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POPULATION, INCOME INEQUALITY AND

THE POVERTY

ECONOMIC
DEVELOPMENT
BY

MAHMOOD ALI
FINAL PROJECT
SYED ABDUL BASIT SHAH

Hamid Khoso
Contents
ABSTRACT...................................................................................................................................................... 2
Income Inequality definition ......................................................................................................................... 2
Kuznetss ratio........................................................................................................................................... 2
Gini Co efficient......................................................................................................................................... 2
Absolute Poverty definition .......................................................................................................................... 2
Head Count Ratio ...................................................................................................................................... 3
Poverty Gap index ..................................................................................................................................... 3
Income inequality in different countries ...................................................................................................... 3
Income inequality and poverty in Pakistan:.............................................................................................. 3
Income Inequality and poverty in India .................................................................................................. 3
Income inequality and poverty in Indonesia ........................................................................................... 4
Income Inequality and poverty in Brazil ................................................................................................... 4
Income inequality and poverty in Nigeria................................................................................................. 5
Income inequality and poverty in Ethiopia ............................................................................................... 5
Relation of Income inequality and Poverty with population ........................................................................ 7

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GROWTH, INCOME INEQUALITY AND THE
POVERTY IN PAKISTAN, INDIA, INDONESIA,
BRAZIL, NIGERIA AND ETHIOPIA

ABSTRACT Nations always make their long term plans on the basis of forecasted Population, because
resources of the nation are consumed by the people so always the vision of a nation is dependent on the
number of the people in nation, We know by the first rule of economics that Resources are limited so we
have to efficiently allocate them, hence for the human development the plans for human population are
of great importance, drastic growth in population poses numerous issues, Deforestation hence population,
unemployment and Conflicts and wars among different countries in order to grab more land for more
people are few of the effects of over-population, only two thousand years ago the world population was no
more than the one fifth of the population of china today but due to increased medical research and
development and growth in technology at one side the life expectancy has increased but on the other
hand the increasing population has caused the issues of constant and growing poverty and unemployment,
in this document we will first define income inequality and poverty along with how they are measured and
then will tell how income inequality and poverty have grown in selected countries which include
1.Pakistan 2. India 3. Indonesia 4. Brazil 5. Nigeria and 6. Ethiopia over the time then we will discuss what
their relation with population has remained over the time and finally we will discuss the causes of such
trends in different countries superficially.

Income Inequality definition: Income inequality is defined as the extent of uneven distribution of
wealth in a given country. Income inequality is mainly measured using the below given methods.

Kuznetss ratio: It is obtained by dividing total income received by top 20% richest people with the total
income received by the lowest 40% of people.

Gini Co efficient: It is obtained by dividing the area of Lorentz curve as obtained by plotting cumulative
earnings against quartiles of population with the area of triangle as made by plotting a line of perfect
equality.

Absolute Poverty definition: A situation when the one earns below a poverty line of $1.9 a day.
Poverty is measured using different methods the main ones include:

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Head Count Ratio: It is the number of population living below the poverty line in a given country.

Poverty Gap index: It is average percentage shortfall of income from poverty line.

Income inequality in different countries: We calculate income inequality in different countries


using Gini coefficients as obtained from the World Banks world development indicators, first we verbally
discuss what has happened to income inequality in different countries through the time and then we show
graphically the trends of income inequalities.

Income inequality and poverty in Pakistan:

Dr Mahbub ul Haq (1968) in one of has articles wrote 22 families control 66 percent income in
Pakistan, recent UNDP report claims that 54 percent of rural people are poor as compared to 9 percent
in cities, while multidimensional poverty in Islamabad, Karachi and Lahore is below 10% but it exceeds
90 percent in Qilla Abdullah and few of other cities. Women hold less than 3 % of the land only, tax
exemption in few of the sectors and then lack of taxes paid by those who earned highest are the main
causes of inequality, corruption hence more concentration of wealth in bureaucrats class and those
who are in government are also the causes, land reforms by General Ayoub and Zulfiqar Ali Bhutto
could also not be successful. Therefore Income inequality in Pakistan throughout the history has
followed a random walk, from the graph as shown below you can well infer that as if no proper policies
have been directed towards reducing inequality, income growth policies mainly in different periods of
Mian Nawaz Sharif have ended with growth in GDP but a high income inequality in these years has
been observed. When it comes to poverty economic growth in Pakistan was slowed down in 1990s as
compared to a decade before however the country is observing a growth in current period (See graph
below)

Income Inequality and poverty in India: As of Nov 2016, India is the second-most unequal country in the
world. The richest 1% of Indians own 58.4% of wealth. The richest 10 % of the Indians own 80.7 % of the
wealth. This trend is going in the upward direction every year, which means the rich is getting richer and
the poor is getting poorer. As shown in the graph the income inequality in this country has followed a very
slightly upward trend.

