Research

As countries become richer, on average the incidence of income poverty falls and other well-being indicators improve as well. For these reasons, economic growth can be a powerful tool for human development. Nonetheless countries with similar rates of economic growth can have very different rates of poverty reduction and growth often comes with increasing inequality.

Impressive body of research on the growth-inequality nexus has long been made available by economists, including non-linear relationship and two-ways relationship, and investigating under which conditions the growth is inclusive, therefore also the most fragile groups benefit from economic expansion. Yet, the present trends deserve attention. Over the last three decades, inequality in income distribution has grown in most developed countries, whose working classes are affected by the new geography of global production, and in several middle-income countries and emerging economies, notably in the world’s most populous countries – China and India – in particular. Conversely, income inequality between countries has declined, at least in relative terms, mostly due to performances of some emerging economies, which also resulted in worldwide poverty reduction.