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shared prosperity

Inclusive growth for shared prosperity

Vinaya Swaroop's picture
Announced in April 2013, the twin global goals of the World Bank – eliminating extreme poverty by 2030 and boosting shared prosperity – have become the guiding principles of its development work.  While reducing poverty has always anchored the Bank’s work, the goal of boosting shared prosperity – measured by the income of the bottom 40 percent – is new.

Evening It Up: A New Oxfam Report on Inequality

Dean Mitchell Jolliffe's picture

In Even it Up: Time to End Extreme Inequality, Oxfam has delivered another powerful report making the case that tackling inequality is essential to create a more just world and to eliminate extreme poverty. I was asked to comment on this newly released report at an October 31 event held at the IMF, and was as impressed by the presentation as I was with the report.

Oxfam effectively uses research findings to advocate for policy changes to reduce global inequality. This statistics-laden report also wisely features compelling stories about real people, helping the reader to better understand how vast disparities in wealth adversely affect wellbeing. Oxfam has consistently argued to bring inequality to the fore of policy discussions, and not surprisingly, this report appears to have created a groundswell for their global #Even It Up campaign. While there were instances where I found myself questioning the quality of some references supporting a few statements and estimates, my overall reaction was that the ‘big picture’ claims of the report were well substantiated. In my comments, I suggest that if this report is a call to action, a useful next step for Oxfam or a partner in this work, will be to bring more clarity to what it means to eliminate extreme inequality. Establishing a goal or a measure to monitor progress will help to create better policies, and ensure better collaboration across governments and institutions.

Parsing the challenges of measuring poverty and shared prosperity

Peter Lanjouw's picture

The data and processes needed to measure global poverty and gauge improvements in the prosperity of the bottom 40% of people in each country present complex challenges and provoke considerable debate amongst poverty experts.  

From the comparability of household surveys and their use in policy design to the utility of purchasing power parity data as a unifying standard for measuring the poor, the devil in global poverty analysis is in the details. It’s also vital to understand the World Bank’s recently adopted twin goals in a broader context, to see how they fit into a broader array of monitorable indicators that each come with their own specific features and insights. We must also listen to client governments and outside partners when they prefer to go beyond income to look at multidimensional social welfare functions.

Poverty, Shared Prosperity, and Trade-Offs

Kathleen Beegle's picture

In April 2013, the World Bank Group endorsed two ambitious goals:  (1) to end extreme poverty by 2030, and; (2) to promote “shared prosperity” by boosting the incomes of the poorest 40 percent of the population in every country. The introduction of the second goal marked a shift in the World Bank Group’s poverty reduction mission. Some might consider the goal #2 to constitute a refinement of a longer-standing -- albeit implicit -- emphasis on growth, widely considered a necessary condition for poverty reduction. 

Is goal #1, ending extreme poverty by 2030, paramount and is goal #2 subsidiary to that first objective? On the other hand, if these two goals are prioritized equally, what might this mean for the extreme poor?  What are the trade-offs between boosting the incomes of the bottom 40 percent in every developing country and ending extreme poverty globally?

The role of changes in income distribution

Jos Verbeek's picture

There is a lot of public discussion about Thomas Piketty’s book on capital and its implications for inequality. His work strikes a chord with many of us because it outlines a future where basically your own or inherited wealth matters and where wage income and apparently your human capital does not matter that much for your income generation. So how do we escape such a one-sided and unequal world? Well, maybe one way is to understand better the interaction between growth, changes in the income distribution, and their implications for shared prosperity.  

Poverty reduction, growth, and movements in income distribution

Jos Verbeek's picture

Last week the President of the World Bank Group launched at the Spring Meetings the report "Prosperity for All." One of the interesting areas the note reported on was the interrelationship between growth, movements in the income distribution and poverty reduction.

There are various ways of showing the impact of growth on people’s income and its interrelationship with a country’s income distribution.  In comparing distributions over time, one of the more useful graphs is a Pen’s Parade (figure 1a), named after another Dutch economist as so many inequality or poverty measures are (other examples are the Theil index and Thorbecke for the Foster-Greer-Thorbecke Poverty Measure).

Why Didn’t the World Bank Make Reducing Inequality One of Its Goals?

Jaime Saavedra-Chanduvi's picture

The World Bank Group (WBG) has established that its mission, endorsed by the governors of its client countries, is centered around the goals of sustainably ending extreme poverty and promoting shared prosperity.  Extreme poverty is monitored by the percent of people living below the $1.25-a-day threshold.  The Bank’s mission thus gives a clear message:  Extreme poverty, hunger, destitution must come to an end.

To monitor progress in shared prosperity, the WBG will track the income growth of the bottom 40 percent of the population in each country.  The clear signal the WBG wants to give is that the institutional mission is about reducing poverty, fostering growth and increasing equity, so we need to monitor what happens to welfare of the less well off in every country.  Improving averages is not enough; a laser focus on those who are at the bottom of the distribution at all times, everywhere, is needed.

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