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Impact Assessment for Macroeconomic Poverty Policy

By Rodney Schmidt, | The North-South Institute | September 1, 2002

What combination or sequence of macroeconomic development policies will most effecctively raise growth rates, improve the distribution of income and reduce aggregate poverty? Can all three objectives be achieved at once?

To learn the answers to these questions for a particular country requires policy analysis and macroeconomic policy impact assessment (MPIA), a concept we define in this paper. In general the answers depend on how growth, income inequality and aggregate poverty occur, how they interact with each other and how they respond to policy. Income growth and aggregate poverty reduction can be associated with either increasing or decreasing inequality. Reducing aggregate poverty can either reduce growth or increase it.

The simple view that growth is always sufficient to reduce income inequality and aggregate poverty is no longer accepted. Logically, rejection of that simple view motivates the internationally agreed Millenium Development Goals (MDGs) and the Poverty Reduction Strategy Paper (PRSP) process. These international conventions reflect disillusionment with devoting macroeconomic development policy solely to economic growth and establish income inequality and aggregate poverty as strategic objectives, together with growth, of macroeconomic policy.

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Read More: Development, Economy, Poverty, Global

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