Friday, December 27, 2013

Extreme poverty

Ending extreme poverty is a hot topic these days.  Here is an article comparing labor and non-labor income's respective roles in reduction of extreme poverty in various countries.  That is to say, how important is economic growth for decreasing extreme poverty, and how important are social safety net programs run by the government or private agencies?  The answer is that they are both important.  By my reading of the graphs, it seems that very poor countries like Nepal or Ghana owe most of their improvement in extreme poverty to general economic growth, while middle-income countries like Colombia or Panama, redistribution and welfare programs play an increasingly important role.  This makes intuitive sense to me, since really poor countries don't have much private wealth nor government revenue to redistribute, while middle-income countries have a lot of wealth they could potentially draw on to help out their own poor.

This other article looks at extreme poverty in the US, defined as incomes of less than $2/capita/day.  I was amazed to learn that some 2.8 million children live in households earning less than $2 per person per day.  By my rough calculations, this would mean about 5 million people in total (children, the adults living with them, and the elderly not counted in this study) living on less than $2 a day in the US.  While this is less than 2% of the country's population, on the other hand it represents more extreme poor in the US than in many poor countries (tiny Sierra Leone, for example)!

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