Sunday, May 25, 2014

Economic growth and poverty reduction.

Economic growth is what lifts people out of poverty:

A 2013 study of 118 countries over four decades finds that over 75% of the income gains of the poorest 40% of income earners is attributable to economic growth [1]. In an earlier study with similar findings, the same authors have noted:

"[These findings support] the view that a basic policy 
package of private property rights, fiscal discipline, macroeconomic stability, and openness to trade on average increases the income of the poor to the same extent that it increases the income of the other households in society. It is worth emphasizing that our evidence does not suggest a “trickle-down” process or sequencing in which the rich
get richer first and eventually benefits trickle down to the poor. The evidence, to the contrary, is that private property rights, stability, and openness [to trade] contemporaneously create a good environment for poor households -- and everyone else -- to increase their production and income...we emphasize that growth on average does benefit the poor as much as anyone else in society, and so standard growth-enhancing policies should be at the center of any effective poverty reduction strategy." [2]

This is very important. Instead of pursuing wealth redistribution we should be focusing on promoting economic growth.




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