what is poverty reduction essay

Poverty Reduction: Concept, Approaches, and Case Studies

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Part of the book series: Encyclopedia of the UN Sustainable Development Goals ((ENUNSDG))

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Definitions

Poverty is universally measured in monetary expenditure terms, and individuals that are considered poor are those living on less than US$1.25 per day. Poverty is however multifaceted as it includes the multitude of lack and deprivations that poor people are subjected to in their lives on a daily basis. These include but are not limited to disease and poor health conditions, illiteracy and lack of access to education, appalling living conditions, lack of access to economic opportunity and disempowerment, underemployment, vulnerability to violence, and exposure to hazardous environmental conditions (OPHI 2019 ). Thus, poverty reduction can be considered as the improvement of an individual’s or group’s monetary expenditure to an amount above the poverty line while improving access to education, healthcare, information, economic opportunities security of land-tenure, and all the other deprivations associated with it.

Introduction

The eradication of poverty is perhaps the only...

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Yakubu Aliyu Bununu

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Bununu, Y.A. (2020). Poverty Reduction: Concept, Approaches, and Case Studies. In: Leal Filho, W., Azul, A., Brandli, L., Özuyar, P., Wall, T. (eds) Decent Work and Economic Growth. Encyclopedia of the UN Sustainable Development Goals. Springer, Cham. https://doi.org/10.1007/978-3-319-71058-7_31-1

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DOI : https://doi.org/10.1007/978-3-319-71058-7_31-1

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• 2017 HLFP Thematic Review of SDG 1: End Poverty in All its Forms Everywhere

• improving access to sustainable livelihoods, entrepreneurial opportunities and productive resources;
• providing universal access to basic social services;
• empowering people living in poverty and their organizations;
• addressing the disproportionate impact of poverty on women;
• working with interested donors and recipients to allocate increased shares of ODA to poverty eradication; and
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Review article, poverty reduction of sustainable development goals in the 21st century: a bibliometric analysis.

• Institute of Blue and Green Development, Shandong University, Weihai, China

No Poverty is the top priority among 17 Sustainable Development Goals (SDGs). The research perspectives, methods, and subject integration of studies on poverty reduction have been greatly developed with the advance of practice in the 21st century. This paper analyses 2,459 papers on poverty reduction since 2000 using VOSviewer software and R language. Our conclusions show that (1) the 21st century has seen a sharp increase in publications of poverty reduction, especially the period from 2015 to date. (2) The divergence in research quantity and quality between China and Kenya is great. (3) Economic studies focus on inequality and growth, while environmental studies focus on protection and management mechanisms. (4) International cooperation is usually related to geographical location and conducted by developed countries with developing countries together. (5) Research on poverty reduction in different regions has specific sub-themes. Our findings provide an overview of the state of the research and suggest that there is a need to strengthen the integration of disciplines and pay attention to the contribution of marginal disciplines to poverty reduction research in the future.

Introduction

Global sustainable development is the common target of human society. “No Poverty” and “Zero Hunger” are two primary goals of the 2030 Agenda for Sustainable Development (SDGs) , along with important premises in the completion of the goals of “Decent Work and Economic Growth Industry” and “Innovation and Infrastructure.” China has made great efforts in meeting its No Poverty targets. To achieve the goal of eliminating extreme poverty in the rural areas by the end of2020 1 , China has been carrying out a basic strategy of targeted approach named Jingzhunfupin 2 , which refers to implementing accurate poverty identification, accurate support, accurate management and tracking. By 2021, China accomplished its poverty alleviation target for the new era on schedule and achieved a significant victory 3 .

However, the worldwide challenges are still arduous. On the one hand, the recent global poverty eradication process has been further hindered by the COVID-19 pandemic. The World Bank shows that global extreme poverty rose in 2020 for the first time in over 20 years, with the total expected to rise to about 150 million by the end of 2021 4 . People “return to poverty” are emerging around the world. On the other hand, people who got out of income poverty may still be trapped in deprivations in health or education. About 1.3 billion people (22%) still live in multidimensional poverty among 107 developing countries, according to the Global Multidimensional Poverty Index report released by the United Nations 5 . Meanwhile, the issue of inequality became more prominent, reflected by the number of people who are in relative poverty 6 .

In line with the dynamic poverty realities, the focusing of poverty research moved forward as well. Research frameworks have evolved from single dimension poverty to multidimensional poverty ( Bourguignon et al., 2019 ) and from income poverty to capacity poverty ( Zhou et al., 2021 ). Research perspectives concentrate on the macroscopic view, but have now turned to microscopic individual behavior analysis. Cross-integration of sociology, psychology, public management, and other disciplines also helps to expand and deepen the research ( Addison et al., 2008 ). Some cutting-edge researchers are making effort to shed light on the relationships between “No Poverty” and other SDGs. For example, Hubacek et al. (2017) verified the coherence of climate targets and achieving poverty eradication from a global perspective 7 . Li et al. (2021) discussed the impacts and synergies of achieving different poverty eradication goals on air pollutants in China. These novel papers give us insightful inspiration on combining poverty reduction with the resource or environmental problem including aspects like energy inequity, carbon emission. Hence, summarizing the research on different poverty realities and academic backgrounds should provide theoretical and empirical guidance for speeding up the elimination of poverty in the world ( Chen and Ravallion, 2013 ).

Previous review literature on poverty reduction all directed certain sub-themes. For example, Chamhuri et al. (2012) , Kwan et al. (2018) , Mahembe et al. (2019a) reviewed urban poverty, foreign aid, microfinance, and other topics, identifying the objects, causes, policies, and mechanisms of poverty and poverty reduction. Another feature of the review literature is that scholars often synthesize the articles and map the knowledge network manually, which constrains the amount of literature to be analyzed, leading to an inadequate understanding of poverty research. Manually literature review on specific fields of poverty reduction results in a research gap. Analysis delineating the general academic knowledge of poverty reduction is somewhat limited despite the abundance of research. Yet, following the trend toward scientific specialization and interdisciplinary viewpoints, the core and the periphery research fields and their connections have not been clearly described. Different studies are in a certain degree of segmentation because scholars have separately conducted studies based on their countries’ unique poverty background or their subdivision direction. Possibly, lacking communication and interaction will affect the overall development of poverty reduction research especially in the context of globalization. Less than 10 years are left to accomplish the UN sustainable development goals by 2030. It is urgent to view the previous literature from a united perspective in this turbulent and uncertain age.

