Referee Report

Halving Global Poverty

Firas Frangieh
Hiba Sbaity and Sophia Wakim

2

Charbel Bassil
Professor
Notre Dame University
Barsa, North Lebanon

Dear Professor Bassil:
We are pleased to present to you the second report in Economic Development, ECN 610,
for the Fall 2011, that was assigned on November 18
th
, 2011 as part of our evaluation. The title
of our report is: Referee Report: Halving Global Poverty.
This report was prepared in compliance with the guidelines you provided us. This report
tackles six different questions posed around the subject of halving global poverty, along with a
referee report about the cited paper at hand.
Our report demonstrates our ability to communicate what we learned from the case study
assigned and its links with theoretical concept explained in class. It also demonstrates our ability
for critical thinking.
In presenting this project, we want you to pay tribute for every one of us. Each individual
had a fair share in contributing to the accomplishment of what we are presenting.

Yours sincerely,

Firas Frangieh
Hiba Sbaity
Sophia Wakim

3

Referee Report
Halving Global Poverty


Firas Frangieh ID#20067010
Hiba Sbaity: ID# 20102991
Sophia Wakim: ID# 20067000

Notre Dame University
Barsa Campus
Fall 2011
Economic Development ECN 610
Professor Charbel Bassil

December 23, 2011


4

Preface


This report is a fulfillment of the requirement for the second evaluation in Economic
Development course, ECN 610, at Notre Dame University. The first part comprises of a referee
report for the cited paper Halving Global Poverty Besley T. and Burgess, R. (2003). In
addition to a critique, and suggestions for improvement. While the second part is an analysis that
tackles six different questions.
Our aim is not to give thorough explanation and economic formulas, but to communicate
what we learned from the case study assigned to us and its links with theoretical concept
explained in class.
The report is both analytical and descriptive. It contains accurate, factual information
together with sound arguments and conclusions. It is an accumulation of various different
resources and joint efforts.
To a large extent, this report is self contained. No prior knowledge of partial evaluation is
needed, since a comprehensive introduction is provided. It is understandable to someone who
has background in the area of the report but is unfamiliar with the particular topic of the report.




5

TABLE OF CONTENTS
LETTER OF TRANSMITAL ..................................................................................... # 2
TITLE PAGE .............................................................................................................. # 3
PREFACE .................................................................................................................. # 4
TABLE OF CONTENTS ............................................................................................ # 5
SUMMARY ............................................................................................................... # 6
CRITIQUE .....#7
GROWTH DRIVERS REVEALED ..................................................................................# 10
SUB-NATIONAL DATA VS TRADITIONAL DATA.....# 12
A MEASURE OF POVERTY# 14
MEASURING GDP PER CAPITA........# 17
RELATION BETWEEN GDP PER CAPITA AND THE OVERALL WELL-
BEING..# 18
THE ROLE OF ECONOMIC GROWTH IN REDUCING
POVERTY....# 20
INFERENCES FROM TABLE ONE AND TWO...# 23
PLAN OF WOLRD CHIEF ECONOMIST .# 27
REFRENCES# 31



6

Summary
The main issue discussed in the "Halving Global Poverty" paper is the millennium
development goal to cut in half the proportion of people living below $1 a day from 30% of the
developing worlds population in 1990 to 15 % by 2015. This paper shows in percentages the
global poverty and the poverty rates across regions as well as growth rates needed to exit
poverty. The relationship between Economic growth and poverty reduction is discussed widely
in this paper and it begins with a complete examination of the issues related to poverty and
economic growth in order to show the general economic growth requirements for reaching the
poverty reduction target. The main sources of growth are accumulating human and physical
capital as well as technological change. These three main sources aect the poor both directly
and indirectly by increasing the income and decreasing poverty rates. The increase in per capita
income and the equality in distributing income have a direct impact on achieving the global
poverty reduction goal. The agenda assembled for the aim of reducing poverty is based on
economic progress that includes multidimensional improvements. Human capital, enhancing the
ability of the poor to reach credit, more secured property rights and contracts, better regulations,
and improvements in the responsiveness of the governments. Also the agenda includes reforms
which directly improve the political and institutional fabric of the developing countries and
policy reforms. In particular, reforms should focus mainly on expanding opportunities for
households, improving the accountability of the elected officials, and improving the climate for
doing business. The agenda should be built on firm theoretical foundations and developed legal
systems.

