Growth and equity
The growth and equity debate has three elements: economic growth, equity and human development. Some are desirable outcomes and some are means of achieving these outcomes. The two are often confused in the growth and equity debate.
These three elements are dealt with through two key schools of thought presented in this Key Issue Guide. The first argues that growth is a sufficient precondition for human development. Thus the link between growth and human development runs in one direction. The second school of thought takes on a more dynamic perspective. It contends that growth is necessary but not sufficient. Growth can only be sustained when all parts of society contribute to, participate in, and benefit from growth. Hence, equitable growth contributes to human development and in turn human development contributes to growth and to equity.
These three elements are dealt with through two key schools of thought presented in this Key Issue Guide. The first argues that growth is a sufficient precondition for human development. Thus the link between growth and human development runs in one direction. The second school of thought takes on a more dynamic perspective. It contends that growth is necessary but not sufficient. Growth can only be sustained when all parts of society contribute to, participate in, and benefit from growth. Hence, equitable growth contributes to human development and in turn human development contributes to growth and to equity.
- Economic policy to reduce income inequalities
- The importance of reducing inequities has become widely recognised as necessary for development. Yet a coherent set of policies to address income inequality has not. This inaugural lecture reviews various themes on income inequality to show how academic analysis and debate can be strengthened to stem the growing tide of income inequality.
Growth: necessary and sufficient for poverty reduction
In the contentious debate linking growth, equity and human development, one line of thinking is that growth is a necessary and sufficient precondition for poverty reduction. Within this school of thought there are two groups; a first group argues that growth, on average, benefits the poor, regardless of how it is distributed. Essentially, the benefits of growth are assumed to trickle down to the poor. A second group champion pro-poor growth. They argue that economic growth is necessary for wealth redistribution – otherwise it would be politically infeasible. In both groups, improvements in equity mean that the poor benefit from growth – regardless of how much more or less the wealthiest benefit. Recommended reading...Looking beyond growth
Growth is a necessary but insufficient condition for human development. In this second school of thought, the relationship between growth, equity and human development is seen as mutually reinforcing. Equitable access to education, for example, enables more people to participate in and contribute to the growth process. Inclusive growth, in turn, allows more people to invest in education and other dimensions of human development. Here, the pace and pattern of growth becomes paramount. These theorists consider which groups are included and excluded in the growth process and in poverty reduction. Addressing inequities is considered integral to sustaining growth, reducing poverty and achieving the Millennium Development Goals (MDGs). Recommended reading...Measuring equity in growth and human development
Equity can be measured in many ways. The unit of analysis to measure equity can be the country (for global inequality), the household and the individual. The metric can be money (e.g. income or expenditure) or non-monetary (e.g. Daily adjusted life years (DALYs) or years of education). Money-metric measures asses how equitable growth is. Non-monetary measures can be used independently, or complemented with money-metric measures, to determine equity in human development.
Methodological approaches to measuring equity can range from quantitative to qualitative methods, with some approaches complementing both (i.e. q-squared approaches). Reductions in equity, both in terms of growth and human development, can be captured through inequality or polarisation measures. Polarisation measures have been introduced in an attempt to better capture those aspects of inequity that standard inequality measures overlook or neglect. Equity can be measured in absolute or relative terms. The choice of metric, the unit of analysis and the methodological approach are not neutral; they shape the results and the conclusions of analyses and hence influence the policy recommendations. Recommended reading...
