Author: Ricardo Fuentes-Nieva (@rivefuentes)
A simple idea can be quite powerful. There is an interesting new paper from the World Bank titled “Twinning the Goals: How Can Promoting Shared Prosperity Help to Reduce Global Poverty?” that is both elegantly simple and very illuminating on the relationship between income growth, poverty and inequality.
The authors, Christoph Lakner, Mario Negre and Espen Beer Prydz, take the most current global data on poverty and then distribute the proceeds from growth in different ways. The main trick in their analysis is to keep the overall growth rate for different countries constant (based on historical trends). The increase in income can then be either distributed evenly (in other words, keeping inequality constant), be regressive (in which income of the richer parts of society grows faster and where inequality increases), or be progressive (where income of the poorest grows faster than the rest of society and thus inequality decreases). Some of the results using the bottom 40% of the population as threshold (given the World Bank’s “shared prosperity goal”) are shown in this graph (kindly shared by the authors).