Encouragingly, with advances in analytical technology, bibliometrics has become increasingly popular for developing representative summaries of the leading results ( Merediz-Solà and Bariviera, 2019 ). It has been widely applied in a variety of fields. In the domain of poverty study, Amarante et al. (2019) adopted the bibliometric method and reviewed thousands of papers on poverty and inequality in Latin America. Given above issues, we expand the scope of the literature and conduct a systematic bibliometric analysis to make a preliminary description of the research agenda on poverty reduction.

This paper presents an analysis of publications, keywords, citations, and the networks of co-authors, co-words, and co-citations, displaying the research status of the field, the hot spots, and evolution through time. We use R language and VOSviewer software to process and visualize data. Our contributions may be as follows. Firstly, we used the bibliometric method and reviewed thousands of papers together, helping keep pace with research advances in poverty alleviation with the rapid growth in the literature. Secondly, we clarified the core and periphery research areas, and their connections. These may be beneficial to handle the trend toward scientific specialization, as well as fostering communication and cooperation between disciplines, mitigating segmentation between the individual studies. Thirdly, we also provided insightful implications for future research directions. Discipline integration, intergenerational poverty, heterogeneous research are the directions that should be paid attention to.

The structure of this article is as follows. Methodology and Initial Statistics provides the methodology and initial statistics. Bibliometric Analysis and Network Analysis offer the bibliometric analysis and network visualization. The remaining sections offer discussions and conclusions.

Methodology and Initial Statistics

Bibliometrics, a library and information science, was first proposed by intelligence scientist Pritchard in 1969 ( Pritchard, 1969 ). It exploits information about the literature such as authors, keywords, citations, and institutions in the publication database. Bibliometric analyses can systematically and quantitatively analyze a large number of documents simultaneously. They can highlight research hotspots and detects research trends by exploring the time, source, and regional distribution of literature. Thus, bibliometric analyses have been widely used to help new researchers in a discipline quickly understand the extent of a topic ( Merediz-Solà and Bariviera, 2019 ).

Research tools such as Bibexcel, Histcite, Citespace, and Gephi have been created for bibliometric analysis. In this paper, R language and VOSviewer software are adopted. R language provides a convenient bibliometric analysis package for Web of Science, Scopus, and PubMed databases, by which mathematical statistics were performed on authors, journals, countries, and keywords. VOSviewer software provides a convenient tool for co-occurrence network visualization, helping map the knowledge structure of a scientific field ( Van Eck and Waltman, 2010 ).

Data Collection

The bibliometric data was selected and downloaded from the Web of Science database ( www.webofknowledge.com ). We choose the WoS Core Collection, which contained SCI-EXPANDED, SSCI, and A&HCI papers to focus on high-quality papers. The data was collected on March 19, 2021.

To identify the documents, we used verb phrases and noun phrases with the meaning of poverty reduction, such as “reduce poverty” and “poverty reduction,” as search terms, because there are several different expressions of “poverty reduction.” We also considered the combinations of “no poverty” and SDGs, “zero hungry” and “SDGs.” Because the search engine will pick up articles that have nothing to do with “poverty alleviation” depending on what words are used in the abstract, we employed keyword matching. Meanwhile, to prevent missing essential work that does not require author keywords, we also searched the title. Specifically, a retrieval formula can be written as [AK = (“search term”) OR TI = (“search term”)] in the advanced search box, where AK means author keywords and TI means title. Finally, we restricted the document types to “article” to obtain clear data. Thus, papers containing search phrases in headings or author keywords were marked and were guaranteed to be close to the desired topic.

A total of 2,551 studies were obtained, with 2,464 articles retained after removing duplicates. Table 1 presents the results for each search term. The phrasing of “poverty alleviation” and “poverty reduction” are written preferences.

TABLE 1 . Information of data collection.

Descriptive Analysis

Figure 1 gives details of each year’s publications during the period 2000–2021. The cut-off points of 2006 and 2015 divide the publication trends into three stages. The first period is 2000–2006, with approximately 40 publications per year. The second period is 2007–2014, in which production is between 80 and 130 papers annually. The third period is 2015–2021, with an 18.31% annual growth rate, indicating a growing interest in this field among scholars. Perhaps this is because 2006 was the last year of the first decade for the International Eradication of Poverty, and 2015 is the year that eliminating all forms of poverty worldwide was formally adopted as the first goal in the United Nations Summit on Sustainable Development. Greater access to poverty reduction plan materials and data is a vital reason for the growth in papers as well.

FIGURE 1 . Annual scientific production.

We can notice that the milestone year is 1995 when we examine the time trend with broader horizons ( Figure 2 ). Before 1995, scant literature touches upon the topic of “poverty alleviation.” This confirms that in the time range we check the majority of the development of academic interest in this issue takes place. Thus, the 21st century has become a period of booming research on poverty reduction.

FIGURE 2 . Annual scientific production in a longer period.

Bibliometric Analysis

In this section, we offer the bibliometric analysis including the affiliation statistics, citation analysis and keywords analysis. Author analysis is not included because some authors’ abbreviations have led to statistical errors.

Affiliation Statistics

From 2000 to 2021, a total of 2,459 articles were published in 979 journals, a wide range. Table 2 lists the top ten journals, which together account for 439 (17.86%) of the articles in our data set. Development in Practice and World Development have the most publications, respectively 121 (4.92%) and 107 (4.35%), followed by Sustainability at 44 (1.8%). The top 10 journals mostly involve development or social issues, with some having high impact factors, including Food Policy (4.189) and Journal of Business Ethics (4.141).

TABLE 2 . Top 10 sources of publications.

Figure 3 presents the geographic distribution of the published articles on poverty reduction. As indicated in the legend, the white part on the map shows regions with zero published articles recorded in WoS. Darker shades indicate a greater number of articles published in the country or region. The US region is darkest on the map, with 593 articles published, followed by England, with 412 papers, and China, with 348 articles. Ranking fourth is South Africa, perhaps because South Africa is a pilot site for many poverty reduction projects. India, for the same reason, is similarly shaded.

FIGURE 3 . Spatial distribution of publication in all countries. Note: the data of all countries is from Web of Science.

Citation Analysis

The number of citations evaluates the influence and contribution of individual papers, authors, and nations. The top 10 countries in total citations are displayed in Table 3 . Consistent with the publication distribution, the leader is the United States (11,861), with the United Kingdom (8,735) and China (1,666) following. However, there is a broad gap between China and England in total citations. The average article citation ranks are quite different from the total citation list. Notably, Kenya takes first place based on its average citations per paper, though its total citations rank seventh, showing that Kenya’s poverty reduction practices and research are of great interest to a large number of scholars. By contrast, China’s average article citation is just roughly one-sixth of Kenya’s. The different pattern of the number of Chinese publications and citations shows that the quality of Chinese research must be improved even as it raises its publication quantity.