7

Critique
The paper uses the headcount ratio based on the 1 dollar a day measure. There exists
other more specific poverty measure that could have been used. Those measures are the poverty
gap ratio, and the income gap ratio.
The use of the headcount as a measure of poverty systematically biases policy in favor of
individuals who are very close to the poverty line. Statistically, these people are the easiest to lift
above the poverty line. Yet of all the poor they are relatively in the least need of help. The
headcount does not show how poor the poor are and what gap exists between them. One way to
partially counteract this bias and more fundamentally take account of the extent of poverty is to
use a measure of the average income shortfall from poverty line. This measure is referred to as
the poverty gap ratio.

Where m is mean (average) income, n is population, y denotes income of an individual, i refers to
individual, and p is the poverty line.
The PGR is defined as the ratio of the average of income (or extra consumption) needed
to get all the poor people close to the poverty line, divided by the mean income (or consumption)
for the whole society. The reason for dividing by the average mean for the society as a whole is
that this gives us an idea of how large the gap is relative to the rescores that may potentially be
used to bridge the gap. In this sense the poverty gap ratio is not really a measure of poverty itself,
but a measure of resources required to eradicate it.
8

Another more specific poverty measure is the Income gap ratio. It accounts for the
inequality in societies with large number of poor people. In societies like this the poverty gap
may look pretty small. IGR It is the total shortfall of the poor from the poverty line divided by
total income required to bring all the poor people to the poverty line.

p y

Here the HC is simply the headcount or the number of the poor.
The poverty gap ratio and income gap ratio capture the per capita intensity of poverty and the
relative deprivation among the poor. The paper should have used the headcount and the poverty
gap measures jointly.
Even yet there exists more ways to break down poverty. The Weak Transfer Principle,
written by Pigou-Dalton suggests that the transfer of income from any person below the poverty
line to anyone less poor, while keeping the set of poor unchanged, must increase poverty. The
world development report (World Bank [1990, box 2.2]) discussed this principal taking the effect
of the 1981 increase in rice prices on poverty in Java Island, Indonesia. Poor households who are
farmers of rice had benefited from the price increase thus decreasing the societys headcount
ratio. However this hides another fact. The poorest poor of Indonesia are landless laborers or
farmers that do not grow rice. They are considered consumers of rice and thus they were
negatively affected. Measures of poverty that are transfer sensitive could account for this
change, whereas traditional measures would register a flawed decline in poverty.


9


As for the relationship between economic growth and poverty reduction the available
evidence shows a positive and dependable relationship. Yet the elasticity () of poverty reduction
with respect to economic growth differs across regions and also across individual countries. This
difference in elasticitys becomes crucial in considering the economic growth necessary to
achieve the Millennium development goals and may be one main reason why previous
evaluations of progress in this field show such inconsistency of results.
The suggestions for reducing global poverty in Halving Global Poverty paper are a bit
narrow. There exist even more areas for improvement. They tackle issues involving the
poverty and what are some ways to reduce it. Yet those cited are either not major or not
backed up as should to make the points clear. The human capital point suggests that
investment in education can be used to attack poverty. The credits section does not talk about
the fact that market for credit in poor countries usually fail because of the lack of collateral
and the incentives to pay are little. Besides we have the inefficient legal system and limited
powers. Media cannot also make a big difference in such countries where the basics are not
found media wont be helping much either.

10


Growth Drivers Revealed
Uncovering the real drivers of growth in our modern world will better help us to tackle
the global poverty problem. What is meant by real drivers of growth is country specific and leis
in the details of local level data. Mainstream economic thinking on how to reduce poverty has
evolved in the last couple of decades. The traditional economic focus in development thinking
focused heavily on a neoclassical model in which growth was achieved by accumulating
productive assets in a climate of macroeconomic stability. Notably the most popular neoclassical
growth model is the SolowSwan growth model. A disadvantage of this model is that it does not
take into account entrepreneurship and strength of institutions which facilitate economic growth.
Studies have shown a contradiction between the effect of growth on macroeconomic indicators
and those at the micro levels like the GINI coefficient. While traditional methodology for
triggering growth might improve GDP or GNI, it can affect inequality and distribution of wealth
negatively.
Lately traditional economic development thinking has been challenged as insufficient
both inside and outside the economic profession. The primary outside challenge has come from
nongovernmental organizations warnings about the negative effects of globalization,
environmental pollution, human rights, power-lessness and exploitation of the poor. Economists
now think much less technocratically about economic development. The emphasis now shifts on
the institutional and political context in which policy and accumulation decisions are made. The
new framework for attaining growth places greater importance on institutional reforms that
improve opportunities for households, develop the climate for doing business and improve the
accountability of elected officials. The current redistributive plan focuses less on transfers of
11

