A normal relationship ? Poverty, growth, and inequality

Humberto Lopez and Luis Servén

No 3814, Policy Research Working Paper Series from The World Bank

Abstract: Using a large cross-country income distribution dataset spanning close to 800 country-year observations from industrial and developing countries, the authors show that the size distribution of per capita income is well approximated empirically by a lognormal density. The null hypothesis that per capita income follows a lognormal distribution cannot be rejected-although the same hypothesis is unambiguously rejected when applied to per capita consumption. The authors show that lognormality of per capita income has important implications for the relative roles of income growth and inequality changes in poverty reduction. When poverty reduction is the overriding policy objective, poorer and relatively equal countries may be willing to tolerate modest increases in income inequality in exchange for faster growth-more so than richer and highly unequal countries.

Keywords: Achieving Shared Growth; Inequality; Economic Conditions and Volatility; Services&Transfers to Poor; Poverty Impact Evaluation (search for similar items in EconPapers)
Date: 2006-01-01
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:3814

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