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Posts on Jan 1970

Uncertainty in Ending Extreme Poverty – Brookings

Whereas sustained economic growth is considered the primary driver of poverty alleviation, the different ways in which growth interacts with changes in income inequality mean that the future of poverty reduction is highly uncertain.

In a recently published working paper, I use historical (1980-2014) data to model and simulate future paths of income inequality and growth, which, in turn, enable us to quantify country-specific changes in poverty rates and income distribution. Our historical-based simulations estimate that the probability of alleviating extreme poverty below the 3 percent threshold by 2030 (Sustainable Development Goal 1) at the global level is small—less than 2 percent.

Furthermore, our results indicate significant variation in future poverty outcomes. For instance, by 2030, the most favorable estimate of poverty headcount at the global level displays a median value of 4.6 percent, with a standard deviation of 0.5. Conversely, our most pessimistic result shows a median outcome of 8.9 percent with a standard deviation of 0.9. These median estimates represent approximately 370 and 720 million people around the world subsisting on less than $1.90 a day (2011 PPP).

In terms of country groupings, in relative terms, extreme poverty is expected to decline in the period 2015-2030 in economies with low, middle, and high rates of per capita output growth. However, in low-output growth economies, the absolute number of poor is expected to increase. The model simulations also predict that high-output growth economies—countries with steady growth rates above 4 percent—will reach poverty rates below a 3 percent level before 2030. Noticeably, the simulations display a low degree of uncertainty around the expected poverty rates in these high-output growth countries.

Moreover, non-resource-output oriented—or more diversified—economies, are predicted to achieve and go below the 3 percent poverty target by 2030. By contrast, several simulation exercises show resource-based economies witnessing an increase in absolute poverty during the period 2015-2030. We find significant dispersion in the estimated paths of poverty outcomes in these resource-based countries, implying that given recent history, it is hardly possible to predict precise estimates of poverty rates in these economies.

Resource-based economies. What is the current and future poverty situation in countries that rely heavily on natural resources? Figure 1 depicts two conditions. First, most countries with abundant natural resource rents in the period 1970-2015 have high rates of extreme poverty. Second, the majority of countries with high poverty headcounts had median annual growth rates of GDP per capita during 1970-2014 below the 4 percent threshold. In sum, it is quite likely that resource-based countries will keep elevated poverty rates by 2030: The most optimistic and pessimistic simulations show median poverty rates of 9 and 20 percent, respectively.

What can resource-based countries do? The main goal in resource-based countries can be the same as for the majority of countries in the world with high poverty rates: to expand the economy more quickly. Because of the volatility of resource prices, the primary strategy could focus on providing more stable economic and financial conditions. This strategy can be reached by developing sustainable debt management frameworks, improving investment and business climates, as well as implementing more transparent and accountable rules to administer resource rents. Additionally, these economies can benefit from strengthening their institutions, including those involving risk management backgrounds. Potential reforms include fiscal rules (probably balanced budget designs) for commodity revenues,
commodity price hedging, diversification strategies of the economic activities, among other actions.

Income inequality. What do the simulations suggest about shifts in income inequality? Most changes in relative income inequality are predicted to be on the positive side. The Gini coefficient across the board is generally predicted to decrease on average over the period 2015-2030. Across this 2015-2030 horizon, our estimates of the Gini coefficient at the global level—population-weighted averages—are expected to decline between 0.7 and 1.9 Gini points (in the Gini scale of 0-100). However, some of our country-grouping estimates of the Gini coefficient display substantial uncertainty and downside risks that imply an increase in the level of inequality in the 2015-2030 period; these negative estimates are especially significant in more diversified countries, and in economies with historically high and low rates of output per capita growth.

A multiplicity of historical-based results exacerbate uncertainty. In comparison with point predictions and perfect-foresight methods, our approach considers both the outcome precision of a multitude of historical-based scenarios and the uncertainty—standard deviation of simulated outcomes—embedded in the predictive fan chart generated for each situation. This multiplicity of results and the predictive fan chart and associated uncertainty provide strong incentives for the improved design of policies for poverty reduction and income redistribution. It is crucial to continue thinking in the design of
hedging mechanisms against risks under variable economic environments affecting poverty and income distribution.

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World Hunger on the Rise as 820m at Risk, UN Report Finds

More than 820 million people worldwide are still going hungry, according to a UN report that says reaching the target of zero hunger by 2030 is “an immense challenge”.