TABLE 3 . Top ten countries by total citations.

Table 4 lists the top 10 most cited articles with their first author, year, source, total citations, and total citations per year. Highly cited articles can be used as a benchmark for future research, and in some way signal the scientific excellence of each sub-field. For example, Wilson et al. (2006) reminded the importance of informal sector recycling to poverty alleviation. Daw et al. (2011) discussed the poverty alleviation benefits from ecosystem services (ES) with examples in developing countries. Pagiola et al. (2005) found that Payments for Environmental Services (PES) can alleviate poverty, and explored the key factors of this poverty mitigation effect using evidence from Latin America 8 . These three papers combined the environmental ecosystem with poverty alleviation. Beck et al. (2007) , Karnani (2007) explored the relationships between the SME sector and poverty alleviation and the private sector and poverty alleviation, respectively. Grindle (2004) discussed the necessary what, when, and how for good governance of poverty reduction. Cornwall and Brock (2005) took a critical look at how the three terms of “participation,” “empowerment” and “poverty reduction” have come to be used in international development policy. Adams and Page (2005) examined the impact of international migration and remittances on poverty. In the theory domain, Collier and Dollar (2002) derived a poverty-efficient allocation of aid. Hulme and Shepherd (2003) provided meaning for the term chronic poverty. Even from the present point of view, these scholars’ studies remain innovative and significant.

TABLE 4 . Top 10 papers with the highest total citations.

Keywords Analysis

The keywords clarify the main direction of the research and are regarded as a fine indicator for revealing the literature’s content ( Su et al., 2020 ). Two different types of keywords are provided by Web of Science. One is the author keywords, offered by the original authors, and another is the keywords plus, contrived by extracting from the cited reference. The frequency of both types of keywords in 2,459 papers is examined respectively in the whole sample and the sub-sample hereinafter for concentration and coverage.

Whole Sample

Table 5 lists the Top 10 most frequently used keywords and keyword-plus of total papers. Clearly author keywords are often repetitive, with “poverty,” “poverty reduction,” and “reduction” chosen as keywords for the same paper, but these do not dominate the keywords-plus. Hence, the keywords-plus may be more precise at identifying relevant content. However, we used author keywords for the literature screening.

TABLE 5 . Top 10 author keywords and keywords-plus with the highest frequency.

In addition to the terms “poverty” or “poverty reduction or alleviation,” we note that “China” and “Africa” occur frequently, with “India” and “Bangladesh” following when we expand the list from the Top 10 to Top 20 ( Supplementary Figure S1 ). The appearance of these places coincides with our speculation that the research was often conducted in Africa, East Asia, or South Asia once again, whereas the larger compositions are from developing countries or less developed countries.

The cumulative trend of TOP20 author keywords and keywords-plus is shown in Supplementary Figure S1 . The diagram also gives some information about other concerns bound up with anti-poverty programs, including “microfinance,” “food security,” “livelihoods,” “health,” “Economic-growth” and “income,” as numerous papers are focused on these aspects of poverty reduction.

Further, policy study and impact evaluation may be the core objectives of these papers. Vital evidence can be found in countless documents. Researchers measured the effect of policies or programs from various perspectives. In the study of Jalana and Ravallion (2003) , they indicated that ignoring foregone incomes overstated the benefits of the project when they estimated net gain from the Argentine workfare scheme. Meng (2013) found that the 8–7 plan increased rural income in China’s target counties by about 38% in 1994–2000, but had only a short-term impact 9 . Galiani and McEwan (2013) studied the heterogeneous influences of the Programa de Asignación Familiar (PRAF) program, in which implemented education cash transfer and health cash transfer to people of varying degrees of poverty in Honduran. Maulu et al. (2021) concluded that rural extension programs can provide a sustainable solution to poverty. Some studies also have drawn relatively fresh conclusions or advice on poverty reduction projects. Mahembe et al. (2019a) found that aid disbursed in production sectors, infrastructure and economic development was more effective in reducing poverty through retrospecting empirical studies of official development assistance (ODA) or foreign aid on poverty reduction. Meinzen-Dick et al. (2019) reviewed the literature on women’s land rights (WLR) and poverty reduction, but found no papers that directly investigate the link between WLR and poverty. Huang and Ying (2018) constructed a literature review that included the necessity and the ways of introducing a market mechanism to government poverty alleviation. Mbuyisa and Leonard (2017) demonstrated that information and communication technology (ICT) can be used as a tool for poverty reduction by Small and Medium Enterprises.

Web of Science provides the publications of each journal category ( Figure 4 ). Economics is the largest type of journal, followed by development studies and environmental studies. Education should be regarded as an important way to address the intergenerational poverty trap. However, we note that journals in education are only a fraction of the total number of journals. Psychology journals are in a similar position, though endogenous drivers of poverty reduction have been increasingly emphasized in recent research. The detailed data can be found in the supplementary documents. To investigate the differences between the subdivisions of the research, we chose economic and environmental journals as sub-samples for further analysis.

FIGURE 4 . Visualization of journal category from the web of science.

As Supplementary Figure S2 shows, the TOP10 author keywords in economic sample are similar to the whole sample. We note that microfinance is a real heated research domain both in economic and whole sample. The poor usually have multiple occupations or self-employment in very small businesses ( Banerjee and Duflo, 2007 ). The poor often have less access to formal credit. Karlan and Zinman (2011) examined a microcredit program in the Philippines and found that microcredit does expand access to informal credit and increase the ability against risk. Banerjee et al. (2015a) reported the results of an assessment of a random microcredit scheme in India, which increased the investment and profits of small-scale enterprises managed by the poor.

Several new keywords enter the TOP20 list in the economic field, including “targeting,” “income distribution,” “productivity,” “employment,” “rural poverty,” “access,” and “program.” “Targeting” is an essential topic in the economic field. It concerns the effectiveness of poverty reduction program and social fairness. Hence, an abundance of literature reviews the definitions of poverty that allow individuals to apply for poverty alleviation programs. Park et al. (2002) , Bibi and Duclos (2007) , Kleven and Kopczuk (2011) , discussed the inclusion error and exclusion error in programs’ targeting and identification under the criterion of poverty lines or specific tangible asset poverty agency indicators (e.g., whether households have color televisions, pumps or flooring, and so forth). In practice, Niehaus et al. (2013) tested the accuracy of different agency indicators to allocate Below Poverty Line (BPL) cards in India and found that using a greater number of poverty indicators led to a deterioration in targeting effectiveness while creating widespread violations in the implementation because less qualified families are more likely to pay bribes to investigators. Bardhan and Mookherjee (2005) explored the targeting effectiveness of decentralization in the implementation of anti-poverty projects. He and Wang (2017) assessed the targeting accuracy of the College Graduate Village Officials (CGVOs) project, a unique human capital redistribution policy in China, on poverty alleviation 10 .

