes, and national INSTITUTIONS, as well as the acceleration of economic growth, the reduction of INEQUALITY, and the eradication of poverty” Source: Todaro and Smith (2012): Economic Development, 11th edition, p.16. https://worldhappiness.report/ed/2023/ Easterlin Paradox: the data showed that richer countries tend to have higher life satisfaction levels, but as the surveys were repeated (and income increased in the country) life satisfaction DIDN’T KEEP UP Potential explanations: - Issues with the DATA - Income has increased but very UNEQUALLY so (so median income hasn´t increased much) - Maybe it´s relative earnings (earnings compared to averages) rather than absolute earnings that drive the relationship over time 3. Some indexes and indicators What´s the difference between GNI and GNP? 1. GNP (Gross National Product), GNI (Gross National Income) 2. Nominal GDP (Gross Domestic Product), Nominal GDP in $PPP (Purchasing Power Parity, PPP) 3. GDP per capita, GDP per capita $PPP. 4. Poverty Lines: 5. Poverty gap index: 6. HDI (Human Development Index): 7. MPI (Multidimensional Poverty Index) 8. IHDI (Inequality adjusted Human Development Index) 9. Gender indices: GDI (Gender development index) and GII (Gender Inequality Index) 10. PHDI (Planetary pressures-Adjusted Human Development Index) 11. GPI (Genuine Progress Indicator) 12. Social progress index 13. Inclusive wealth index 14. Lorenz curve. 3. Development indicators The poverty line (or poverty threshold) is the minimum amount of income considered adequate. • The (national) poverty line is calculated by adding up the cost of essentials needed by an adult in a given year. It usually reflects the amount below which a person’s minimum nutritional, clothing, and shelter needs cannot be met in that country 2.15 DOLLARS A DAY, ABSOLUTE, OBJECTIVE, ECONOMIC XTREME POVERY. MINIMUM A MOUNT OF MONEY THAT IS REQUIRED TO LIVE WITH THE MINIMUM AMOUNT OF MONEY Poverty lines vary by country, but an international poverty line is constructed for comparison as well: • The international poverty line was constructed by taking the poverty lines of the 15 poorest countries. It was originally set at 1$/day (in 1990), then revised to 1.25$/day (in 2005) 1.90$/day (in 2011) and recently updated to 2.15$/day (in 2022) https://blogs.worldbank.org/developmenttalk/r icher-array-international-poverty-lines Even absolute poverty lines (what it takes to afford «the minimum») are relative: they increase as income grows Instead of 1 «extreme» poverty line, we have several (more relevant) lines, one for each income category https://blogs.worldbank.org/developmenttalk/richer-array-international-poverty-lines A richer set of poverty lines better reflects poverty within each category 3. Development indicators In poverty headcounts (such as the number of people who live below a poverty line) individuals who are marginally below the poverty line are counted as being poor just as individuals with consumption levels much further below the poverty line The poverty gap index tries to capture the intensity of poverty, telling us the fraction of the poverty line that people are missing, on average, in order to escape poverty 𝑝𝑝 1 𝑧𝑧 − 𝑦𝑦𝑖𝑖 𝑃𝑃𝑃𝑃𝑃𝑃 = � 𝑁𝑁 𝑧𝑧 𝑖𝑖=1 𝑁𝑁: 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑝𝑝: 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏 𝑡𝑡𝑡𝑡𝑡 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑧𝑧: 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙 𝑦𝑦𝑖𝑖 : 𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖𝑖 𝑜𝑜𝑜𝑜 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑖𝑖 3. Development indicators Because poverty is multidimensional, indices have evolved to go beyond the monetary aspect and better capture poverty The UN´s Human Development Report keeps on providing more crosscountry comparable data to make better action possible 2014 2010 1990 Human development index (HDI) Multidimensional poverty index (MPI) Inequalityadjusted Human development index (IHDI) Gender equality index (GII) 2020 Gender development index (GDI) Planetary-pressures adjusted human development index (PHDI) 3. Development indicators The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable, and having a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions. The HDI was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. 3. Development indicators The Multidimensional Poverty Index (MPI) is a summary measure of average achievement in key dimensions of human development: health, education and decent standards of living. The index replaced the HDI in 2010 (it identifies deprivations across the same three dimensions as the HDI, but uses slightly different data) 3. Development indicators 3. Development indicators Comparing the Multidimensional Poverty Index (MPI) and the Human Dedevelopment Index (HDI) 3. Development indicators We get a picture that looks a lot like the one we are used to using other indicators … Human Development Index and Multidimensional poverty index (2015) Human Development Report -- Public Data Explorer 3. Development indicators … there is high correlation between the MPI and the 1.90$ poverty line (the data is before the poverty line was adjusted to $2.15) … … but if we look closer, we can see some differences https://ophi.org.uk/multidimensional-poverty-index/databank/global-comparisons/ 3. Development indicators Inequality Adjusted Human Development Index (IHDI) The