Asia – The evolution of income distributions, inequality, and poverty between 1992 and 2010

The incidence of poverty in the Asian region is quite high despite the spectacular growth performance of the PRC, India and other economies in the region. According to the 2013 World Development Indicators, 12.5% of the population in East Asia and 31% of the population in South Asia are below the $1.25/day poverty line used by the World Bank.1 A staggering 66.7% of the population in South Asia and 21.7% of the population in East Asia is under the $2/day poverty line. Poverty incidence under the $1.25/day poverty line is 32.67%, 18.06%, and 11.80%, respectively, in India, Indonesia and the PRC. The picture is equally disturbing when national poverty lines are used. The incidence of poverty in rural India and rural PRC is quite high compared to their urban counterparts, indicating an unequal distribution of growth across rural and urban regions of these countries.

According to the Asian Development Bank (2012), over the last 20 years, inequality in the distribution of income has worsened in the three most populous countries. In the PRC, the Gini measure of inequality has increased from 0.32 to 0.43; in India from 0.33 to 0.37 and in Indonesia from 0.29 to 0.37. This means that inequality in the region has generally been on the rise while GDP has been growing at impressive rates.

Duangkamon Chotikapanich, William E. Griffiths, D. S. Prasada Rao, and Wasana Karunarathne  in Income Distributions, Inequality, and Poverty in Asia, 1992–2010 examine levels and trends of inequality and poverty in Asia during the period 1992–2010. Also, based on the data on GDP growth, inequality in the income distribution, and poverty incidence in various countries in the Asian region, it is important to examine the benefits accrued to the poor from GDP growth in these economies. Has the growth in the Asian region been pro-poor? How have the gains from GDP growth been distributed to households at different levels of income? Has the pro-poor growth been absolute or relative? With an absolute approach, growth is considered to be pro-poor if it reduces absolute poverty. In contrast, growth is defined as pro-poor under a relative approach if the growth benefits the poor proportionately more than the non-poor.

The authors find that the People’s Republic of China (PRC) has grown rapidly with increasing inequality accompanying this growth. India has been relatively stagnant. Indonesia has grown rapidly after suffering an initial set back from the Asian financial crisis in 1997.

Income distributions for developing countries in Asia are modeled using beta-2 distributions, which are estimated by a method of moments procedure applied to grouped data. Estimated parameters of these distributions are used to calculate measures of inequality, poverty, and pro-poor growth in four time periods over 1992–2010. Changes in these measures are examined for 11 countries, with a major focus on the PRC, India, and Indonesia, which are separated into rural and urban regions.

Chosen excerpts by Job Market Monitor. Read the whole story at Income Distributions, Inequality, and Poverty in Asia, 1992–2010