Lecture 6.2

Democracy and Redistribution

Emmanuel Teitelbaum

Poverty

Definitions

• Poverty–a lack of money, material possessions or means
  • Income-based approach (World Bank)
  • Capabilities approach (Amartya Sen)
• Inequality–the unequal distribution of wealth and opportunity in a society

Measuring Poverty

• “Headcount ratio”
  • Percentage of population below a poverty line
  • Associated with income-based approach
• Multidimensional poverty index
  • Associated with capabilities approach
  • Measures “intensity” of poverty, not just frequency
  • Incorporates health care, education and living standards

Extreme, Moderate and Relative Poverty (Sachs)

• Extreme poverty or “absolute poverty”
  • Cannot meet basic survival needs
• Moderate poverty
  • Basic needs are just barely met
• Relative poverty
  • Lack access to tools for upward social mobility
  • Applies mainly to high income countries (Sachs 2005)

Poverty Lines ($ per day 2021 PPP)

• Extreme poverty: $3.00
• LMIC threshold: $4.20
• UMIC threshold: $8.30

Extreme Poverty

Regional Trends in Extreme Poverty

LMIC Threshold

UMIC Threshold

Global Trends at Different Thresholds

Multidimensional Poverty

U.S. Extreme Poverty

• Angus Deaton
  • “The U.S. Can No Longer Hide from Its Deep Poverty Problem”
  • Roughly $4/day deep-poverty line (close to today’s $4.20 LMIC line)
• Life expectancy of poorest Americans less than Bangladesh or Vietnam
• Health indicators declining, not getting better

Discussion

• Go to Gapminder Dollar Street
• Pick a family
• Where do they fall on the poverty scale?
  • Extreme
  • Moderate
  • Relative
  • Not poor
• What would be the biggest challenge of living like that family?

Latin America

Inequality Trends

Poverty Trends

Health Spending

Education Spending

Key Concepts

• ISI (Import substitution industrialization)
• Formal and informal sector workers
• Contributory benefits, e.g. traditional pensions
• Noncontributory benefits
  • CCT (conditional cash transfer)
  • NCP (non-contributory pensions)

Holland and Schneider

• What is easy vs. hard redistribution?
• What do they want to explain?
• Competing explanations
  • Electoral competition
  • Deindustrialization
  • Partisan ideology
• What is their explanation?
• Come up with one good question about the reading