Poverty, Inequality and
Development
ECONOMIC DEVELOPMENT
Poverty and Inequality
Poverty is the deprivation of
food, shelter, money, and
clothing when people can’t
Inequality refers to
satisfy their basic needs. It
disparities in the distribution
can also be understood
of economic assets and
simply as a lack of money or
income.
more broadly in terms of
barriers to everyday human
life.
Measuring Inequality
1. Size Distributions
The personal or size distribution of
income is the measure most
commonly used by economists. It
simply deals with individual persons or
households and the total incomes they
receive.
Derived solely from employment
or came also from other sources
such as interest, profits, rents,
gifts, or inheritance.
2. Lorenz Curve
Graphicalrepresentation of income
or wealth distribution developed by
American economist Max Lorenz in
1905
It is drawn as cumulative income
curve
A population is divided into quintiles
Therichest quintile is the 20% of
households with the highest disposable
income
Similarly,
the poorest quintile is the 20%
of households with the lowest disposable
income
Lorenz
Curve
Lorenz curve A graph
depicting the
variance of the size
distribution of
income from perfect
equality
The Lorenz Curve I A
Level and IB Economics -
YouTube
3. Gini Coefficient
Philippines GINI index, 2017-2020 -
[Link]
4. Functional Distributions
Functional distribution of income (factor share distribution of income)
The distribution of income to factors of production without regard to the ownership of the
factors.
Measuring Absolute Poverty
Absolute poverty is the number of people who
are unable to command sufficient resources to
satisfy basic needs.
Lives below the international poverty line of less
than $1.25 or $2 per day in PPP dollars.
Measured as headcount index H/N
Totalpoverty gap (TPG) it measures the total
amount of income necessary to raise
everyone in the poverty line.
Measuring
Absolute Poverty
Total Poverty Gap (APG)
Average poverty gap (APG)
Average income shortfall (AIS)
Foster-Greer-Thorbecke index
(FGT)
Poverty reduction may
cause growth
Inclusive growth can cause poverty reduction,
directly and indirectly
Less
appreciated: Poverty reduction can cause
growth and development, while failure to address
poverty can constrain prospects for development
because:
Although small, poverty income is part of total
income
Programs that raise productivity of poor directly
even at small scale has direct contribution to
growth;
Poor health, nutrition, and education lowers
economic productivity of people in poverty,
leading directly and indirectly to slower growth
Poverty reduction may
cause growth
Often, the poor lack access to credit, which
constrains growth, e.g.: – Lost opportunities for
entrepreneurship which may benefit society –
Leaves them unable to finance their children’s
education, also limiting the skilled labor force
needed for development – Incentives for high
fertility as a source of old-age financial security
Higher income for the poor raises demand for
locally produced goods
Social exclusion/injustice, which is associated
with poverty, also likely causes economic
stagnation:
Economic Characteristics of High
Poverty Groups
Rural poverty
Women and poverty
Ethnic minorities, indigenous populations,
and poverty
Population Growth Economic
Development: Causes,
Consequences and
Controversies
Population is a dynamic field. There
have been significant changes in
birth rates and the population
trajectories of countries and
continents in recent years. Global
population is still growing by more
than 80 million a year, however, and
is most likely to continue growing for
the rest of this century unless we
take action.
Population: the numbers | Population
Matters | Every Choice Counts |
Sustainable World Population
Fertility Rate
on Most
Populous
Countries
Malthusian Theory
Malthusian Theory of Results in imbalance between
Population
population and food supply
Population increases in Food supply increases in
geometrical progression arithmetical progression
(1,2,4,8,16,32,64,128,256 (1,2,3,4,5,6,7,8,9,in 200
in 200 years) years)
How to correct the imbalance?
Positive or natural checks-
Preventive: late marriages,
Famines, epidemics, wars
chastity, moral restraint
etc.
Estimated
World
Population
Growth
Structure of the World’s
Population
The world’ population is very unevenly distributed by:
1. Geographic region
2. Fertility
3. Mortality
4. Age structures
5. Net Migration
Structure of the
World’s Population
The world’ population is very
unevenly distributed by:
1. Geographic region
More than three-quarters of the
world’s people live in developing
countries
Fewer in an economically
developed nation.
Structure of the
World’s Population
The world’s population is very unevenly
distributed by:
2. Fertility is defined as the quality
of being fertile or productiveness.
The fertility rate at a given age is the
number of children born alive to
women of that age during the year as
a proportion of the average annual
population of women of the same age.
Fertility rates decrease
Structure of
rapidly when women are
the World’s empowered, when children
Population (especially girls) stay in
education for longer, when
countries become more
affluent, and, crucially,
when people can use
modern contraception.
Bringing
Down
Fertility
•The current birth rate for Philippines in 2021 is 19.978 births per 1000
people, a 0.99% decline from 2020.
• The birth rate for Philippines in 2020 was 20.177 births per 1000
people,
a 0.98% decline from 2019.
•The birth rate for Philippines in 2019 was 20.377 births per 1000 people,
a 0.97% decline from 2018.
• The birth rate for Philippines in 2018 was 20.576 births per 1000 people,
a 3.31% decline from 2017.
• Philippine Population Program is Republic Act 6365, otherwise known as the “Population Act
of
1971.”
[Link]
Rate of population increase The growth rate of a
population, calculated as the natural increase after
adjusting for immigration and emigration.
Natural increase The difference between the birth
rate and the death rate of a given population.
Important Net international migration The excess of persons
terms to migrating into a country over those who emigrate from
that country.
remember Crude birth rate The number of children born alive
each year per 1,000 population (often shortened to
birth
Death rate The number of deaths each year per
1,000 population.
