from the viewpoint of development economics (otsubo_20190413)_2on1.pdf3 5 sustainable development...

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From the Viewpoint ofDevelopment Economics

Economists’ Reasons for Poverty

(From MDGs to SDGs)(For GSID I2ID-DE Part I Lecture)

Prof. Shigeru T. OTSUBO

GSID, Nagoya University

April 2019

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1. “Economic Development” in “Development”

For “Poverty” Reduction…..

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Sustainable Development Goals (SDGs) ◆ Goal 1: End poverty in all its forms everywhere◆ Goal 2: End hunger, achieve food security and improved

nutrition and promote sustainable agriculture◆ Goal 3: Ensure healthy lives and promote well-being for all at

all ages◆ Goal 4: End hunger, achieve food security and improved

nutrition and promote sustainable agriculture◆ Goal 5: Achieve gender equality and empower all women and

girls◆ Goal 6: Ensure availability and sustainable management of

water and sanitation for all◆ Goal 7: Ensure access to affordable, reliable, sustainable and

modern energy for all

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Sustainable Development Goals (SDGs) ◆ Goal 8: Promote sustained, inclusive and sustainable economic

growth, full and productive employment and decent work for all◆ Goal 9: Build resilient infrastructure, promote inclusive and

sustainable industrialization and foster innovation◆ Goal 10: Reduce inequality within and among countries◆ Goal 11: Make cities and human settlements inclusive, safe,

resilient and sustainable◆ Goal 12: Ensure sustainable consumption and production

patterns◆ Goal 13: Take urgent action to combat climate change and its

impacts◆ Goal 14: Conserve and sustainably use the oceans, seas and

marine resources for sustainable development

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Sustainable Development Goals (SDGs)

◆ Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

◆ Goal 16: Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

◆ Goal 17: Strengthen the means of implementation and revitalize the global partnership for sustainable development

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Photo: © Lisa KristineSource:TED (Jan. 2012)

Photos: © Shigeru T. Otsubo

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Major Shifts from MDGs to SDGs

◆ DGs for all, developed and developing, alike…

◆ Ever expanding notion of “Sustainability”Sustainable Planet and Sustainable Society

◆ Determination to interfere “Internal Affairs”Dealing with (Structural) Inequality in order to savestructurally poor (domestic governance incl. institutions, laws/regulations, even embedded social values

◆ Calls for Wider Participation & Networking Brain Power

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III.3 Poverty Indicator, Social Issue and PolicyIntervention

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Stage of Development Poverty Measurement Social Issue Policy Intervention

Less Developed

Developing

Emerging

Developed

Advanced

Calorie Poverty

Expenditure (Basic Needs)

Poverty

Relative Poverty

SWB & Subjective

Poverty

Subjective Poverty

Hunger

Decent Living

Social Exclusion

Satisfaction and Political Instability

Satisfaction and Political Instability

Food Policies

Growth Policies

Redistribution Policies

Social Policies

Social Policies

Source: Authors

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What is Economic Growth?

In the development economics field, the term “economic growth” and “economic development” are distinctively used. Strictly speaking, economic growth is the growth of the size of the real economy in a country, which is measured by the gross domestic product (GDP). The growth rate is what we call the economic growth rate. However, when discussing its effect to poverty reduction, there are times that increase in the average income per capita (GDP divided by population) is considered economic growth. In this case, the rate of per capita income increase is observed.

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What is Economic Development? In economic development, “development” is perceived as a process. Economic development is defined as a concept that involves the following structural changes and social transformation that accompany economic growth.

◆ Industrial transformation (shift from an agriculture-dominant society to an industry-dominant society), and economic structural changes such as developments in economic/social infrastructure and institutions;

◆ Social transformation and the changes in lifestyles that accompany urbanization (labor migration from rural areas to cities);

◆ Cultural transformation such as the shift from family/relative/tribe-oriented organization/relationship to a more merit-based, contractual organization/ relationship;

◆ Political transformation including democratization and (legal) institution building for the establishment of property rights, contract enforcement, and so forth.

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What is Economic Development? When we see “development” as outcomes, it is considered

that development has happened or has been made, only when human well-being has improved along with economic growth (income growth).

Dadley Seers (1969) discusses as follows: The questions to ask about a country’s development are therefore: What has been happening to poverty? What has been happening to unemployment? What has been happening to inequality? If all three of these have declined from high levels, then beyond doubt this has been a period of development for the country concerned. If one or two of these central problems have been growing worse, especially if all three have, it would be strange to call the result “development” even if per capita income doubled. (P-G-I Triangle & Pro-Poor Growth)

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P-G-I Triangle

19FIGURE 1.2 Poverty-Growth-Inequality Triangle under GlobalizationSource: Authors’ construction.

