Growth can generate prosperity and opportunity. But, can under different conditions, similar rates of growth have same effects on poverty?  Study says poverty reduction depends on the pace and pattern of the growth. It reduces poverty depends on the degree to which the poor participate in the growth process and share in its proceeds.

Economic growth is a crucial means for expanding the substantive freedoms of the people. These freedoms are strongly associated with improvements in general living standards, to become healthier, to eat better, to invest in education by sending their children to school

How quickly growth reduces poverty depends both on the initial income distribution and how it evolves over time. In societies with more unequal distributions the same growth rate makes far less of a dent in poverty. How efficiently average growth will reduce poverty also depends on how the income distribution shifts as the economy grows.

Obstacles In The Way Of Poverty Reduction And Growth

  • Investment Capacity Constraints 

Investment is critical for growth and to escape from poverty. Low-income levels are a fundamental reason why the poor cannot save enough money to finance productive investments and another obstacle when they want to borrow: steep transaction costs and high interest rates that make credit a losing proposition.

  • Constraints for Human Capital Development

Human capital, in its broadest sense, comprises people’s educational attainment, their health and nutrition. The investment may hold little appeal for poor families primarily because of the opportunity cost of children and young people who could be working in their homes or bringing in outside paychecks.

  • Social Instability

Another channel through which poverty can stall growth is by way of its relationship with social and political equilibrium. Where social injustice is pervasive, no say in the political process, trigger social upheaval and, ultimately, the kind of sustained violence that puts the brakes on growth.

Study says, the economic growth is a crucial factor in poverty reduction, but the level of inequality and its evolution affect its impact on poverty. Also the economic growth is not just associated with reducing poverty but a positive link too between economic growth and broader measures of human development. So, to reap the benefit of growth and to reduce poverty the constraints as given above needs to be addressed.


References:

WEF

OECD

UN-WIDER

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