Important terms to
remember
Total fertility rate (TFR) The number of
children that would be born to a woman if she
were to live to the end of her childbearing years
and bear children in accordance with the
prevailing age specific fertility rates.
Life expectancy at birth The number of years a
newborn child would live if subject to the mortality
risks prevailing for the population at the time of the
child’s birth.
Under-5 mortality rate Deaths among children
between birth and 5 years of age per 1,000 live
births.
Structure of the
World’s Population
The world’ population is very unevenly
distributed by:
3. Mortality
Death Rate (or crude death rate) The number
of deaths per 1,000 population in a given year.
In the Philippine context, death rate is
5.8/thousands in 2019.
Structure of the
World’s Population
The world’ population is very unevenly
distributed by:
4. Age structures
Population is relatively youthful in the
developing world.
Youth dependency ratio
The proportion of young people under age
15 to the working population aged 16 to
64 in a country
Structure of the World’s
Population the figure clearly reveals
that most future
population growth will
take place in the
developing world.
Structure of the World’s
Population
The world’ population is very unevenly distributed by:
4. Age structures
Youth Dependency Ratio
Definition: population ages 0-15 divided by the population
ages 16-64. Formula: ([Population ages 0-15] ÷ [Population ages 16-
64]) × 100
Elderly dependency ratio
Definition: population ages 65-plus divided by the population
ages 16-64. Formula: ([Population ages 65-plus] ÷ [Population
ages 16-64]) × 100
Total dependency ratio
Definition: sum of the youth and old-age ratios. Formula:
(([Population ages 0-15] + [Population ages 65-plus]) ÷ [Population
ages 16-64]) × 100
Hidden momentum of population growth The phenomenon whereby
population continues to increase even after a fall in birth rates because the large
existing youthful population expands the population’s base of potential parents.
In the case of population growth, this momentum can persist for decades after
birth rates drop.
Reasons: 1. Birth rates cannot be altered overnight
2. Age structure of many developing countries’ population takes time
Structure of the World’s
Population
The world’ population is very unevenly distributed by:
5. Net Migration
Net international migration for a given country refers to the
difference between the number of immigrants and the number
of emigrants. If more people immigrate to a country than
emigrate from it, the country gains population from positive net
migration.
The USA has the highest
total number of immigrants,
being home to 19 per cent
of the world’s immigrants.
This is followed by Germany
and Russia, with a combined
share of 9.7 per cent of the
world’s immigrants.
Highest Migration
rate
ttps://[Link]/
agenda/2020/02/world-
migration-report-2020-
international-migrants-
trends/
Demographic transition
Demographic transition is the phasing-out process of population
growth rates from a virtually stagnant growth stage characterized by
high birth rates and death rates through a rapid-growth stage with
high birth rates and low death rates to a stable, low growth stage in
which both birth and death rates are low.
Demographic transition
The Demand for
Children in
Developing Countries
Children in poor societies are seen partly as
economic investment goods in that there is an
expected return in the form of both child labor
and the provision of financial support for
parents in old age.
In many developing countries, there is a strong
intrinsic psychological and cultural determinant of
family size, so the first two or three children should
be viewed as “consumer” goods for which demand
may not be very responsive to relative price
changes.
In deciding whether or not to have additional children,
parents are assumed to weigh private economic benefits
against private costs, where the principal benefits are the
expected income from child labor, usually on the farm, and
eventual financial support for elderly parents.
Households do not act in unitary, which means they have
different objective function. Husbands tend to have more
children than the wife.
Research showed in developing countries
have provided support for the economic
High female employment,
Greater theory of fertility.
As women become better There is a strong
educated, they tend to association between
female school attendance
earn a larger share of declines in child mortality
(Primary and Secondary)
household income and to and the subsequent
revealed a
produce fewer children. decline in fertility.
lower levels of fertility.
Empirical
evidence
This fact alone underlines the
importance of educating women and
improving public health and child
nutrition programs in reducing fertility
levels
The Consequences of High
Fertility: Some Conflicting
Perspectives
ARGUMENTS:
The problem is not population growth but other issues.
Population growth is a false issue deliberately created by dominant rich
country agencies and institutions to keep developing countries in their
dependent condition.
For many developing countries and regions, population growth is in fact
desirable.
Other Issues
Other issues
1. Underdevelopment
[Link] Resource Depletion and
Environmental Destruction
3. Population Distribution
4. Subordination of Women
Other issues
1. Underdevelopment
If correct strategies are pursued
and lead to higher levels of living,
greater self-esteem, and expanded
freedom, population will take care
of itself.
For as long as people in developing
countries remain impoverished,
uneducated and unhealthy and the
social safety net remains weak parents
will continue to have a big family
Other issues
2. World Resource
Depletion and
Environmental
Destruction
In this argument developed
nations should curtail their
excessively high consumption
standards instead of asking
less developed nations to
restrict their population growth
Other issues
3. Population Distribution
In this argument ,it is not the
number of people per se that is
causing population problems but
their distribution in space.
Governments should therefore strive
not to moderate the rate of
population growth but rather to bring
about a more natural spatial
distribution of the population in terms
of available land and other productive
resources.
Other issues
4. Subordination of Women
In this argument, population growth
is a natural outcome of women’s lack
of economic opportunity.
Ifwomen’s health, education, and
economic well-being are improved
along with their role and status in both
the family and the community, this
empowerment of women will
inevitably lead to smaller families and
lower population growth.
Other Empirical Arguments: Seven Negative
Consequences of Population Growth
According to the latest empirical research, the potential negative
consequences of population growth for economic development
can be divided into seven categories: its impact on economic
growth, poverty and inequality, education, health, food, the
environment, and international migration.
A. Economic Growth
B. Poverty and Inequality
C. Education
D. Health
E. Food
F. Environment
G. International Migration