money from the rich to the poor and more on specific policies particularly public services, credit,
and property rights which can be shifted in a pro-poor direction. Modern development economics
excuse the common stereotype of economists as seeing free markets leading to economic growth
as the only direction out of poverty.
Another disturbing aspect of the global poverty issue is the problem of redistribution and
inequality. Statistical data suggest a positive relation between poverty and inequality. Finding
effective means of achieving redistribution that directly affect the well being of poor households
is a must. How much poverty reduction occurs at a given rate of economic growth, however,
varies significantly across countries and over time. In countries where income inequality is low,
growth is more effective in reducing poverty as in countries with high inequality. And in
countries where the distribution of income worsens during growth, the impact of growth on
poverty is not as strong. Shifting concentration towards the distributional impact of growth by
squaring specific growth drivers directly related to the poor and their economic needs.







12

Sub-National data vs. Traditional Data
The challenge is now on to look at these issues below the cross country level and to
understand how these studies can inform the debate about global poverty reduction. To be able to
look at issues below the cross country level we need to generate country specific data to unveil
where the real problem lies. For example the paper points out that in Kenya an evaluation has
been made to determine whether increasing the supply of textbooks or improving child health
affects attendance and attainment in schools. Another example acknowledged in the paper comes
from Burgess and Pande (2002) who evaluate the impact of a massive social banking experiment
in India where licensing rules were used to force commercial banks to open over 30,000
branches in rural areas. They find that banking in rural India led to significant falls in rural
poverty. They also find effects on nonagricultural output and employment, agricultural wages
and on education, which helps them to understand how the arrival of banks in rural India enabled
people to exit poverty. Another Indian study by Besley and Burgess (2000) showed by utilizing
state level data find that poverty in rural India was reduced by land reform that strengthened
property rights over land.
Traditional data gathering and traditional data analysis does not lead to uncovering the
real drivers of growth. This is because of the issue of comparability between countries and across
different survey instruments. Obtaining reliable measures of poverty requires household surveys
about the distribution of income or consumption that can be comparable between countries. Even
in underdeveloped countries differences may exist in consumption patterns of poor households.
Also some underdeveloped countries in Eastern Europe may have initially a greater level of
education in contrast to African nations for example.
13

The themes that are emerging give important and useful guidelines for the debate about
effective policy. The kind of evidence currently being built by microeconomic research at the
subnational level will doubtless be the most persuasive and credible advice to policymakers in
the decade to come. The imaginative use of data and theory by economists that characterizes
recent research may still lack simple answers, but serve as a credible guide to policy making. But
it is clear that, when it comes to halving global poverty, there is no definite route.

















14

A Measure of Poverty
The country poverty measures in this paper are constructed from Panel data, a
combination of time series data and cross sectional data. These panel data household surveys
contain the distribution of income or consumption that is comparable across countries. The paper
uses a poverty line computed by Chen and Ravallion (2001) using World Bank purchasing power
parity exchange rates based on price and consumption basket from the 1993 international
comparison project. This poverty line is estimated to be 1.08$ per day. International
Indicators are used to compare between countries. They are adjusted by the purchasing power
allowing for comparison. The latest World Bank estimation of the extreme poverty line is $1.25
a day (in 2005 PPP $).
A poverty line is the monetary cost to a given person, at a given place and time, of a
reference level of welfare. People who do not attain that level of welfare are deemed poor, and
those who do are not. Ravallion (1998).
A poverty line shifts the attention of governments and nongovernmental organizations on
the living conditions of the poor. In practice, there exists more than one poverty line measure
depending on what it is based on. Some econometricians prefer to use nutritional standards or the
minimum nutritional need rather than using monetary standards to compute the line. The poverty
line has two focal roles. One role is to determine what the minimum level of living is, before a
person is no longer considered poor. The other role is to make microeconomic comparisons such
as poverty lines for families of different sizes and compositions, living in different places, or for
different dates to tell us what expenditures are needed in each set of conditions to ensure that the
minimum level of living needed to escape poverty is reached.
15

Then the authors move to sum the poverty line measure to arrive at the headcount index which
measures the percentage of people below the 1$ a day line in a country. The headcount index
measures the proportion of the population that is poor. It is popular because it is easy to
understand and measure. But it does not point the intensity of poverty. Such quantum
computations using cross country data is made fairly easy using statistical packages such as
SPSS.

