EC1111 - International Economic Policy RHUL - Autumn Vinay P. Nundlall Seminar 7 Read the articles posted in Moodle which relate to the topic on Poverty, then answer the following questions: Question 1 Is the poverty measure used by Besley and Burgess (2003) satisfactory? Explain your answer. What is the main empirical result from their research? Besley and Burgess use the Headcount index - the students should argue the merit and demerit of this. E.g. the index looks at an arbitrary line of poverty, and may exclude a lot more people who consider themselves poor. Poverty can be relative: if you can live on more than $1.25 a day, but your peers are living on $50 a day, then you will be considered poor. In middle income countries, the threshold of $1.25 is not enough. Further, people may be provided with all the basic means to lead a healthy life (housing, health care, food and shelter), but not have the income to spend on additional goods and services that make their lives enjoyable. The main result is that they estimate the elasticity of poverty with respect to real income to be negative, which implies that as income increases, the poverty index drops. The size of the elasticity matters and they find that it varies across regions in the world. The higher the absolute value, the more responsive poverty alleviation is to economic growth. The smaller the absolute value is, the less responsive it is. For the whole world, it is fi0.73. However, the estimate for SubfiSaharan Africa, the poorest region in the world (which by the way, is the only region that is getting poorer every year!), is fi0.49. This means that the region is resilient to policies geared towards alleviating poverty. Policy measures aimed at economic growth are not filtering down to improving the poor's fortunes because of institutional problems (probably because land is not distributed equitably, income is not redistributed fairly, etc ... ) Question 2 Explain what are: The Millennium Development Goals The Washington Consensus To what extent are they important?
These are all posted on Moodle and are selffiexplanatory. For the MDG's, students should go to the UN or UNDP site as well as the website of The Earth Institute. There are 8 international development goals that the UN wants to achieve by 2015. They are: 1. To eradicate extreme poverty and hunger 2. To achieve universal primary education 3. To promote gender equality and empower women 4. To reduce child mortality 5. To improve maternal health 6. To combat HIV/AIDS, malaria, and other diseases 7. To ensure environmental sustainability 8. To develop a global partnership for development Washington consensus: This term appeared in 1990 "to refer to the lowest common denominator of policy advice being addressed by the Washingtonfibased institutions to Latin American countries as of 1989." The policies advised to these struggling economies were: · Fiscal discipline · A redirection of public expenditure priorities toward fields offering both high economic returns and the potential