Globalization, Growth, and Distribution
In the last two decades, across a range of countries high growth rates have reduced poverty but have been accompanied by rising inequality. This paper is motivated by this stylized fact, and by the strong distributional concerns that persist among populations and policy makers alike, despite the poverty reduction observed in official statistics where growth has been sufficiently high. This seeming disconnects frames the questions posed in this paper. Why the disconnect, and what to do about it? It is argued that official poverty statistics may be missing key elements of the ground level reality of distributional evolution, of which rising inequality may be an indirect indicator. Heterogeneity of population means that there may be significant numbers of poor losers from technical change, economic reform and global integration, even when overall measured poverty falls. In terms of actions, attention is drawn to the role of safety nets as generalized compensation mechanisms, to address the ethical and political economy dimensions of such a pattern of distributional evolution. Addressing structural inequalities is also a long term answer with payoffs in terms of equitable growth. In terms of future analysis, diminishing returns have set in to the inequality-growth cross-country regressions literature. Further work to help policy makers should focus on: (i) new information to illuminate the disconnect; (ii) analysis and assessment of safety nets as generalized compensation mechanisms; and (iii) addressing specific forms of structural inequality related to assets, gender, and social groupings like caste or ethnicity.
Summary: | In the last two decades, across a range
of countries high growth rates have reduced poverty but have
been accompanied by rising inequality. This paper is
motivated by this stylized fact, and by the strong
distributional concerns that persist among populations and
policy makers alike, despite the poverty reduction observed
in official statistics where growth has been sufficiently
high. This seeming disconnects frames the questions posed in
this paper. Why the disconnect, and what to do about it? It
is argued that official poverty statistics may be missing
key elements of the ground level reality of distributional
evolution, of which rising inequality may be an indirect
indicator. Heterogeneity of population means that there may
be significant numbers of poor losers from technical change,
economic reform and global integration, even when overall
measured poverty falls. In terms of actions, attention is
drawn to the role of safety nets as generalized compensation
mechanisms, to address the ethical and political economy
dimensions of such a pattern of distributional evolution.
Addressing structural inequalities is also a long term
answer with payoffs in terms of equitable growth. In terms
of future analysis, diminishing returns have set in to the
inequality-growth cross-country regressions literature.
Further work to help policy makers should focus on: (i) new
information to illuminate the disconnect; (ii) analysis and
assessment of safety nets as generalized compensation
mechanisms; and (iii) addressing specific forms of
structural inequality related to assets, gender, and social
groupings like caste or ethnicity. |
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