Where Np is the number of poor and N is the total population (or sample). If 60 people are poor
in a study that samples 300 people, then P
0
= 60/300 = 0.2 = 20%. P
0
can be rewritten as:

Here, I is a function that takes on a value of 1 if the expression in brackets is true and 0 if
not true. So if expenditure (yi) is less than the poverty line (z), then I equals to 1 and the
household would be counted as poor.
The utmost advantage of the headcount index is that it is simple to construct and easy to
understand. However this index has two known flaws. First, the headcount index does not take
the intensity of poverty into account. Second, the head-count index does not indicate how poor
the poor are, therefore does not change if people below the poverty line become poorer.
There exists a problem of comparability of data in such measures.
When poverty line computation is based on the PPP exchange rate, successive time span
upgrades and adjustments yearly should be applied to it. This is because exchange rates change
across time. There are also concerns regarding the method to account for changes in inflation and
16

cost of living in each country. Available consumer price indices do not always reflect well the
spending behavior of the poor. Now back to the 1.08$ a day poverty line it has been found that it
is representative of poverty lines in sub Saharan Africa and south Asia, and does not correspond
well to what is judged as poverty in middle income countries. Even more Imagine this poverty
line applied to a developed country like France. Such suggestion is clearly deemed absurd. As a
result this line is viewed as conservative for middle income developing countries.
The view that for countries tend to be scarcer than GDP measures stems out from
different reasons. Poverty measures are hard to obtain because of the methodology of collection;
household surveys. Traditional view in measuring poverty is based on data from national
accounts which are easy to obtain. This had lead to the lack of secondary data. Now more
secondary data is being collected worldwide. Such data can be found on the World Bank website
under poverty monitor.







17

Measuring GDP Per Capita
The GDP per capita is measured using the purchasing power parity (PPP) exchange rate
based on different price levels between the developing countries allowing for a better
comparison. In this paper particularly the purchasing power parity exchange rates was based on
the consumption basket and price data taken from the 1993 International comparison project.
Using the PPPs as conversion factor, GDP is converted into an artificial common currency (ex:
US$), called purchasing power standard (PPS), making the comparison of the purchasing power
of countries with different national currencies possible. The PPP exchange rate is one that
equalizes the price of a collection (basket) of goods in country to the price of that basket in a
base country in a base year (Weerapana, 2010-2011). GDP per capita measured using PPP
exchange rates (GDP in PPP terms) is the best way to compare output across countries both to
avoid unjustified fluctuations of market interest and exchange rates and to correct for differential
prices for similar goods across countries. Currently the house hold survey data is only available
for 88 out of 158 low and middle income countries and this represent 89% of the developing
countries total population (Burgess and Besley, 2003).





18

Relation between GDP Per Capita and the Overall Well-Being
Using economic measures like GDP per capita as an alternative to study the well being of
the population made much sense for many years. GDP per capita provides an accurate measure
of a countrys ability to deal with the material needs of its people; it is used as a method to
determine the material well-being of a country and not the overall well-being (Giovannini, Hall,
and d'Ercole, 2006). As long as life necessities remain scarce, any addition to the GDP per capita
can be directly translated to improvements in meeting the populations basic needs. GDP per
capita is a basic economic indicator that measures the level of total economic output relative the
population of a country. It reflects changes in total material well-being of the population. But we
should not forget that the well-being of individuals and households also depend on factors other
than GDP per capita, such as environmental quality, health care, distributive concerns, increase
in life expectancy, clean drinking water, access to schooling, it (GDP per capita) also doesnt
account for issues such as energy and material interactions with the environment, and social and
environmental costs of production. Therefore, it is not a perfect measure of the overall level of
well-being (Debraj Ray, 1998). Referring to Besley and Burgess Paper, we noticed that in India
the households living under less than dollar a day spent around 73% of their income on food, and
around 50% of the children in these households are malnourished. This will give evidence that
any increase in the GDP per capita in these households will directly lead to meeting the basic
needs and not the overall well-being. It is important also to state that the income and output and
per capita measures are biased in the developing countries because these figures are
underreported for tax purposes leading to unreliable data and analysis, most of the time the data
used is biased and underestimates what is actually happening. Going back to the example of
India in the paper, it is stated that most of these households live in rural areas and most of them
19

