Links Between Growth, Inequality, and Poverty: A Survey

Valerie Cerra, Ruy Lama and Norman Loayza (nloayza@worldbank.org)

No 2021/068, IMF Working Papers from International Monetary Fund

Abstract: Is there a tradeoff between raising growth and reducing inequality and poverty? This paper reviews the theoretical and empirical literature on the complex links between growth, inequality, and poverty, with causation going in both directions. The evidence suggests that growth can be effective in reducing poverty, but its impact on inequality is ambiguous and depends on the underlying sources of growth. The impact of poverty and inequality on growth is likewise ambiguous, as several channels mediate the relationship. But most plausible mechanisms suggest that poverty and inequality reduce growth, at least in the long run. Policies play a role in shaping these relationships and those designed to improve equality of opportunity can simultaneously improve inclusiveness and growth.

Keywords: Growth; Inequality; Poverty; Income Distribution; Economic Development; Inclusive Growth; unbalanced growth; public goods; poverty-reducing effect; family income; poverty ratio; growth breeds poverty; poverty headcount ratio; Income inequality; Income; Poverty reduction; Global (search for similar items in EconPapers)
Pages: 54
Date: 2021-03-12
New Economics Papers: this item is included in nep-cwa, nep-fdg and nep-gro
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Citations: View citations in EconPapers (16)

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Working Paper: Links between Growth, Inequality, and Poverty: A Survey (2021)
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