ECON133 Ending Global Poverty Global Inequality and Growth Assigment Read the 20-25 pages article and then answer the questions in the prompt with details/

ECON133 Ending Global Poverty Global Inequality and Growth Assigment Read the 20-25 pages article and then answer the questions in the prompt with details/proof from the article supported. 5 questions in total. At least 100 words for each question. ECON 133 “Global Inequality and Growth”
Mandatory Reading # 5 Due April 21st
Lucy Page and Rohini Pande (2018), “Ending Global Poverty: Why Money Isn’t Enough”
Please answer the 5 questions below.
1. Describe the two ways in which the geography of poverty has changed in the past 40
years. How do these changes explain Figure 2.1.8 in your reading #2 (World Inequality
report, part II)?
2. Explain why the following statement is true: there is a geographic misallocation of aid
distribution. Using Table 1 and Figure 2, find two countries that best illustrate this
statement and explain why they do.
3. Which aid-funded privately-run health program has the most chances to succeed: DTP
vaccination or trachoma treatment? Explain why.
4. What are the two governance challenges that high-poor middle-income countries are confronted with when it comes to providing “invisible infrastructure”? Make sure you define
in your answer what invisible infrastructures are. You can provide examples if they are
useful to clarify your answer.
5. Explain why there is a principal-agent problem when it comes to the provision of invisible
infrastructure. In what way can the media mitigate this problem? Provide ONE example
of successful media intervention.
1
Journal of Economic Perspectives—Volume 32, Number 4—Fall 2018—Pages 173–200
Ending Global Poverty: Why Money Isn’t
Enough
Lucy Page and Rohini Pande
T
he share of the world’s population living below the global extreme poverty
line ($1.90 in consumption per day) has plunged dramatically in recent
decades, from 42 percent in 1981 to 11 percent in 2013 (PovcalNet 2018).
This remarkable decline has buoyed hopes of continued reductions and created
expectations about where future reductions will take place. In 2015, the international community enshrined the aim of ending extreme poverty by 2030 in the
Sustainable Development Goals. The current literature talks of passing the “baton”
of poverty reduction from China to India, and then to nations of Africa (Chandy,
Ledlie, and Penciakova 2013; Commission on State Fragility, Growth, and Development 2018).
Historically, the quest to reduce poverty has relied on two levers: economic
growth (the idea that “a rising tide lifts all boats”) and the intentional redistribution
of resources to the poor, either by the domestic state or foreign aid. In this essay, we
argue that growth and aid, at least as currently constituted, are unlikely to suffice to
end extreme poverty by 2030. To end extreme poverty sustainably and as quickly as
possible, the states governing the world’s poor need to be strengthened such that
they are both accountable to the needs of the poor and have the capacity to meet
those needs. The international development community should recalibrate the allocation of resources to increase accountability and state capacity.
■ Lucy Page is a PhD student in Economics, Massachusetts Institute of Technology, Cambridge,
Massachusetts. Rohini Pande is Rafik Hariri Professor of International Political Economy,
Harvard Kennedy School of Government, Cambridge, Massachusetts. Their email addresses
are lucypage@mit.edu and Rohini_Pande@hks.harvard.edu.
†
For supplementary materials such as appendices, datasets, and author disclosure statements, see the
article page at
https://doi.org/10.1257/jep.32.4.173
doi=10.1257/jep.32.4.173
174
Journal of Economic Perspectives
Underlying our argument is the changing global geography of need. Table 1
describes a dramatic shift in the concentrations of extreme poverty over the last 30
years. Panels A and B of Table 1 list the 20 countries that were home to the highest
shares of the world’s poor in 1987 and 2013, respectively. In 1987, 90 percent of the
world’s poor lived in low-income countries, while only 6.5 percent lived in middleincome countries. Only five of the 20 countries with the most people in poverty
were middle-income. By 2013, over 60 percent of the world’s poor lived in middleincome countries, and nine of the 20 countries with the highest concentrations of
extreme poverty were middle-income. The eight middle-income countries that each
have 1 percent or more of the world’s poor are India, Nigeria, China, Indonesia,
Pakistan, the Philippines, South Africa, and Zambia. In 2013, just under half of the
world’s extreme poor (49.3 percent) lived in these eight countries, which we refer
to as the high-poverty middle-income countries.1
As the countries where the poor live have grown richer, the world’s poorest
people are increasingly split between two country groupings: low-income, fragile
states like Afghanistan, Liberia, and the Democratic Republic of Congo (DRC); and
the set of fast-growing but increasingly unequal high-poverty middle-income countries. Countries in these two groupings have often seen diverging growth trajectories
over the last three decades. In 1987, China and the DRC had similar GDP. That year,
China was home to more than one-third of the world’s extreme poor, and DRC was
home to 1.1 percent. By 2013, China had become a middle-income country and its
share of the world’s extreme poor had fallen tenfold, to just over 3 percent. Meanwhile, the share of the world’s poor in DRC increased roughly sixfold. Low-income
fragile countries are often trapped in cycles of erratic growth and misdirected aid,
while high-poverty middle-income countries typify a global trend of falling crosscountry inequality accompanied by greater within-country inequality (Hammar and
Waldenström 2017). While a poor person in Liberia might live in a village where
nearly everyone else is destitute, a growing share of the poor live in places like
Dharavi in Mumbai—Asia’s largest slum—in view of a high-rise reported to be the
most expensive private residence in the world (Crabtree 2018).