grow crops that they directly consume, these output are not reported accurately and this gives
evidence that these data are not precise to be used in such comparison (Debraj Ray, 1998). The
GDP per capita figure also does not measure how comfortable people are in terms of their human
development or standard of living. Subsistence farmers may be able to provide most of their
needs even though they contribute only a very small amount to the GDP/GNI (Global
Education).













20

The Role of Economic Growth in Reducing Poverty
Poverty is reduced by economic growth; this result is studied by a regression equation
stated later on in the paper. Accumulating human and physical capital and technological change
are the main sources of economic growth. These sources have both a direct and indirect effect on
the poor. The most evident direct result is probably for human capital, hence the returns may add
directly to the wages of the poor who become educated. However, there is also much debate
about whether certain agricultural technologies, such as Higher Yielding Varieties (Crops that
has been specially bred or selected to produce more than the natural varieties of the same
species) are useful in raising the income of the poor. Different forms of physical capital
limitation (because of imperfect capital markets) may also slow down the income sources of the
poor. Hence, increased capital force may yield a direct advantage to the poor if relaxed. Growth
may also generate indirect results which may aect the poor. For example, technological
change may expand the demand for factors owned predominantly by the poor (such as raw labor
input) raising wages of households with low levels of land and physical and human capital.
There may also be important complementarities between physical capital and labor. The
relationship between economic growth and poverty is eventually a task in quantication. Here,
cross country poverty and national income data from the World Bank is analyzed to see what it
shows. A scale in evaluating the anti-poverty result of growth is the elasticity of poverty with
respect to income per-capita which we denote by (Besley and Burgess, 2003).
The Burgess and Besley paper examines the relationship between economic growth and
poverty by a regression that measures the elasticity of poverty with respect to income per capita.

log

21

Where Pit is the headcount poverty rate based on the dollar a day poverty line, i (thita)
is a countrys xed eect, it is real per capita national income for country i at time t,

is the
error term, and itais the elasticity
This equation studies how growth is related to reducing poverty by measuring the
elasticity of poverty with respect to income per capita. The increase in income is directly
translated to a decrease in poverty. This method of estimation only works if there is more than
one observation on poverty and per capita income in the data because of the fixed effect term,
and only 60 countries in the sample studied have data for more than one year. In eect, all
countries that appear only once are eliminated from the data set. In Table 2 in Burgess and
Besley paper we see that is negative and signicant, meaning that increases in income per
capita directly leads to a reduction in poverty. For example the first column in Table 2 shows that
is -0.76 for the whole sample, meaning that a 3.8% increase in growth is required in 25 years to
cut the global poverty into half. Increasing the income per capita in the developing countries
will be directly translated to decrease poverty until reaching the 2015 halving global poverty
goal, and the data provided in table 2 gives a support to the view that the increase in growth is
directly translated to reduction in poverty.
Because of the fixed effect term used in the estimated equation that relates poverty to
growth, this method of estimation only works if there is more than one year observation on
poverty and per capita income in the data. Using only one year observation for each country will
change the study from observing panel data to cross-sectional data. The fixed effect and the time
factor are omitted and a constant C is included in the equation, C gives how much poverty if the
income is 0. The equation is changed to the following:
22

The Cross-sectional study can provide a "snapshot" of the relation between economic
growth and poverty reduction in a population at a particular point in time. However, since
growth and poverty are measured at the same period of time, it may not be possible to distinguish
whether the cause and effect relationships are certain for this study. The effect of log (mu) on log
(P) is given by the parameter eta, which is elasticity. So in order to study which variable causes
the other you switch the dependent and independent variables.
















