Explain the relationship between growth and inequality, Financial Management

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While poverty reduction has become the main goal of development efforts, there is an on-going and sometimes heated debate about the elements that would be at the center of any sensible poverty reducing strategy. By definition, poverty reduction in a country is a function of the changes in average income and changes in income inequality. But this simple identity raises some obvious questions on what should be the right balance between pro-distribution and pro-growth interventions in a poverty strategy.

i) Describe the relative contribution of income growth and distributional changes to changes in poverty.

ii) Explain the relationship between growth and inequality.


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