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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.
This is the part of after-tax personal income that is not spent.
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