23

Inferences from Tables One and Two
Table 1: Poverty Across the Globe

Table 1 page 6, provides estimates of the Poverty Across the Globe. It shows the population
living below 1.08$ a day according to the 1993 purchasing power parity in different developing
regions of the world in years 1987, 1990, 1993, 1996, and 1998. According to the World Bank,
these regions that are found in the table comprise of the countries that are classified as low or
middle income countries. Using the headcount index which is the fraction of people living
below the poverty line in total population-we can see that in 1987, the percentage was 28.7,
which corresponds to 1196 million people. Continuing with our inference, the fraction of people
living below poverty line in total population year 1998 fell to only 24.3 % corresponding to 1214
million people. The numbers in poverty has actually increased by 18 million. Despite the fact
that the proportion living in poverty is falling, the number of poor in millions show limited
change.
24

However, during the years 1990-1998, poverty rate in East Asia drops from 27.6% to
15.3%, and absolute numbers fall from 452 to 278 million. Those figures are impressive over the
eight years. The region has come close to halving the proportion in poverty- 15 years ahead of
schedule. This region symbolize the largest fall in poverty ever witnessed in history (Ahuja et al.,
1997) and have led to a miracle taking place East Asia.
Taking a closer look at the table, we find out that the main concentrations of the poor are
in Sub-Saharan Africa, East Asia, and southwest Asia. We can also see that the distribution of
poverty across the studies regions is highly unequal. For example, let us take the percentage of
people below 1.08$ year 1987 in the sub-Saharan Africa and compare it with that of East Europe
and Central Asia. The former has a 0.2% poverty rate while the latter is struggling, with a
percentage that is close to making half its population below the poverty line, at 46.6%. The
number of poor increased from year 1987 to 1998 in both regions. Sub- Saharan Africa over this
period, added 74 million people to its account. It is in no sense on the way to achieving the
Millennium Poverty Reduction Goals-if anything it is tormenting to go in the opposite direction.
To conclude, we see that between years 1987 and 1998, the incident of poverty fell in
Asia and the Middle East and North Africa, and rose in central Europe and Central Asia. With a
miracle the Chinese experienced.






25

Table 2: Growth and Poverty Across the Globe, 1990-2015.


Table 2 pages 8, provides data about Growth and Poverty Across the Globe, 1990-
2015. It shows the estimates for which is the elasticity of poverty with respect to income per
capita. The formula used to obtain the data found in the table is:
log

log

Looking at , we can see that for the whole sample is -0.73 with a standard error of 0.25.
That is increases in income per capita are coupled with reductions in poverty.
If we take East Asia and Pacific the time of the study that is year1990 = -1.00, standard error
term

= 0.14 with a historical growth from year 1960 to 1990 was 3.3%. This region needs 21
times its historical average to halve poverty and its annual growth level to halve poverty is below
the historical average.
26

In East Asia, the historical growth is less than the annual growth rate to halve poverty
with an elasticity of -1.00. In contrast, Latin America and the Caribbean have annual growth rate
which exceeds the historical growth rate needed to halve world poverty.
The problem interpreting table 1 is that the figures are controversial. If we look into
resources such as the World Development Report 2000/2001, we find numbers that are quite
different than the ones in the World Bank document published the same year. Moreover,
changing the base year would make a significant change. For example, if year 1987 is taken as
the base year, then the numbers in poverty would show an increase of around 17 billion. Also,
poverty varies over space and time. This pattern is difficult to square with some fixed effect
argument, whether this has to do with resource endowments, disease burden, geography or
societal norms it doesnt show the causal link between
As for the problems interpreting table 2, we can see that the data has a limitation which is
the fixed effect term, and only countries with data on poverty and per capita income for more
than one year are included in the regression. Moreover, some countries actually have high
standard error this is either because of the lack of data collected or because of the unfair
distribution of wealth. Moreover, the elasticities used are high the researches must have used
lower elasticities to be able to show the effect of changes of national income on reductions of
poverty.






27

Plan of World Chief Economist
According to the Millennium Development Report issued by the United Nations year
2010 and signed by the Secretary-General Ban Ki-Moon we would notice that without a major
push forward, many of the MDG targets are likely to be missed in most regions. Old and new
challenges threaten to further slow progress in some areas or even undo successes achieved so
far.
The risk of death or disability and economic loss due to natural disasters is increasing
globally and is concentrated in poorer countries. Armed conflict remains a major threat to human
security and to hard-won MDG gains. Large populations of refugees remain in camps with
limited opportunities to improve their lives. In 2009, 42 million people had been displaced by
conflict or persecution, four fifths of them in developing countries.
The number of people who are undernourished has continued to grow, while slow
progress in reducing the prevalence of hunger stalledor even reversed itselfin some regions
between 2000-2002 and 2005-2007. About one in four children under the age of five are
underweight, mainly due to lack of food and quality nutrition, inadequate water, sanitation and
health services, and poor care and feeding practices.
An estimated 1.4 billion people were still living in extreme poverty in 2005. Moreover,
the effects of the global financial crisis are likely to persist: poverty rates will be slightly higher
in 2015 and even beyond, to 2020, than they would have been had the world economy grown
steadily at its pre-crisis pace.
Gender equality and the empowerment of women are at the heart of the MDGs and are
preconditions for overcoming poverty, hunger and disease. But progress has been sluggish on all
frontsfrom education to access to political decision-making.
28