What does this changing geography suggest about how to reduce poverty? In
low-income countries, steady economic growth likely remains the most important
tool for improving the lives of the poor. Yet instigating and sustaining such growth
has often proven hard. Instead, the pattern seems to be one of erratic economic
1
We use data on extreme poverty from PovcalNet (2018). Ferreira et al. (2016) provides a useful
summary of PovcalNet’s methods for estimating extreme poverty and of the $1.90 per day poverty line.
To be consistent with the 2013 poverty data, we classify countries as low-, middle-, or high-income using
the World Bank’s country income classifications from FY2015, which are based on data from calendar
year 2013. We do not classify any low-income countries that transitioned to middle-income status since
FY2015, like Bangladesh and Kenya, as high-poverty middle-income countries. We continue to use FY2015
income classifications throughout the text and figures. The World Bank’s PovcalNet released revised
data on global poverty through 2015 in September 2018. These estimates suggest that the increasing
concentration of the poor in relatively wealthy countries held true through 2015, when the World Bank
estimates that 62.1 percent of the world’s extreme poor lived in middle-income countries (using FY2017
income classifications).
Lucy Page and Rohini Pande
175
Table 1
Global Geographies of Extreme Poverty, 1987 and 2013
Millions in Poverty
Share
Ranking in
extreme headcount of world’s # of world’s
poverty
(%)
poor (%)
poor
Millions Poverty
Share Ranking in
in extreme headcount of world’s # of world’s
poverty
(%)
poor (%)
poor
A: 1987
Low-income
countries:
Total
Middle-income
countries:
Total
1,587
57.3
90.3
China
India
Indonesia
Pakistan
Nigeria
Vietnam
Myanmar
Bangladesh
Ethiopia
Dem. Rep. of
the Congo
659.5
391.1
122.5
61.1
56.8
42.3
36.5
33.4
24.6
19.6
60.8
47.9
71.4
62.2
64.5
68.5
94.4
33.9
56.6
62.3
37.5
22.2
7.0
3.5
3.2
2.4
2.1
1.9
1.4
1.1
1
2
3
4
5
6
7
8
10
11
Tanzania
Nepal
Mozambique
Uganda
Sudan
15.0
12.7
11.7
10.7
8.4
64.7
72.6
89.5
68.2
45.7
0.9
0.7
0.7
0.6
0.5
13
14
15
16
18
115.2
11.9
6.5
25.1
15.4
8.9
8.3
7.8
17.8
26.9
25.8
15.4
9.7
1.4
0.9
0.5
0.5
0.4
Middle-income
countries:
Total
478.1
9.6
61.1
India
210.4
16.5
26.9
1
85.2
25.2
23.6
12.7
10.7
9.3
8.9
7.8
49.6
1.9
9.4
7.0
10.8
17.5
58.8
69.5
10.9
3.2
3.0
1.6
1.4
1.2
1.1
0.9
2
6
7
13
15
16
17
20
Brazil
Philippines
South Africa
Thailand
Mexico
9
12
17
19
20
B: 2013
Low-income
countries:
Total
Dem. Rep. of
the Congo
Ethiopia
Bangladesh
Tanzania
Madagascar
Mozambique
Kenya
Uganda
Malawi
Mali
Niger
284.3
36.9
36.3
54.1
75.9
6.9
3
27.8
26.5
23.3
17.9
16.9
15.1
13.5
11.7
8.6
8.5
29.3
16.8
45.9
77.8
63.9
33.7
35.8
70.4
52.0
46.3
3.6
3.4
3.0
2.3
2.2
1.9
1.7
1.5
1.1
1.1
4
5
8
9
10
11
12
14
18
19
Nigeria
China
Indonesia
Pakistan
Philippines
South Africa
Zambia
South Sudan
Note: Panels A and B include the twenty countries with the highest share of the world’s extreme poor in
1987 and 2013, respectively. Note that Panel B includes the full list of eight high-poverty middle-income
countries in 2013, which we define as middle-income countries with at least one percent of the world’s
poor in 2013: India, Nigeria, China, Indonesia, Pakistan, Philippines, South Africa, and Zambia. We
classify countries as low- or middle-income in 1987 and 2013 based on the World Bank’s list of economies
for FY1989 and FY2015, respectively; classifications for these years use income data from calendar years
1987 and 2013. We use data on extreme poverty from PovcalNet (2018).