HDI is an average of human development achievement. Because it´s an average, it hides differences across a country´s population The IHDI is calculated as the geometric mean of inequality-adjusted dimensional indices. So it takes into account not only the average achievements in health, education, and income, but also how those are distributed among its population by “discounting” each dimension’s average value according to its level of inequality. IHDI = HDI when there is no inequality. IHDI < HDI as inequality rises. The difference between the HDI and IHDI, expressed as a percentage of the HDI, indicates the loss in human development due to inequality The IHDI relies uses data on income/consumption and years of schooling from national household surveys 3. Development indicators The IHDI has been calculated since 2010 so we can see how inequality is changing by analyzing the trend in the IHDI https://hdr.undp.org/inequality-adjusted-human-development-index#/indicies/IHDI 3. Development indicators Gender Development Index (GDI) The GDI measures gender inequalities in achievement in the three basic dimensions of human development, separated by gender https://hdr.undp.org/inequality-adjusted-human-development-index#/indicies/IHDI 3. Development indicators Gender Inequality Index (GII) The GII is a composite metric of gender inequality using three dimensions: reproductive health, empowerment and the labor market. A low GII value indicates low inequality between women and men, and viceversa. https://en.wikipedia.org/wiki/Gender_Inequality_Index#/media/File:Gender_Inequality_Index _2019.svg The adjustment to standard HDI values by the planetary pressuresadjusted HDI increases as the level of human development increases http://hdr.undp.org/sites/default/files/hdr2020.pdf 3. Development indicators The Genuine Progress Indicator (GPI) measures sustainable economic welfare, rather than economic activity alone. It tries to capture the wellbeing of a country, incorporating environmental and social elements not found in the calculation of GDP. It uses 3 underlying principles: - Consider consumption, but adjust for inequality include non-market benefits (not counted in GDP) deduct bads such as environmental degradation, human health effects, and loss of leisure time. https://www.researchgate.net/publication/303311122_We_Can%27t_Eat_GDP/figures?lo =1 If you are interested (this is not a required reading), you can dig deeper by reading “We can´t eat GDP” (Fioramonti, 2015) for a short review of alternative measures 3. Development indicators The social progress index measures the capacity of a society to meet the basic human needs of its citizens, establish the building blocks that allow citizens and communities to enhance and sustain the quality of their lives, and create the conditions for all individuals to reach their full potential https://www.socialprogress.org/assets/downloads/resources/2019/2019-SocialProgress-Index-executive-summary-v2.0.pdf 3. Development indicators The Inclusive wealth index measures a nation’s capacity to create and then maintain human well-being over time. To that end, the index measures wealth using the country’s manufactured, human and social natural capital. It is meant to be used as a sustainability index, and allow countries to measure whether they are developing in a way that allows future generations to meet their own needs http://www.managi-lab.com/iwp/iwp_iw.html Economic development (part 3) Contents 1. Understanding poverty 2. What is development? 3. Some development indicators. 4. The inequality problem. 5. Future projections and recent trends. 4. The inequality problem Inequality reduces well-being, with differences by regions Source HDI: Human Development Index IHDI: Inequality-Adjusted Human Development Index 4. The inequality problem Notable increase in prosperity https://ourworldindata.org/uploads/2013/11/Global-Inc-Distribution-2003-and-2013-1.png 4. The inequality problem But high inequality persists https://ourworldindata.org/how-global-inequality-has-changed-from-2003-to-2013 4. The inequality problem And may be increasing in some places 4. The inequality problem Particularly problematic in Latin America source 4. The inequality problem In some cases, the financial crisis took a heavy toll https://openknowledge.worldbank.org/bitstream/handle/10986/30418/9781464813306_Ch02.pdf 4. The inequality problem • The wealth of a country can be distributed very unevenly. • Inequality manifests itself in many ways: 1. Rent 2. Wages 3. Consumption 4. Access to opportunities for advancement (education ) 5. Access to resources ( water) 6. Access to services (health ) 7. Access to freedoms and political opportunities 4. The inequality problem • Inequality on variables such as income, consumption or income can be measured in various ways. • It is a complex task: - What is the reference unit (Individuals, households , neighborhoods, cities , regions ...) ? - What is the relevant reference period? Are there differences between people over the life cycle? - What indicator values ​are acceptable to society? 