In India, the poverty line is defined as an income sufficient to buy food providing 2,400 calories (rural)
and 2,100 calories (urban), plus 20% of that amount for other basic needs. During the 1950s - 1970s, the
percentage defined as below this line fluctuated around 50% of the population. Since that time, there has

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been some decline but even in the early 1990s it stood at over 30% for both rural and urban populations.
These rates do not apply equally to all sectors of society. Poverty is especially pronounced among the
Scheduled castes and tribes, and among agricultural laborers. There is also a growing class of urban poor,
economic refugees seeking an income in the city and finding themselves with no job or housing. Beggars
are still very common, and provide the western visitor with their most disturbing images of India.
Inequalities in India are not only very widespread: they are very visible, with beggars living on the
pavements outside luxury hotels and above were employed. However, there are still 21.9% of the
population who live below the national poverty line. Poverty as shown in the below graph has followed a
decreasing pattern throughout the years but still this is the country among all six selected ones which has
seen least decline in poverty.

Income inequality and poverty in Indonesia : Income inequality in Indonesia has also been relatively
constant throughout the time, it can be well observed from the graph that there have not been taken any
long term measures to decrease the inequality rather sometimes it has decreased and sometimes has been
increasing, according to the world bank the country has observed a sustained growth throughout last 15
years but it has mainly benefitted rich, Currently the government has taken initiatives and has planned to
reduce the Gini coefficient from 41 to 36 by 2019, poverty in Indonesia has seen a drastic decrease
throughout the history however there was just one period 1996 to 1999 in which the country saw a drastic
increase in poverty may be because of Asian financial crisis, however this increase was once again
controlled, since then the poverty has decreasing (See graph), According to the Asian development Bank
report the poverty in country was 11.2% in 2015, in 1999 47.9 million people in country were classified
poor however this number decreased to 35 million in 2011.

Income Inequality and poverty in Brazil: During the last two decades the poverty in Brazil has declined
along with inequality however the inequality in this country as compared to other five selected countries
is very high, Socialist policies of the current and the last government have been the main cause behind this
decrease in poverty , During the last two decades 28 million people in country were lifted up from extreme
poverty and 36 million entered in middle class, however 16.2 million people still live in extreme poverty,
of these 16 million 4 million live with no income at all. Presidents program of Brazil without misery, and
presidents Bolsa Familia cash transfer program are two of the main programs behind this improvement.
Also Busca Ativa or active search strategy is implemented to conform that benefits reach families who not
yet have received them due to geographical separation.

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Income inequality and poverty in Nigeria : Recent world bank report shows that there has been an
enormous reduction in poverty in Nigeria, however the income inequality in the country has almost been
similar, the causes of income inequality in country can be traced back to social divisions, cast system and
then the colonial era, like Pakistan taxation problems and the corruption are major causes of inequality in
this country as well, Government is heavily dependent on the export of oil neglecting the taxes to be
efficiently collected from general public. Over all the income in equality in the country has seen an
increasing trend however from the year 1996 to 2000 the country seen a decreasing trend in inequality.

Income inequality and poverty in Ethiopia: Ethiopia is one of the countries where significant human
development has been observed during the recent years, this is mainly because on average 70% of countrys
budget has been on health, education and other basic facilities, also according to the UN report the poverty
of 40% in 2000 fell to 30% in 2011, this according to the different researches is mainly because of
agricultural growth in country. When it comes to inequality, this is the only country among six selected
countries which has seen an enormous decrease in inequality from 1996 to 2000, it seems as if that the
country has highly performed in this area, currently for more than five years the inequality in country has
remained static.

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Gini Coeffeciant of selected six countries throughout Years
70

60

50

40

30

20

10

Pakistan India Indonesia Brazil Nigeria Ethiopia

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Relation of Income inequality and Poverty with population : No doubt population growth
is one of the greatest issues faced by globe specially the developing country, as discussed above
unemployment hence income inequality and then the poverty and inter country wars are few of the effects
of population growth, however when population regressed with poverty the results were not as expected,
with the constant growth in population the poverty in almost every of the selected countries has been
decreasing, this may be mainly because poverty is not merely a function of population rather different
other variables also can have an effect on the poverty, throughout the years the technological changes and
a decrease in the wars hence a decreased budget on defense have leaded to increased employment sources,

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moreover along with more research and development not only the life expectancy and the living standard
of people have improved but also this has given birth to numerous jobs for people. However with the
increased population the quality for jobs for drastically increasing number of people has not remained
same, most of the developing countries where population has been increasing the quality of jobs done by
people on average has been pathetic, mostly people do the jobs at farms, no technical jobs are done, they
merely earn to be subsistent, as explained above more than 35% people on average live in poverty in
developing countries hence with respect to increasing population the income inequality has increased that
is number of poor have been increasing however their collective earnings have contributed to countrys
GDP overall hence the population has not got a positive relation with poverty which was expected because
poverty is also dependent on different other variables apart from population. Correlation coefficients of
population with Gini coefficients and the poverty gap index were calculated for all the countries and results
are given as under.