The terms “inequality” and “growth” are first and second in the keywords-plus. This may be because inequality and growth are two of the major components in poverty changes in the economic field, which are stressed in the studies of Datt and Ravallion (1992) , Beck et al. (2007) . The ranking may also imply that the economics of the 21st century is more concerned with human welfare than the pursuit of rapid economic growth. Since a growing number of organizations are trying to build human capital to improve the livelihoods of their clients and further their mission of lifting themselves out of poverty. McKernan (2002) showed that social development programs are important components of microfinance program success. Similarly, Karlan and Valdivia (2006) argued that increasing business training can factually improve business knowledge, practice effectiveness, and revenue. Besides, cash transfers are widely adopted to reduce income inequality and improve education and the health status of poor groups ( Banerjee et al., 2015b ; Sedlmayr et al., 2020 ). Benhassine et al. (2015) noted that the Tayssir Project in Morocco, a cash transfer project, achieved an increasing improvement of school enrolment rate in the treatment group, especially for girls 11 .

We combine the journal types of “Environmental Studies” and “Environmental Sciences” into one unit for analysis ( Supplementary Figure S3 ). In the environmental field, the terms “conservation” and “management” are ranked first and second. This field also involves “ecosystem services,” “climate change,” “biodiversity conservation,” and “deforestation,” with rapid growth in recent years. These themes were discussed by Alix-Garcia et al. (2013) , Alix-Garcia et al. (2015) , Sims and Alix-Garcia (2017) in their investigations of the effect of conditional cash transfers on environmental degradation, the poverty alleviation benefits of the ecosystem service payment project, and comparison of the effects in protected areas and of ecosystem service payment on poverty reduction in Mexico. The differences in economic research in poverty reduction and environmental field show the necessity of strengthening cooperation between disciplines.

Network Analysis

Network relationship is established by the co-occurrence of two types of information. It enables mapping of the knowledge nodes with a joint perspective, instead of viewing scientific ideas in isolation. The data is imported into VOSviewer software after removing duplicates by R package. We then provide the co-authorship analysis, co-citation analysis, and co-keywords analysis.

Co-Authorship Analysis

Co-authorship may reflect international cooperation as shown by the country distribution ( Figure 5 ). When the authors of two countries have a cooperative relationship, a line is generated to connect the corresponding countries. The size of nodes reflects the number of countries of origin of the authors. The width of the line represents the cooperative frequency between them, and the different colors mark the partition of the countries.

FIGURE 5 . International networks of co-authorship.

The network includes a total of 1,449 countries, of which 92 meet the threshold of at least five instances of cooperation. The United States, United Kingdom, China, and South Africa have the strongest interlinkage with other countries or regions. Whether countries in each cluster demonstrate international academic cooperation on poverty reduction is sometimes based on geographic location. For example, the red cluster includes the United States, Mexico, Brazil, Chile, and Ecuador. These countries mainly lie in the Americas. The United Kingdom, Kenya, Uganda, and South Africa are in the yellow group, located in Europe and Africa. The green cluster includes China, Malaysia, and Bangladesh, all Asian countries. The distribution of countries on each cluster and the map as a whole show that research on poverty alleviation is usually conducted by developed and developing nations together. This may be due to anti-poverty programs in developed countries usually being subsidized by international non-governmental organizations, as shown by the branch literature devoted to foreign aid and poverty reduction ( Mahembe et al., 2019b ).

Co-Citation Analysis

Co-citation analysis can locate the core classical literature efficiently ( Zhang et al., 2020 ). Pioneering studies of co-citation analysis were performed by Small (1973) . When an article cited two other articles, a relationship of co-citation will be established between these two “cited” articles ( González-Alcaide et al., 2016 ). Since co-citation aims at reference, it targets the knowledge base for the past.

Figure 6 displays the co-citation network of the cited references. The functions of the sizes and colors are the same as in Figure 5 . The most cited papers in the co-citation relationship are the studies of Foster et al. (1984) , Sen et al. (1999) , Dollar and Kraay (2002) , which respectively explore poverty measures, globalization and development, and the growth impact for the poor.

FIGURE 6 . Cited reference network of co-citation.

Figure 7 gives the co-citation heat map of sources, based on their density. We set the threshold at 20, and 78 cited sources remained on the map. Different colors signify different clusters of co-citation. The lighter the color, the more frequently the journals are cited. There are four major categories. World development and the Journal of Development Economics have the largest influence on the red cluster, which mainly contains development and economic studies. The second cluster is green and includes the fields of energy, environment, and ecology, with Ecology Economics as its brightest star. The Journal of Business Ethics and Annals of Tourism Research are the most-cited journals in the third and fourth cluster, which represents the fields of business and tourism. Some psychology studies exist in transitional spaces between business studies and economic studies, suggesting a trend of interdisciplinary work. In the past 10 years, we checked manually that psychology and other interdisciplinary research performed well. Many papers were published in Science or Nature. In the research of Mani et al. (2013) , there was a causal relationship between poverty and psychological function. Poverty reduced the cognitive performance of the poor, because poverty consumes spiritual resources, leaving fewer cognitive resources to guide choices and actions. Another psychology-based experiment in Togo showed that personal proactive training increased the profits of poor businesses by 30%, while traditional training influence was not significant ( Campos et al., 2017 ). In the study of Ludwig et al. (2012) , they revealed that the shift from high-poverty to low-poverty communities resulted in significant long-term improvements in physical and mental health and subjective well-being and had a continuing impact on collective efficacy and neighborhood security.

FIGURE 7 . Cited source density network of co-citation.

Co-Words Analysis

The analysis of co-words was performed after the co-citation analysis. Since it is hard to explain the changes in cluster from year to another in a co-citation map, Callon et al. (1983) proposed co-word analysis to identify and visualize scientific networks and their evolution. Based on our keyword analysis and following the arguments of Zhang et al. (2016) , the knowledge structures of author keywords and keywords plus are similar, but keywords plus can mirror a large proportion of the author keywords when the threshold of the number of instances of a word exceeds 10. The merger of two types of keywords will inflate the total number of words, leaving unique words representing the latest hot spot with little chance to be selected. Therefore, we conduct the co-word analysis using keywords plus to map the structure.