4. The inequality problem • One example of a potential decision: What type of economic inequality should we use? 1. Wealth 2. Market income (earnings / wages / returns to investments) 3. Disposable income / Final income (disposable – VAT + public services). Which indicator we use matters greatly https://www.core-econ.org/the-economy/book/images/web/figure-19-01.jpg Greater inequality in market income Inequality has decreased in some countries, and increased in others https://www.researchgate.net/figure/Market-and-disposable-income-inequality_fig2_305990979 4. The inequality problem Some inequalities can be drivers for higher effort and for risk-taking that leads to innovation and investment But inequality can also unfairly restrict opportunities for some people / groups Accidental situations, such as place of birth, family income/status, and (in some countries) gender or race can result in differences in opportunity, which lead to economic disparities unrelated to talent/effort. Categorical inequalities: RESULT FROM EXTERNAL Intergenerational inequality: Intergenerational elasticity: HOW MUCH WILL YOUR INOCME CHANGE IF YOUR PARENTS INCOME CHANGED Social mobility: ABILITY TO CHANGE YOU PLACE IN SOCIETY 4. The inequality problem We use the Lorenz curve: a picture of how income is cumulatively distributed among members of a population. Accumulated income (%) Total equality Total inequality The further the Lorenz curve bows away from the line of income equality, the more unequal the distribution of income. Accumulated population (%) 4. The inequality problem The area between the Lorenz curve and the perfect-equality line gives us an idea of how unequal is the distribution of income. The numerical equivalent of this area is known as the “gini coefficient” • If there is no inequality: gini coefficient = 0 • The larger the coefficient (maximum of 1), the more unequal the income distribution in the country Accumulated Income (%) 1 if maximum inequality Gini index 0 if total equality Lorenz Curve Cumulative Population (%) 4. The inequality problem Accumulated Income (%) An example Total equality Gini coefficient = 0 Nicaragua 2011 Gini index= 0,34 19,84% 13,10% Nicaragua 1993 Gini Index = 0,50 Cumulative Population (%) (�� sus AINAB � DEVELOPMENT 10 G�··� ALS �6 �� REDUCED INEQUALITIES l!0.1 By 2030, progressively achieve a11d sustain income growth of the bottom 40 per cent oHhe population at a rate lhigher than the national average 10.2 By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or e,co11omic or other status li0.3 Erlsure equal opportunity and mduc,e inequalities of outcome, including by eliminating discrimit1atory laws, policies a11d practices and promotingi appropriate legislation, policies at1d actio:n in thi s rngard 110.4 Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater e,quality 10.5 lmprove the regulatio:n at1d monitorit1g of global financia! markets and institutions and strengthen the implementation of such re-gu1lations 110.6 Erlsure enhanced representation at1d voice for dev,eloping countries in decision-making in global intemational eco:nomic and frnancial it1stitu.1ions in order to deliver more e , ffective, credible, accountable and legitimate it1stiturtions l!0.7 Facilitate nrderly, safe, re-guiar and responsible migration and mobility of people, including1 tlhrough �he implementation of planned and w,ell-managed migration policies 10.A lmplement the principie of special and differential treatment fo:r developingi countries, in particular I east develope,d countries, in aocordance with World Trade Organization agreements 110.B Encourage offlcial development assista11ce and financia! flows, including foreign direct inv,estment, to states whe:re the 11e,e,d is greatest, in particular least developed countries, Afñcan countries, small island developing states and landlocked developi11g countries, in accordance with t'heir national plans and prngrammes li0.1 C By 2030, reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 pe,r cent l ! 1 ,�·i.::,i, \ Universidad ,:; de Navarra ..,.,o,ot-' ;:::; ◄ '; ► Contents 1. Understanding poverty 2. What is development? 3. Some development indicators. 4. The inequality problem. 5. Future projections and recent trends. 5. Recent trends: The role of climate change in development Climate change is likely to play a role in development “Between 2030 and 2050 climate change is expected to cause an additional 250,000 deaths a year from malnutrition, malaria, diarrhoea and heat stress. Hundreds of millions more people could be exposed to deadly heat by 2050, and the geographic range for disease vectors—such as mosquitoes that transmit malaria or dengue—will likely shift and expand.” The overall impact on people will depend on their exposure and their vulnerability. Both factors are intertwined with inequality in a vicious circle Because climate change will hit the tropics harder first, its effects are likely to deepen existing problems 5. Recent trends: The role of climate change in development 5. Recent trends: The technological divide will remain problematic The technological divide poses problems for development and potential risks for a less equal world, as mobile technology promotes financial inclusion (“the ability to access and use a range of appropriate and responsibly provided financial services in a well regulated environment”) and opportunities for growth 5. Recent trends: Extreme poverty will concentrate in Africa Shifting concentration of the world´s poor from Asia to Africa is likely to continue https://openknowledge.worldbank.org/bitstream/handle/10986/30418/9781464813306_Ch01.pdf 5. Recent trends: Poverty is going down, but the rate