The number of people with not enough to eat has risen for the third year in a row as the population increases, after a decade when real progress was made. The underlying trend is stabilisation, when global agencies had hoped it would fall.

Millions of children are not getting the nutrition they need. The UN says the pace of progress in halving child stunting and reducing the number of low birthweight babies is too slow, which jeopardises the chances of achieving another of the sustainable development goals.
Nearly half of all child deaths in Africa stem from hunger, study shows
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The report is from the UN Food and Agriculture Organization, the International Fund for Agricultural Development, the UN Children’s Fund (Unicef), the World Food Programme and the World Health Organization.

While hunger remains widespread, obesity – also related to malnutrition – continues to rise in all regions. There are 338 million school-age children and adolescents who are overweight and 672 million obese adults. Asia and Africa, which have nine out of 10 of all stunted children and more than nine out of 10 of all wasted children worldwide, are also home to nearly three-quarters of all overweight children worldwide, largely driven by unhealthy diets.

One in seven babies around the world were born with low birthweight in 2015, the report says, many of them to adolescent mothers. That puts them at risk of poor development.

The world’s population has steadily grown, with most people living in urban areas. Technology has “evolved at a dizzying pace, while the economy has become increasingly interconnected and globalised”, say the heads of the UN agencies in a foreword to the report.

“Many countries, however, have not witnessed sustained growth as part of this new economy. The world economy as a whole is not growing as much as expected.”

Climate breakdown is affecting agriculture and the number of farmers has declined. “All of this has led to major shifts in the way in which food is produced, distributed and consumed worldwide – and to new food security, nutrition and health challenges.”

Hunger is increasing in countries where economic growth is lagging and there is income inequality.

“Our actions to tackle these troubling trends will have to be bolder,” the UN leaders say. “We must foster pro-poor and inclusive structural transformation focusing on people and placing communities at the centre to reduce economic vulnerabilities and set ourselves on track to ending hunger, food insecurity and all forms of malnutrition.”

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Nigeria Needs $24bn to Lift People Out of poverty — Oxfam

Oxfam has said it will cost about $24bn to lift all Nigerians living below the extreme poverty line of $1.90 out of poverty for one year.

The international organisation revealed in a new report that 69 per cent of Nigerians were living below the poverty line, adding, “Nigeria runs the most expensive governments in the world, with an over-bloated civil service, government advisers and aides, whose salaries are often very high.”

According to the report, the government at national and sub-national levels has been worsening inequality by under-funding public service, such as healthcare, education, water and sanitation and women’s empowerment.

The Interim Country Director, Oxfam Nigeria, Constant Tchona, gave the details in Abuja during the launch of the first regional report on the commitment to reducing inequality index.

The report said, “It will cost about $24bn to lift all Nigerians living below the extreme poverty line of $1.90 out of poverty for one year. This amount of money is just lower than the total wealth owned overall by the five richest Nigerians in 2016, which was equal to $29.9bn.

“Poverty in Nigeria is particularly outrageous because it has been growing in the context of an expanding economy where the benefits have been reaped by a minority of people, and have bypassed the majority of the population.”

According to Tchona, the richest man in Nigeria will take 42 years to spend all of his wealth at one million per day.

He said, “According to Oxfam’s calculations, the amount of money that the richest Nigerian man can earn annually from his wealth is sufficient to lift two million people out of poverty for one year.”

“The gap between the rich and the poor may be a worldwide problem but in Nigeria the scale of inequality is staggering. Nigeria is the only oil-producing nation in the league of five countries with the largest number of poor people. Official poverty rates remain high, at 46 per cent of the population or 62 per cent in strict per capita terms.”

He added, “Though the country’s economy has expanded at an average of six per cent every year since 2006, the paradox of growth in Nigeria is that as the country gets richer, more than half of its 200 million-strong population continues to live in abject poverty.

“With the misapplication of resources and priorities, economic growth in Nigeria has not created meaningful opportunities and employment as many of the country’s youth, including those with university degrees, are currently unemployed.”

Tchona outlined measures that should be taken by the government to end inequality in Nigeria.

He said, “There is an urgent need to critically examine the culture of governance and break the policies and norms that sustain the concentration of wealth and income at the top, to forestall the self-perpetuating cycle of inequality that subjugates many and sustain poverty in Nigeria.”

He said economic policies and development strategies should be formulated in a participatory manner and should have at the core reducing inequality as a key principle.

Tchona said the government should take urgent actions to bring down the cost of governance.

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