We set the minimum number of occurrences to 15, and 100 words with the greatest link strength are selected from the total of 2,774. As shown in Figure 8 , keywords plus generates 4 clusters. To our delight, each cluster does reflect the research priorities of each region.

FIGURE 8 . Keywords-plus co-occurrence cluster map.

The first cluster (red) reveals studies concerning livelihood, conservation, management, climate change and agriculture. These topics have strong interlinkage to Africa, suggesting that poverty reduction in Africa is often related to basic livelihood and ecology. The poor in Africa rely on the ecological conditions heavily as they are facing a more disadvantaged climate and resources. Therefore, their poverty reduction process is sometimes highly unstable and subject to considerable internal and external constraints. Stevenson and Irz (2009) concluded that the numerous studies presented almost no evidence of aquaculture reducing poverty directly.

The second cluster (green) represents studies focused on economic growth and income inequality, common in China and India. This pattern may imply that papers of this cluster focus on the economic conditions of the poor. Other studies in this cluster are related to migration, health, and welfare. The third cluster (blue) is the poverty reduction strategies on microfinance and empowerment, which are associated with Bangladesh where the Grameen Bank, one of the most notable and intensely researched microcredit programs, was founded ( McKernan, 2002 ). This cluster’s studies are interested in approaches such as business, markets, and education, to help the poor rise from poverty. The fourth cluster (yellow) contains studies of poverty reduction programs on environmental services in Latin America, where the environmental problem is intertwined with poverty traps.

Figure 9 shows the time trend of keywords-plus co-occurrence. Because the keywords plus are extracted from the cited references, they can reflect the changes in hotspots from relatively early to the most recent years. As can be seen, education, technology, and environmental services are the latest keywords in research on poverty reduction.

FIGURE 9 . Keywords-plus co-occurrence time trend map.

There are several limitations to our bibliometric analysis, though we undertake an extensive review of the literature. First, we inevitably lose a fraction of the literature. keywords and title are chosen as the criteria for helping precisely concentrate the search results on our subject. However, the Web of Science core collection on which our study relied is weak in the coverage of literature to some degree. Hence, there is a trade-off between the quantity and the quality of literature. We choose the latter, leading to an unclear restriction of the comprehensiveness of research. Second, we can identify recent research status but are not able to locate the Frontier accurately. Network mapping requires selecting a minimum occurrence threshold for including corresponding authors, keywords, and citations into the network. Because a certain number of citations or new hotspots take several years to be widely used and studied, this threshold may neglect these important data ( Linnenluecke et al., 2020 ). One possible solution is to manually examine the latest published papers in high-quality journals. Third, the mining of subfields is not deep enough. In other words, bibliometrics cannot sort out the main conclusions of literature on poverty reduction. For instance, we do not know whether the conclusion of different studies are consistent for the same poverty alleviation project. Neither do we know the exact mechanism of the anti-poverty program through bibliometric analysis, which limits the possibility of finding research points from controversial conclusions or mechanisms.

However, several points are worth taking into consideration for the future. To start with, poverty reduction is a natural interdisciplinary social science problem. Interdisciplinary has become a major research trend. Except applying cash transfer to ecological programs, associations are raised. We may discuss whether the combination of finance and ecology will bring positive benefits to financial stability, ecological protection, and poverty reduction by the means of capitalization of ecological resources or establishing the ecological bank. Our analysis suggests that some unheeded branch disciplines like human ethology are contributing to poverty reduction research as well. Thus, we need to investigate the interdisciplinary integration and the contribution of marginal disciplines on poverty reduction.

Then, more attention should be paid the intergenerational poverty. It requires researchers to extend the time span of observation and questionnaire investigation. Some work has been done. One example is the research of Hussain and Hanjra (2004) . They reviewed literature and clarified that advances in irrigation technologies, such as micro-irrigation systems, have strong anti-poverty potential, alleviating both temporary and chronic poverty. Another example is the research of Jones (2016) , which indicated that conditional cash transfers (CCTs) could indeed interrupt the intergenerational cycle of poverty through human capital investments. However, there remains a lot of work to be done for preventing the next generation from returning to poverty in this turbulent period. In a related matter, the role of education in isolating intergenerational poverty or returning to the poverty trap should be highlighted. What kind of education would more effectively help families out of poverty, quality education or vocational skill education? How to allocate educational resources effectively? For poor students, what kind of psychological intervention in education is needed to mitigate the impact of native families and help them grow up confidently? Lots of questions waiting for empirical answering, yet we note that the educational journal only took a little fraction of the total journals in Section 4.3.2.

Next, poverty does exist in prosperous conurbations though the focal point obtained from keywords analysis is “rural area”. Nevertheless, both the slums in the center of big cities and circulative flowing refugees are experiencing more relative deprivation, representing a state of instability. Chamhuri et al. (2012) reviewed the objects, causes, and policies of urban poverty. Exploring how to lift a particular small economic low-lying area out of poverty is also of great significance. Follow-up researches should keep up.

Moreover, poverty alleviation needs to be based on individual or group-specific characteristics to some degree. It is not feasible to implement a unified poverty alleviation policy on a large scale. Exquisitely designed randomized controlled trials are used to reveal the heterogeneous influence of poverty alleviation programs. Haushofer and Shapiro (2016) compared the difference between monthly transfers and one-time lump-sum transfers. The subdivision research on the effect of poverty reduction programs should be strengthened. We imagine that a model may be formed to predict the total poverty reduction effects of different policies in the various region to obtain an optimized strategy of “No Poverty” in the future.

Lastly, exploring whether poverty reduction will be contradictory or coordinate with other SDGs might be a popular direction. About the literature review, two aspects can be improved. The first is merging with other databases to compare the loss of the trade-off between quality and quantity. Next, subsequent literature reviews need to explore how to better combine manual literature collation and bibliometrics, especially when the subject is a large topic.

Poverty reduction is one of the objectives of welfare economics and development economics. It is a classic and lasting topic and has recently come into the limelight. Poverty reduction studies in the 21st century are usually based on specific poverty alleviation projects or policies in developing countries. Researchers examine numerous topics, including whether the target audience has been precisely identified and covered in the design and implementation process, whether poverty reduction projects have been proved effective, what mechanisms have contributed to the success of poverty reduction projects, and what caused their failure. The aim of this paper is to summarize the amount, growth trajectory, citation, and geographic distribution of the poverty reduction literature, map the intellectual structure, and highlight emerging key areas in the research domain using the bibliometric method. We use the VOSviewer software and the R language as tools to analyze 2,459 articles published since 2000.