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2. The State of the World

Economic Growth(Changes in per capita Income)(Changes in Income Disparity)

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Regional Poverty Estimates (2011 PPP $1.90 )

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World’s Poor in 2005

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Income Convergence?

Note: Country compositions of geographical regions are basically fixed. Country compositions of income groups, however, change over years. For tabulation, they are fixed using 2019 World Bank income groupings.

Source: Compiled by author using World Bank, World Development Indicators On-line Database. http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators�data downloaded on April 13, 2019�

Table1-2 Changes in Regional Real Per Capita GDP �2010 US$�

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Income Convergence? (σ-convergence)

(from Otsubo (2009), Globalization and Development)

http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators

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Income Convergence?(Absolute β-convergence)

(Source) Otsubo (2009), Globalization and Development.

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High Income OECD 24 Countries: 1960-2005All Countries: 1960-2005

(Barro’s Ad Hoc Growth Equation Estimation)

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3. Poverty-Growth-Inequality Triangle

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, ' A ? F

A AE , ?AE - A ,? , ? A AE , ?AE - AD ?A ? DA D ?A A? A

Figure 0: Poverty-Growth-Inequality Triangle

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Figure 0.5: Decomposition of change in distribution and povertyinto growth and distribution effects

Source: Bourguignon (2003), Figure 1.2; Bourguignon (2004), Figure 1

Change in Poverty = F( growth, distribution, change in distribution) (assuming log-normal distribution)

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Recent Movements in Japan’s Gini Indices

Source : Author’s unscientific imagination !?

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Figure 4 : Growth is good for the poor (Figure 1-4 in Ch.1)

Source: Dollar and Kraay (2007), Figure 1

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31

.

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Pro-Poor vs. Pro-Growth Pro-Poor Growth

Figure 1-3 Kuznets’ Inverted U-Curve

1

- 0

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Figure 3: Cross-country estimates of the Kuznets curve

Source: Bourguignon 2004, Figure 5

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33

Figure 6 : Poverty incidence in China and India, 1981-2001

Source : Ravallion (2005), Figure 12

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Figure 9 : Income inequality in rural and urban areas and nationally (China)

Source : Ravallion and Chen (2004), Figure 5

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Figure 7 : Inequality and average income in India

Source : Bruno, Ravallion, and Squire (1996), Figure 1

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4. Evolution of Development Paradigms…..

Economists’ Reasons for Poverty

(Refer to the A3 Table Distributed)

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The Evolution of Development Paradigm:A Simplified Review

After WWII1960s (early 1970s)

ISI

1980s

SAP

End of the 20th C.& Beyond

PRSP

New PoliticalEconomy of

Development???

-2015

MDGsBHN

Role of Government

1985-

Globalization

1989-

GovernanceNIE

Social Capital

37

38

Source: Prof. Shigeru T. Otsubo, I2ID Book Chapter 1; Table 1-3

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The Evolution of a Development Paradigm(Figure 1-1 & Table 1-3 in Chapter 1)

39

The Evolution: 1940s to 1960s

40

21

The Evolution: 1970s

41


42

22


43

The Evolution: into the 21st Century

44

23

45

5. Issues of Major Concern …

Industrialization in the 21st C.

46

24

Price indices for selected energy and commodity products 1985-2000

-40

10

60

110

160

210

260

Jul-85

Jun-86

May-87

Apr-88

Ma r-89Feb

-90Jan

-91

Dec-91

Nov-92

Oct-93

Sep-94

Aug-95

Jul-96

Jun-97

May-98

Apr-99

Ma r-00Feb

-01Jan

-02

Dec-02

Nov-03

Oct-04

Sep-05

Aug-06

Jul-07

Jun-08

May-09

Apr-10

Ma r-11Feb

-12

Inde

x. 2

005=

100

Crude Oil Metals Food

1990s

Source: www.indexmundi.com/commodities


-40

10

60

110

160

210

260

Jul-85

Jun-86

May-87

Apr-88

Ma r-89Feb

-90Jan

-91

Dec-91

Nov-92

Oct-93

Sep-94

Aug-95

Jul-96

Jun-97

May-98

Apr-99

Ma r-00Feb

-01Jan

-02

Dec-02

Nov-03

Oct-04

Sep-05

Aug-06

Jul-07

Jun-08

May-09

Apr-10

Ma r-11Feb

-12

Inde

x. 2

005=

100

Crude Oil Metals Food

1990s


Source: www.indexmundi.com/commodities

Price indices for selected energy and commodity products1985-2000-2012 (in fact, 1998/1999 on…)

25

World Total Fertility Rate Map (2006)

Note: Replacement rates are 2.07-2.08 for developed countries; 2.5-3.3 for developing countries.

