On poverty

Deglobalization and poverty

Goldberg and Reed in this paper ask the question: What is the pathway to development in a world with less international integration? They answer this question within a model that emphasizes the role of demand-side constraints on national development. Their suggestions include:

• First, deeper economic integration via more provisions especially with richer countries, for instance regarding the mobility of labor (including the unskilled and professional tradespeople);
• Second, redistribution of income which targets the poor and the middle class. While direct aid to the poor is a valuable tool to help them escape poverty, resources must also be made available to broaden the middle class, who sustain the value of the market;
• The presence of imperfect competition underlying their model suggests that redistribution of firm profits in particular is important. Efforts to assist households in accumulating equity shares may therefore be especially useful policies for redistribution, as opposed to the redistribution of wage income.

Income Distribution, International Integration and Sustained Poverty Reduction
Authors: Pinelopi Koujianou Goldberg, Tristan Reed
From: Yale University, World Bank

Poverty in the US

In this paper, Larrimore and al. build annual household data files using U.S. income tax filings between 2007 and 2018. They find that:

• Roughly 1 in 10 people are in poverty in any given year and over 4 in 10 people spent at least one year in poverty between 2007 and 2018.
• Many people move in and out of poverty each year, but the share of people in poverty at any point over several years far exceeds the share in poverty in any single year. For example, of those in poverty in 2007, one-third were in poverty for at least half of the years through 2018.

Presence and Persistence of Poverty in U.S. Tax Data
Authors: Jeff Larrimore, Jacob Mortenson, David Splinter
From: Board of Governors of the Federal Reserve System, Joint Committee on Taxation, US Congress

Poverty and COVID in Europe

In this paper Palomino and al. evaluate the effect of social distancing and lockdowns on poverty and wage inequality in Europe. Their analysis reveals that:

• Under a scenario of a lockdown of 2 months, they estimate a mean loss rate for the poor of 10% and an increase in the headcount poverty index of 4.9 percentage points on average in Europe, with the change ranging from 2.6 points (Switzerland) to 8.5 points (Croatia). Wage inequality increases as well, with a change in the Gini coefficient equal to 3.5% for Europe on average, and changes ranging between 2.2% (Netherlands) and 4.9% (Cyprus).
• Under a more severe scenario of a lockdown of 6 months and partial closure at 60% of full capacity, they estimate a mean loss rate of 16.2% for the poor workers in overall Europe; a rise of 9.4 % in the headcount poverty index and a Gini increase of 7.3% on average for Europe.

Their results also highlight that lockdown measures  will lead to an increase in  between-countries inequality  in Europe of between 2.5% and 4.0%, while within-countries inequality will increase by between 5.0% and 12.1%.

Wage Inequality and Poverty Effects of Lockdown and Social Distancing in Europe
Authors: Juan C. Palomino, Juan G. Rodríguez, Raquel Sebastian
From: University of Oxford, Universidad Complutense de Madrid

Ending poverty as a motivational goal

There are times and places when announcing a goal for ending poverty is clearly little more than a symbol of good intentions. It tells poor citizens, and those who care about them, that the government (or international agency) purports to be on their side, even if nothing much is done to ease poverty. This can be called a “symbolic goal.”

At times there have also been more substantive aims. Advocates against poverty have variously seen it as: the most morally objectionable aspect of inequality, stemming mainly from economic and political forces rather than bad choices by poor people; a key material constraint on human freedom and social inclusion; a risk of deprivation, whether currently poor or not; and a cost to other valued goals, including economic efficiency, human development and environmental sustainability. The actions that might be motivated in response range from specific policies to efforts to help poor people organize collectively for things that matter to them. Thus, goal setting is seen as an incentive mechanism for attaining better outcomes. We can call this the “motivating goal.”

A Short History of the Idea of Ending Poverty
By: Martin Ravallion – Georgetown University