We have several conclusions. First, the 21st century is a period of booming research on poverty reduction, and the number of publications has increased sharply since 2015. Second, in affiliation analysis, Development in Practice and World Development are the top publications. The most frequently cited source of co-citations are World Development , Ecology Economics, Journal of Business Ethics, and Annals of Tourism Research , respectively the centers of the fields of economics, energy, the environment, and ecology, business, and tourism. Third, there are differences in the national and regional distribution of literature, based on the number of publications and citations. The United States led both the publication list and the total citation list, followed by the United Kingdom, China, and South Africa. Yet, there is a huge variation in the number of citations, with the United States and the United Kingdom having almost 5 to 6 times more citations than China and South Africa. In terms of average citations, Kenya is the best performer. The average citation amount in China is low, implying that Chinese scholars need to improve the quality of their literature. Fourth, in the keyword analysis, policy discussion and impact estimation are the two major themes. The keywords related to poverty reduction are different among different disciplines. Economics pays more attention to inequality and growth, while environmental disciplines pay more attention to protection and management. This may suggest that strengthening the cooperation between disciplines will lead to more diversified research perspectives. Fifth, in the co-author analysis, international cooperation is usually related to geographical location. For example, there is a large amount of cooperation between Europe and Africa, within Asia, and between North and South America. At the same time, poverty reduction research often shows the cooperative patterns of developed and developing countries. Last, in the co-keyword analysis, four clusters reflect the research priorities of each region. Poverty reduction in Africa is often related to basic livelihood and ecology. The economic conditions of the poor are the concerns of research in China and India. The South Asia region is also the location of microcredit program experiments. Poverty traps are intertwined with environmental problems in Latin America’s literature.

Our findings also offer inspiration for the future. There may be a need to investigate the interdisciplinary integration. Intergenerational and urban poverty deserve attention. The heterogeneous design of poverty alleviation strategies needs to be further deepened. It might be a popular direction to figure out whether poverty reduction will be contradictory with other SDGs and conduct scenario simulation. We identify shortcomings as well. Finally, precisely identifying research frontiers requires further exploration.

Author Contributions

All authors listed have made a substantial, direct, and intellectual contribution to the work and approved it for publication.

This work is supported by National Natural Science Foundation of China (NSFC) (grant number 72022009).

Conflict of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s Note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

Supplementary Material

The Supplementary Material for this article can be found online at: https://www.frontiersin.org/articles/10.3389/fcomm.2021.754181/full#supplementary-material

1 The extreme poverty criterion set by World Bank is 1.9$ a day in purchasing power parties (PPP), https://www.worldbank.org/en/research/brief/policy-research-note-03-ending-extreme-poverty-and-sharing-prosperity-progress-and-policies . The China poverty alleviation target in 2020 is to eliminate absolute poverty, which is defined as living less than 2,300 yuan per person per day at 2010 constant prices. In addition to living above the absolute poverty line, people who must reached other five qualitative criteria can be calculated getting rid of absolute poverty, which is no worries about food, clothing, basic medical care, compulsory education and housing safety

2 Jingzhunfupin is a general term of Chinese targeted poverty alleviation work model. Opposite to the haploid poverty alleviation, different assistance policies will be formulated according to the different category of poverty, distinctive causes, dissimilar background of poor households and their divergent living environment

3 https://enapp.chinadaily.com.cn/a/202102/26/AP60382a17a310f03332f97555.html . https://www.bbc.com/news/56213271

4 https://www.worldbank.org/en/topic/poverty/overview

5 The global Multidimensional Poverty Index (MPI) is developed by the United Nations Development Programme (UNDP) and the Oxford Poverty and Human Development Initiative (OPHI) since 2010. It has been published annually by OPHI and in the Human Development Reports (HDRs) ever since. https://ophi.org.uk/multidimensional-poverty-index/

6 Relative poverty is another poverty measurement to reflect the underlying economic gradient. It is induced from the relative deprivation theory. Countries set the relative poverty line at a constant proportion of the country or year-specific mean (or median) income in practice ( https://doi.org/10.1162/REST_a_00127 )

7 This paper mainly found that eradicating extreme poverty, i.e., moving people to an income above $1.9 purchasing power parity (PPP) a day, does not jeopardize the climate target. That is to say, the climate target and no poverty goal is consistent and coordinated

8 This paper indicated that Payments for Environmental Services may reduce poverty mainly by making payments to poor natural resource managers in upper watersheds. The effects depend on how many participants are poor, the poor’s ability to participate, and the amounts paid

9 8–7 plan is the second wave of China’s poverty alleviation program. The Leading Group renewed poverty line and the National Poor Counties list in 1993. Targeted counties received three major interventions: credit assistance, budgetary grants for investment and public employed projects (i.e., Food-for-Work).

10 In the College Graduate Village Officials (CGVOs) program, the government hire outstanding graduates to work in the rural areas, for example as the village committee secretary, to help rural development and alleviate poverty. In this paper, the College Graduate Village Officials assisted eligible poor households to understand and apply for relevant subsidies, which reduced elite capture of pro-poor programs and move forward poverty alleviation process

11 The Tayssir Project was labeled the Education Support Program, sending a positive signal of its educative value

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Keywords: poverty reduction, bibliometric analysis, VOSviewer, sustainable development goals, 21st century

Citation: Yu Y and Huang J (2021) Poverty Reduction of Sustainable Development Goals in the 21st Century: A Bibliometric Analysis. Front. Commun. 6:754181. doi: 10.3389/fcomm.2021.754181

Received: 06 August 2021; Accepted: 01 October 2021; Published: 18 October 2021.

Reviewed by:

Copyright © 2021 Yu and Huang. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

*Correspondence: Yanni Yu, [email protected] ; Jinghong Huang, [email protected]

† These authors have contributed equally to this work

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1. Introduction

Macroeconomic Stability Is Necessary for Growth Macroeconomic Instability Hurts the Poor Composition and Distribution of Growth Also Matter Implications for Macroeconomic Policy

3. Macroeconomic Stability and Economic Growth

Sources of Instability Stabilization Elements of Macroeconomic Stability

4. Growth-Oriented Macroeconomic Policies and Poverty Outcomes

Financing Poverty Reduction Strategies Fiscal Policy Monetary and Exchange Rate Policies Policies to Insulate the Poor Against Shocks

Poverty is a multidimensional problem that goes beyond economics to include, among other things, social, political, and cultural issues ( see Box 1 ). Therefore, solutions to poverty cannot be based exclusively on economic policies, but require a comprehensive set of well-coordinated measures. Indeed, this is the foundation for the rationale underlying comprehensive poverty reduction strategies. 1 So why focus on macroeconomic issues? Because economic growth is the single most important factor influencing poverty, and macroeconomic stability is essential for high and sustainable rates of growth. 2 Hence, macroeconomic stability should be a key component of any poverty reduction strategy.

