1393: Poverty and Development Fall 2006 Beatriz Armendáriz Littauer Room Tel Office Hours: Tuesdays 9 – 11 & Wednesdays 3 - 4

Teaching Fellow Minh Phuong Bui Office Hours: Thursdays 8 – 11 Room: TBA

Overview Poverty & A Rudimentary Notion of Poverty Line - Income (< $ 1 or < $2 a day) - Health (inadequate access, vulnerability…) - Education (illiteracy, inadequate access & quality) Development Enhancement of people’s functionings and capabilities A. Sen

In this course: The fundamental goal of economic development: Eradication of poverty as captured by the MDGs: 1. Reduce by half the proportion of people living in extreme poverty (<$1 a day) 2. Ensure universal primary education 3. Eliminate gender disparity in primary and secondary education 4. Reduce infant and child mortality by two thirds 5. Reduce maternal mortality by three-quarters 6. Ensure universal access to reproductive health services 7. Implement national strategies for sustainable development in every country, so as to reverse the loss of environmental resources

1. The Basics: Poor people (about 1.2 billion, mostly in South Asia and Sub-Saharan Africa) are talented But: Very limited access to education, health, credit.. → Low productivity → Low income……..vicious circle or poverty trap

2. The Relationship between Per Capita Income and Growth Source: Dollar and Kray (2001)

3.a Relationship between income per capita and health

3.b Relationship between Income per capita and health

4. Relationship between income per capita and education

Measures of income per capita across countries and overtime are not accurate. Two methodologies: 1) exchange rate method 2) ppp method Moreover, distribution of income in poor countries is highly unequal → poor are twice cursed: -once for living in countries that are poor on average -and, again, for being on the receiving end of the high levels of inequality in those countries (DR, pp. 22 – 23)

An alternative approach: In addition to Income Per Capita: 1.Life expectancy at birth 2.Educational attainment → Human Development Index (HDI) published yearly by the United Nations since 1990.

Seven additional variables related to poverty and underdevelopment Institutions Credit constraints Aggregate shocks Population growth Agriculture Underindustrialization Globalization Environmental degradation → Next Class: Growth and Poverty Reduction (WDR 2004, Chap. 1, and DR Chap 3, and Easterly, Chap ).