How much can poverty be reduced by growth and how much by redistribution? Existing analyses of that question have been limited by inaccurate estimates of current and forecasted poverty rates, based on excessive optimism regarding the impact of growth on poverty in richer countries. Richard Bluhm will discuss a new framework for estimating and projecting poverty rates based on two new papers coauthored with Denis de Crombrugghe and Adam Szirmai.
The two papers highlight four key findings. First, the new modeling approach reveals that the relationship between average incomes and poverty is considerably weaker in richer regions and stronger in poorer regions than previous studies suggest. Second, the findings imply a much larger role of inequality in driving poverty rates. Third, the projections show that the pace of $1.25-a-day poverty reduction will slow down. Optimistic scenarios suggest a poverty rate of 8–9 percent in 2030, far short of the World Bank’s new target of 3 percent by 2030. Finally, rapid progress of $2-a-day poverty reduction will likely be maintained, with an additional one billion people crossing that line by 2030.