Macroeconomic stability by itself, however, does not ensure high rates of economic growth. In most cases, sustained high rates of growth also depend upon key structural measures, such as regulatory reform, privatization, civil service reform, improved governance, trade liberalization, and banking sector reform, many of which are discussed at length in the Poverty Reduction Strategy Sourcebook , published by the World Bank. 3 Moreover, growth alone is not sufficient for poverty reduction. Growth associated with progressive distributional changes will have a greater impact on poverty than growth that leaves distribution unchanged. Hence, policies that improve the distribution of income and assets within a society, such as land tenure reform, pro-poor public expenditure, and measures to increase the poor’s access to financial markets, will also form essential elements of a country’s poverty reduction strategy. 4

To safeguard macroeconomic stability, the government budget, including the country’s poverty reduction strategies, must be financed in a sustainable, noninflationary manner. The formulation and integration of a country’s macroeconomic policy and poverty reduction strategy are iterative processes. Poverty reduction strategies need first to be articulated (i.e., objectives and policies specified), then costed, and finally financed within the overall budget in a noninflationary manner. The amount of finance, much of which will be on concessional terms, is, however, not necessarily fixed during this process: if credible poverty reduction strategies cannot be financed from available resources, World Bank and IMF staff should and will actively assist countries in their efforts to raise additional financial support from the donor community. Nonetheless, in situations where financing gaps remain, a country would have to revisit the intermediate objectives of their strategy and reexamine their priorities. Except in cases where macroeconomic imbalances are severe, there will usually be some scope for flexibility in setting short-term macroeconomic targets. However, the objective of macroeconomic stability should not be compromised.

2. The Links Between Macroeconomic Policy and Poverty Reduction: Growth Matters

Economic growth is the single most important factor influencing poverty. Numerous statistical studies have found a strong association between national per capita income and national poverty indicators, using both income and nonincome measures of poverty. 5 One recent study consisting of 80 countries covering four decades found that, on average, the income of the bottom one-fifth of the population rose one-for-one with the overall growth of the economy as defined by per capita GDP (Dollar and Kraay, 2000). Moreover, the study found that the effect of growth on the income of the poor was on average no different in poor countries than in rich countries, that the poverty–growth relationship had not changed in recent years, and that policy-induced growth was as good for the poor as it was for the overall population. Another study that looked at 143 growth episodes also found that the “growth effect” dominated, with the “distribution effect” being important in only a minority of cases (White and Anderson, forthcoming). These studies, however, establish association, but not causation. In fact, the causality could well go the other way. In such cases, poverty reduction could in fact be necessary to implement stable macroeconomic policies or to achieve higher growth.

Studies show that capital accumulation by the private sector drives growth. 6 Therefore, a key objective of a country’s poverty reduction strategy should be to establish conditions that facilitate private sector investment. No magic bullet can guarantee increased rates of private sector investment. Instead, in addition to a sustainable and stable set of macroeconomic policies, a country’s poverty reduction policy agenda should, in most cases, extend across a variety of policy areas, including privatization, trade liberalization, banking and financial sector reforms, labor markets, the regulatory environment, and the judicial system. The agenda will certainly include increased and more efficient public investment in a country’s health, education, and other priority social service sectors. 7

Macroeconomic Stability Is Necessary for Growth

Macroeconomic stability is the cornerstone of any successful effort to increase private sector development and economic growth ( see Box 2 ). Cross-country regressions using a large sample of countries suggest that growth, investment, and productivity are positively correlated with macroeconomic stability (Easterly and Kraay, 1999). Although it is difficult to prove the direction of causation, these results confirm that macroeconomic instability has generally been associated with poor growth performance . Without macroeconomic stability, domestic and foreign investors will stay away and resources will be diverted elsewhere. In fact, econometric evidence of investment behavior indicates that in addition to conventional factors (i.e., past growth of economic activity, real interest rates, and private sector credit), private investment is significantly and negatively influenced by uncertainty and macroeconomic instability (see, for example, Ramey and Ramey, 1995).

Macroeconomic Instability Hurts the Poor

In addition to low (and sometimes even negative) growth rates, other aspects of macroeconomic instability can place a heavy burden on the poor. Inflation, for example, is a regressive and arbitrary tax, the burden of which is typically borne disproportionately by those in lower income brackets. The reason is twofold. First, the poor tend to hold most of their financial assets in the form of cash rather than in interest-bearing assets. Second, they are generally less able than are the better off to protect the real value of their incomes and assets from inflation. In consequence, price jumps generally erode the real wages and assets of the poor more than those of the non-poor. Moreover, beyond certain thresholds, inflation also curbs output growth, an effect that will impact even those among the poor who infrequently use money for economic transactions. 8 In addition, low output growth that is typically associated with instability can have a longer-term impact on poverty (a phenomenon known as “hysteresis”). This phenomenon typically operates through shocks to the human capital of the poor. In Africa, for instance, there is evidence that children from poor families drop out of school during crises. Similarly, studies for Latin American countries suggest that adverse terms-of-trade shocks explain part of the decline of schooling attainment (see, for example, Behrman, Duryea, and Szeleky, 1999).

Composition and Distribution of Growth Also Matter

Although economic growth is the engine of poverty reduction, it works more effectively in some situations than in others. 9 Two key factors that appear to determine the impact of growth on poverty are the distributional patterns and the sectoral composition of growth.

If the benefits of growth are translated into poverty reduction through the existing distribution of income, then more equal societies will be more efficient transformers of growth into poverty reduction . A number of empirical studies have found that the responsiveness of income poverty to growth increases significantly as inequality is lowered. 10 This is also supported by a recent cross-country study that found that the more equal the distribution of income in a country, the greater the impact of growth on the number of people in poverty (Ravallion, 1997). Others have suggested that greater equity comes at the expense of lower growth and that there is a trade-off between growth and equity when it comes to poverty reduction. 11 A large number of recent empirical studies, however, have found that there is not necessarily such a trade-off 12 and that equity in its various dimensions is growth enhancing. 13

The sectoral composition of growth can determine the impact that growth will have on poverty. Conventional wisdom has been that growth in sectors of the economy where the poor are concentrated will have a greater impact on reducing poverty than growth in other sectors—indeed, this is almost a tautology. For example, it is often argued that in countries where most of the poor live in rural areas, agricultural growth reduces poverty because it generates income for poor farmers and increases the demand for goods and services that can easily be produced by the poor. 14 Various country-specific and cross-country studies have shown that growth in the agricultural and tertiary sectors has had a major effect on reducing poverty, while growth in manufacturing has not. 15 This reinforces the case for duty-free access to industrial country markets for agricultural exports from low-income countries. The links may be more complex over the long run, however. While faster growth in agriculture may address rural poverty in the short-term, reliance on agricultural activity may also intensify output variability, which, in turn, would contribute to increasing rather than decreasing poverty. A more diversified economy with a vibrant manufacturing sector might offer the best chances for a sustainable improvement in living standards in the long run.