176
Journal of Economic Perspectives
growth episodes in which the periods of prosperity reached few (Acemoglu and
Robinson 2012) or evaporated or reversed in periods of conflict (  Jones and Olken
2008). In the absence of sustained growth, direct provision of cash and services to
the poor is a critical, immediate way to alleviate poverty in low-income countries.
Foreign aid will likely play a key role in providing these services.
In the second cluster of countries, growth has lifted millions out of poverty,
but has also left millions behind amid increasing inequality (Alvaredo, Chancel,
Piketty, Saez, and Zucman 2018). Continued growth may ultimately lift up those
remaining millions, but it may do so much more slowly than is necessary. Ending
poverty by 2030 in this second group of countries will require not just growth
of the economy, but redistribution of new domestic resources to the poorest.
Such redistribution must come in the form of services and institutions that the
poor need for economic mobility. Because these countries receive relatively little
foreign aid, domestic states will bear most of the responsibility for providing these
services to the poor.
Perhaps because we typically identify the poor as those living below a certain
income or consumption level, providing the poor with resources to exit poverty is
often characterized in terms of cash transfers: that is, give the poor money and they
will stop being poor. But poverty is more than just a lack of money, and escaping it
requires more than cash. A variety of studies have shown that extreme poverty can
be reduced by providing poor households with health, education, and access to a
secure financial system and credit services, and by creating and enforcing regulation to ensure they are not exploited by shopkeepers, landowners, and employers.
The effective use of resources targeting extreme poverty, therefore, requires
a complementary focus on investments in what we term “invisible infrastructure.”
We conceive of invisible infrastructure as the social and human systems that enable
citizens to realize their capabilities and escape poverty. This comprises traditional
elements of social infrastructure like health care and education but also, importantly, the incentive and information structures that bring the actions of those who
control resources in line with the needs of the poor.
In advocating for investment in invisible infrastructure, we emphasize that the
domestic state is the inevitable regulator, if not always the provider, of these services
and institutions for the poor. First, the state is the only body with the mandate to
provide certain critical institutions, like property rights and a monopoly of violence.
Second, even where for-profit businesses and nongovernmental organizations are bestplaced to provide specific services, such as micro-credit, the state alone can regulate
the provision of these services to the poor. Third, the state has a role to play in spotting gaps in service provision and intervening in the absence of viable private sector
providers. The final reason is pragmatic: the size of the state in each high-poverty
middle-income country dwarfs foreign aid. While aid may play a role in providing
invisible infrastructure and relieving immediate suffering in low-income countries,
these countries too will graduate out of foreign aid as they grow richer; as they do, the
state will increasingly bear responsibility for providing the invisible infrastructure and
will likely still house large poor populations.
Ending Global Poverty: Why Money Isn’t Enough
177
Therefore, enabling the provision of invisible infrastructure requires building
capable and accountable domestic states. How can the international development
community best deploy its resources to help?
A key part of the task at hand is to ensure that aid policies strengthen domestic
institutions rather than undermine them. Especially in low-income countries, aid
agencies often bypass messy, corrupt states and instead channel funds through a
cadre of nongovernment organizations, contractors, and other nonstate actors.
There are reasons for this. Doing so may be necessary on occasion, as, for instance,
when delivering humanitarian aid after a natural disaster. Also, donor-country
politicians may find it hard to justify working with governments seen as corrupt or
compromised. But in the long term, aid transfers that bypass the state may fail to
improve—and in some cases may even harm—the state’s capacity to provide invisible
infrastructure to its citizens. Even in the short term, cutting out the domestic state
inhibits the use of two vital tools: local information about what works in context,
and mechanisms for taking citizen preferences into account. The loss of these tools
can damage long-term prospects for poverty reduction, because people who feel
they have no voice in development may be less willing to support it by paying taxes.