of decline is slowing down Once most countries in Asia achieve the poverty target, poverty reduction is projected to slow down http://hdr.undp.org/sites/default/files/hdr2019.pdf https://www.brookings.edu/blog/future-development/2019/05/23/global-poverty-reduction-has-sloweddown-again/ 5. Recent trends: Poverty is going down, but the rate of decline is slowing down Between 1990 and 2015, the global poverty rate fell by slightly more than 25 percentage points (an average decline of 1 percentage point a year). Despite this progress, there is some concern about long term trends in face of existing evidence that the rate of poverty reduction has recently slowed down. https://openknowledge.worldbank.org/bitstream/handle/10986/30418/9781464813306_Ch01.pdf “The first scenario assumes that every country grows at its average growth rate from 2005–15. This growth rate is then used to “grow” the household survey mean over time, in a way that does not change the level of inequality. This approach makes it possible to move the entire distribution of consumption or income forward in time, starting with the 2018 nowcast and moving up to 2030. The second scenario is like the first, except for one difference: the growth rate for each country is not its historical average, but rather the historical average for its region. For each region, the average annualized real growth rate between 2005 and 2015 is estimated and then used as the growth rate for each country in the region. The third scenario is identical to the second but uses twice the historical regional growth averages. These three scenarios all assume that inequality in the country remains unchanged until 2030. The final scenario explores what happens if growth is pro-poor; if the bottom 40 percent on average grows faster than the country as a whole. This scenario, not anchored to any empirical data, assumes that each country grows by 6 percent annually toward 2030, but that the bottom 40 percent, on average, grows by 8 percent annually” (pages 23-24, Ending extreme poverty: progress, but uneven and slowing”) 5. Recent trends: Some progress in the Human development index Years of progress, measured via the HDI Source: Human Development Report 2014, p. 36. 5. Recent trends: Some progress in the Human development index But negative covid effects http://hdr.undp.org/en/content/covid-19-human-development-coursedecline-year-first-time-1990 5. Recent trends: Growth of the medium class https://www.brookings.edu/blog/future-development/2018/09/27/a-global-tipping-point-half-the-world-is-now-middle-class-or-wealthier/ 5. Recent trends: Growth of the medium class The medium class is growing globally, with Asia taking on an important role Source: Human Development Report 2013, p. 14. http://oecdobserver.org/news/fullstory.php/aid/3681/An_emerging_middle_class.html 5. Recent trends: Concerns over inequality But even as the medium class grows, concerns over inequality persist 5. Recent trends: Convergence in basic capabilities There is convergence at first sight http://hdr.undp.org/sites/default/files/hdr2019.pdf 5. Recent trends: But diverge in enhanced capabilities But a deeper look reveals that concerns over inequality persist http://hdr.undp.org/sites/default/files/hdr2019.pdf 5. Recent trends: Economic activity´s shift to the East will contine, but at slower pace Shifting weight of economic activity is likely to continue, especially with the growth of India and China, but at a slower pace 5. Recent trends: Decoupling of GDP growth and progress in development? Development is inherently complex and the combination of shifting wealth, economic convergence and the dynamic movement of well-being factors adds further complications. It has blurred a previously clearer line between what constitutes a “developed” and a “developing” country As a result, we are seeing decoupling of GDP growth and improvement in wellbeing in some parts of the world: absolute poverty is still rising in some countries, even with economic growth. • The long-term trend of increasing well-being is quite robust in Latin America and Asia, although low-income countries in Latin America have relatively struggled to gain more in terms of well-being, relative to GDP per capita. • Compared to achievements in the rest of the world, Africa could gain more in terms of wellbeing, relative to its growth in GDP per capita 5. Recent trends: Decoupling of GDP growth and progress in development? Economic growth, although slower, was of greater quality for early industrialisers than it has been for many emerging countries in recent years However, where policies were pursued to adequately solve well-being issues, reaching high levels of well-being outcomes came more quickly than it did for early industrialisers https://www.oecd.org/dev/Overview_EN_web.pdf 5. Recent trends: Decoupling of GDP growth and progress in development? This decoupling has contributed to increase social discontent Over the last 3 decades (1990-2020), GDP and wealth grew, middle clases expanded, extreme poverty fell, but people were increasingly unhappy (OECD, Perspectives, 2021). Why? - Increasing inequality within countries - Non-income indicators did not match the GDP´s upward trend for all groups - Strains on global labor force - Environmental issues 5. Recent trends: Polices for poverty reduction New approaches to poverty reduction, such as risk management