The World Bank Group came up this year with an agenda for halving global poverty by
2015. Based on the Millennium Development Goals, we came up with details to meet them and
halve the global poverty. Let us review together the UN Millennium agenda:
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria, and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development
Hunger and extreme poverty can be eradicated in many ways. Land distribution is one
way. People will have land to cultivate either for household consumption or for cash.
Agricultural investments shall be motivated especially among uneducated people who can put
their labor skills into work.
Expanding nutrition programs that target young children is going to be one of the
important components of halving the poverty and achieving the millennium goals. Those
children have the right of being educated as education is a factor that reduces poverty rates.
Education shall be mandatory at least in its primary years. This will decrease early
marriages and will in turn decrease the birth rates. Sexually transmitted diseases become less
common among educated pupils. Economically education has a significant impact on income. It
encourages economic growth and it is a method used to attack poverty.
29

Womens role shall be empowered in the society. Increasing womens labor force
participation and strengthening labor policies affecting women, improving womens access to
credit, land and other resources and promoting womens political rights and participation will
help them move from being under the poverty line to above it.
Moreover, ensuring environmental sustainability in an environment that is being misused
and depleted is an important issue. This can be done by investing in clean energy, making
infrastructure improvements, increasing access to sanitation, offering technical assistance.
In addition to this, each country shall develop clear, well-developed legal systems and
competition authorities coupled with privatization of organization will help impact the economy
and economic development of those countries. Promoting debt relief, developing IT
infrastructure, expanding trade agreements, improving access to affordable drugs, increasing
poverty-reducing expenditures are also plans that will help reduce poverty.
According to Jeffery Sacs in his book The End of Poverty after studying developing
countries focusing on the African Region and how to pull those countries out of the misery they
are in, he came up with the following:
A true MGD- based poverty reduction strategy would include five parts:
y A Differential Diagnosis, which identifies the policies and investment that the
country needs to achieve the Millennium Development Goals.
y An Investment Plan, which shows the size, timing, and costs of the required
investment.
y A Financial Plan to fund the Investment Plan, including the calculation of the
MGD financing Gap, the portion of financial needs that donors will have to fill.
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y A Donor Plan, which gives the multiyear donor commitments for filling the
MGDFG.
y A Public Management Plan that outlines the mechanisms of governance and
public administration that will help implement the expanded public investment
strategy.
With the feedback from the United Nations as for where we stand in the process of
achieving the Millennium goals coupled with a poverty reduction strategy like the one
provided in The End of Poverty, detailed have been developed to reduce poverty. Poverty
is like a web it cannot be reduced unless all the problems are tackled. Whether a child, a
man, or a woman, they should be treated equally. They should be able to live a decent life
and be able to have access to resources and education like every other person. Economic
development and reduction of poverty cannot happen without the support of the
governments, people, and media. Nothing can be achieved. Just never forget that when there
is a will, there is a way. United we stand, divided we fall.








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REFRENCES
Besley and Burgess (2000) Land Reform, Poverty Reduction and Growth: Evidence from India
Burgess and Besley (2003) Halving global poverty
Burgess and Pande (2002) Do Rural Banks Matter? Evidence from the Indian Social Banking
Experiment.
Chen and Ravallion (2001) China is poorer than we thought, but no less successful in the fight
against poverty
Debraj Ray (1998) Development Economics, Chapter2: Economic Development: Overview
Giovannini, Hall, and d'Ercole (2006) Measuring Well-Being and Societal Progress
Ki-Moon, B. (2010). Millenium Development Goals Report. New York.
Ravallion (1998) Pro-Poor Growth: A Primer
Sachs, J. (2005). The End of Poverty .
Weerapana (2010-2011) Econ 102: Macroeconomics Lecture 2: Gross Domestic Product and its
Variants