We argue, therefore, that a sustainable end to global poverty will require that
the international development community and civil society organizations invest
resources in interventions that can help build capable, democratic state institutions. Some guidance on successful interventions comes from recent empirical
contributions in the political economy of development literature, which support an
agency perspective on government functioning: governments comprise individuals
interacting along a human chain of command. Governance failures like corruption
and leakage of funds reflect failures to resolve misaligned incentives and informational asymmetries along this human chain (for an overview, see Finan, Olken, and
Pande 2017). Designing such reforms requires insights from the fields of political
economy and mechanism design, as well as a theory of government that allows the
disempowered to act as principal. Ultimately, it is democracy, done right, that best
allows citizens to demand what they need to end poverty.
Can We Rely on Growth to End Poverty?
Economic growth has significantly lowered global poverty (Kraay 2006; Dollar,
Kleineberg, and Kraay 2016). China alone was home to three-quarters of the 1.12
billion people lifted out of extreme poverty worldwide between 1981 and 2013, when
it grew at an average rate of 10 percent per year. India grew at an average annual
rate of 6.2 percent over the same period, and it had about 190 million fewer people
in extreme poverty in 2013 than in 1981; Indonesia, which saw average growth of
5 percent, had 92 million fewer.2
2
Authors’ calculations using poverty data from PovcalNet (2018) and data on GDP growth from World
Development Indicators (2018b).
178
Journal of Economic Perspectives

One would hope for growth to produce similar gains in today’s low-income
countries, lifting their citizens up the income ladder. Yet freeing low-income countries from cycles of conflict, natural disasters, and recession has proved challenging,
and it is not clear when and how sustained economic growth will arrive as a driver of
substantial declines in absolute poverty (   Jones and Olken 2008).
In today’s high-poverty middle-income countries, economic growth will
certainly continue to reduce extreme poverty. But poverty can have a long half-life
in the presence of inequality. In India, which in 2013 contained the largest share of
the world’s extreme poor, over 100 billionaires lived alongside 210.4 million people
in extreme poverty in 2013. This imbalance arises from unequal growth: India’s top
10 percent of incomes captured 66 percent of growth between 1980 and 2016, while
the bottom 50 percent captured only 11 percent (Alvaredo et al. 2018). Furthermore, growth often discriminates: in India, disadvantaged social groups (Hindu
lower castes and Muslims) came to represent 55 percent of the poor in 2011—up
from 44 percent in 1983.3 Assouad, Chancel, and Morgan (2018) provide congruent
evidence for high-poverty middle-income Brazil and South Africa.
At minimum, these trends in inequality suggest that growth does not reduce
poverty as quickly as the equitable distribution of resources might permit. A stronger
conjecture is that as the poor are increasingly drawn from socially disadvantaged
groups, discrimination and inequality-fueled conflict will weaken growth’s ability to
raise the incomes of the poor (for instance, Mitra and Ray 2014). In either case, we
argue that ending extreme poverty as quickly as possible in both low-income and
high-poverty middle-income countries will require coupling growth with mechanisms to directly redistribute resources to the poor in the forms that they need.
Can Physical Infrastructure or Cash Suffice to End Poverty?
Consider people living in a remote rural village separated from the nearest city
by a river, a forest, and steep mountains (Castañeda et al. 2018). What would it take
for them to gain enough income to exit poverty? A traditional model of economic
development that focuses on raising earnings might call for investments in physical
infrastructure—perhaps the construction of a road to allow them to sell goods or
make their way to the city for work.
How would this road get built? A bridge across the river isn’t enough, nor is
a tunnel under the mountain, nor is a way through the forest. Rather, all of these
things need to be constructed and linked into a viable path from the village to
the city. Private companies might build some of these elements—but the road as a
whole is expensive and difficult enough that the state will need to coordinate and,
likely, subsidize parts of construction.
Rural roads, by themselves, may not bring jobs to the village (Asher and
Novosad 2018). But for many male villagers, the road might still enable an escape
from poverty. They can get on the bus, go to the town, and find manual work there,
3
Authors’ calculations using rounds 61 and 68 of India’s National Sample Survey (NSS 2016).
Lucy Page and Rohini Pande
179
perhaps enabled by a free bus ticket (Bryan, Chowdhury, and Mobarak 2015). But
neither the road nor a free bus ticket may suffice for a poor female villager, since
social norms and safety concerns may prevent her from getting on the bus in the
first place. Perhaps she can make some money selling vegetables at the bus stand,
but beyond that, the road will do very little for her directly.
A more modern model of development might advocate sending the woman
cash. Indeed, mo…
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