Source: http://en.wikipedia.org/wiki/Image:Fertility_rate_world_map_2.png

By 2020, growth in world’s working-age population will be exclusively determined by developing

countries

Source: World Bank (2013) Global Development Horizons “Capital for the Future”

Shar

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ld

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latio

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by

deve

lopi

ng c

ount

ries

(%)

26

Saving rates will decline more slowly in developing countries…

By 2030, those countries will account for two-thirds of global savings…


Developing countries have accounted for a growing share of global savings since around 2000…

Nat

iona

l Sav

ing

as sh

are

of g

loba

l in

com

e (G

NI)


27

53

6. Association with Other Subject Areas

(Human Capital incl. Education, Governance, Democracy,

Human Development…)

54

Building ‘Interdisciplinary’ and ‘Active’International Development Studies

Given issues/problems in the field:we are in need of Multidisciplinary Network Studies

28

55

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5LE RHML P RDD MLM H FMTDPL L D L FD DLR

(

9 RGDP / MLRPM PH A D

DP MERP CD G LFDG LFD HL DVNMPR NPH D H NMPR NPH D P RHM

EMP D G NDPHMC ) ) (

8M ME9 A DPT RHML EMP D G NDPHMC (

ME7 D L D DP / NHR 5L M D

DPHMC .TDP FD 3 PM RG RDTable 1-4

Estimated Ad Hoc Growth Equation �Human Capital, Governance,

Institutions and Economic Growth�

Note: Dependent variables are the growth rates of real per capita GDP for 1965-75, 1975-85, and 1985-90. Estimation is carried out by three-stage least-squares (with different instrumental variables used for each period/equation). pvalue for joint significance of two democracy variables (items (8) and (9)) is 0.0006 (i.e. jointly significant). Dependent variables are classified by this author in order to facilitate readers’ understanding of the estimated results.Source: Barro (1997), Table 1.1, simplified and re-categorized by this author.

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Money alone is not enough!!

But if that Money was not

available?

29

57

Economic Growth and Human DevelopmentFigure 1-5

Per Capita Income and Human

Note: Horizontal axis: per capita income

levels in the year 2006 (in 2005-based

PPP$) shown in deviations from the mean income of Middle-Income countries�ppp$6,649�.Vertical axis: human development

indicators in the year 2006 shown in

deviations from the mean value of the Middle-Income countries (0.774).

Source: Author’s own compilation using the original data set on the Human

Development Data Site of the United

Nations Development Program (UNDP�< http://hdr.undp.org/en/statistics/data/>.

-0.5

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

��

X-axis�pc real GDP ppp $1,000) deviation from Middle Income mean : $6,649�

Y-axis Humadn Development Indicator

�deviation from Middle Income mean: 0.774�

Gabon

BotswanaSouth Africa

Equatorial Guinea

58

What is Development? 1

Introduction to International Development Studies: An Interdisciplinary Approach

co-editors: Prof. S. Otsubo, development economistProf. H. Kimura, political scientist,Prof. S. Ito, development sociologist

In this book, we define ‘development’ as the reform of the whole structural system that produces material as well as non-material poverty.

30

59

What is Development? 2When ‘proper incentives to get out of poverty’ so defined by

a development economist are given to the ‘structural poor’, if they are equipped with ‘capabilities’ and ‘adaptability’ to respond, those who cannot easily benefit from ‘trickle-down’ may rise to their feet and overcome poverty by themselves.

The ‘potential poor’ who may easily fall into poverty given external economic/social/natural shocks are equipped with resilience supported by social capital including social safety nets, they may not have to fall into poverty repeatedly.

The poor have to be treated as active participants to development. For that end, people have to be ‘empowered’.

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What is Development? 3

The state of ‘development’ should be the situation where people are empowered and a country is full of empowered human beings.

‘International development’ should be the international cooperation/collaboration heading for this end.

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61

Three Pillars of Poverty Reduction

Therefore, we set the three pillars of poverty reduction as follows:

1. Attainment of ‘pro-poor’ growth (the growth engine has to be running),

2. Adoption of proper public policies, incl. exercising good governance and building institutions, and

3. Empowerment of the ‘structural poor’ and the ‘potential poor’.

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“Poverty never sleeps…..

Thank you …..

from the viewpoint of development economics (otsubo_20190413)_2on1.pdf3 5 sustainable development...

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