Home | Business News | Browse by Publication | W | WIDER Angle

Poverty - growth - inequality triangle in China.

Article Excerpt
Poverty reduction can be achieved through growth and/or improved distribution. However, growth can lead to a decrease or increase in inequality. Thus, it may not translate into poverty reduction. Meanwhile, poverty and growth depend on the level and dynamics of inequality. This complex interrelationship among growth, inequality and poverty is termed the poverty-growth-inequality (PGI) triangle. The triangle poses a challenge or dilemma to development strategists and policymakers: should growth or inequality be prioritized in the design and execution of development policies?

Post-reform China represents a good opportunity for studying the PGI triangle. While growth in China has helped lift some 270 million rural poor out of poverty during 1980-2000, the efficiency-driven-but-equity-ignoring development experience has lead to the rise of inequality with possible adverse consequences for poverty and future growth. In what follows, we summarize major findings from a recent WIDER project on poverty and inequality in China, and provide some policy recommendations.

Major findings

Growth-Inequality: Inequality is harmful to growth no matter what time horizon is considered. The growth-inequality relationship is non-linear, but positively correlated, suggesting further increases in inequality in China.

Poverty-Growth-Inequality: Income growth and favourable distributional changes in China explain reductions in rural poverty in the first half of...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!