What are the implications of these empirical findings for macroeconomic policy? First, in light of the importance of growth for poverty reduction, and of macroeconomic stability for growth, the broad objective of macroeconomic policy should be the establishment, or strengthening, of macroeconomic stability. Policymakers should therefore define a set of attainable macroeconomic targets (i.e., growth, inflation, external debt, and net international reserves) with the objective of maintaining macroeconomic stability, and pursue macroeconomic policies (fiscal, monetary, and exchange rate) consistent with those targets. In cases where macroeconomic imbalances are less severe, a range of possible targets may be consistent with the objective of stabilization. Precise targets can then be set within that range, in accordance with the goals and priorities in the country’s poverty reduction strategy (see the section on fiscal policy later in this pamphlet).

Second, most developing countries will likely have substantial scope for enhancing the quality of growth, that is, the degree to which the poor share in the fruits of such growth, through policies aimed at improving income distribution. These policies (e.g., land tenure reform, changes in marginal and average tax rates, increases in pro-poor social spending, etc.) often are politically charged, and usually require supporting structural and governance reforms that would empower the poor to demand resources and/or ensure that resources intended for them are not diverted to other groups of the population. As these topics pertain more broadly to political economy, rather than exclusively to macroeconomics, they are beyond the scope of this pamphlet. But they reinforce the point that economic growth alone is not sufficient for poverty reduction and that complementary redistributional policies may be needed to ensure that the poor benefit from growth.

Finally, while issues regarding the composition of growth also go beyond strict macroeconomics, several general policy observations can be made. There is a general consensus that policies that introduce distortions in order to influence growth in a particular sector can hamper overall growth. The industrial policies pursued by many African developing countries in the 1960s have long been discredited (World Bank, 1982). Instead, strategies for sector specific growth should focus on removing distortions that impede growth in a particular sector. In addition, policymakers should implement policies that will empower the poor and create the conditions that would permit them to move into new as well as existing areas of opportunity, thereby allowing them to better share in the fruits of economic growth. The objectives of such policies should include creating a stable environment and level playing field conducive to private sector investment and broad-based economic growth; removing the cultural, social, and economic constraints that prevent the poor from making full use of their existing asset base and accessing markets; and increasing the human capital base of the poor through the provision of basic health and education services. Using these policies, and the redistributive policies described above, policymakers can target “pro-poor” growth—that is, they can attempt to maximize the beneficial impact of sustained economic growth on poverty reduction.

Broadly speaking, two considerations underlie macroeconomic policy recommendations. First, there needs to be an assessment of the appropriate policy stance to adopt in a given set of circumstances (i.e., should fiscal and/or monetary policy be tightened or loosened?). Second, there is the choice of specific macroeconomic policy instruments that would be beneficial for a country to adopt (e.g., the use of a nominal anchor, a value-added tax (VAT), etc.). In practice, these two considerations are closely linked. Adjusting a policy stance is often done via the adoption of a new instrument (or the modification of an existing one). More important, both considerations are essential to efforts to enhance an economy’s stability.

The specific stance must fit each country’s particular situation. These situations can be put into three broad classes: (1) instability/disequilibrium; (2) stabilization (e.g., transition from instability to stability); and (3) stability/steady economic growth. This Section briefly discusses how macroeconomic policies can contribute to stability. For countries that enjoy stable macroeconomic conditions, there is somewhat greater flexibility in the choice of appropriate stance for macroeconomic policy. The central issue for these countries will be to ensure that the financing of their poverty reduction strategies does not jeopardize macroeconomic stability, which will be discussed in the last section of this pamphlet.

Sources of Instability

There are two main sources of economic instability, namely exogenous shocks and inappropriate policies. Exogenous shocks (e.g., terms of trade shocks, natural disasters, reversals in capital flows, etc.) can throw an economy into disequilibrium and require compensatory action. For example, many low income countries have a narrow export base, often centered on one or two key commodities. Shocks to the world price of these commodities can therefore have a strong impact on the country’s income. Even diversified economies, however, are routinely hit by exogenous shocks, although, reflecting their greater diversification, shocks usually need to be particularly large or long-lasting to destabilize such an economy. Alternatively, a disequilibrium can be “self-induced” by poor macroeconomic management. For example, an excessively loose fiscal stance can increase aggregate demand for goods and services, which places pressure on the country’s external balance of payments as well as on the domestic price level. At times, economic crises are the result of both external shocks and poor management.

Stabilization

In most cases, addressing instability (i.e., stabilization) will require policy adjustment ; whereby a government introduces new measures (possibly combined with new policy targets) in response to the change in circumstances. 16 Adjustment will typically be necessary if the source of instability is a permanent (i.e., systemic) external shock or the result of earlier, inappropriate macroeconomic policies. However, if the source of instability can be clearly identified as a temporary shock (e.g., a one-time event) then it may be appropriate for a country to accommodate it. 17 Identifying whether a particular shock is temporary or is likely to persist is easier said than done. Since there is often a considerable degree of uncertainty surrounding such a judgment, it is usually wise to err somewhat on the side of caution by assuming that the shock will largely persist and by basing the corresponding policy response on the appropriate adjustment.

In most circumstances where adjustment is necessary, both monetary (or exchange rate) and fiscal instruments will have to be used. In particular, successful adjustment to a permanent unfavorable shock that worsens the balance of payments will often require a sustained tightening of the fiscal stance, as this is the most immediate and effective way to increase domestic savings and to reduce domestic demand—two objectives typically at the center of stabilization programs.

Adjustment policies may contribute to a temporary contraction of economic activity, but this contingency should not be used to argue against implementing adjustment policies altogether, as the alternative may be worse. Attempting to sustain aggregate demand through unsustainable policies will almost certainly aggravate the long-run cost of a shock, and could even fail in the short run to the extent that it undermines confidence. In the long run, greater benefits to the poor are to be had as a result of the restoration of macroeconomic stability. The appropriate policies to protect the poor during adjustment are to maintain, or even increase, social expenditures and to adopt, where feasible, compensatory measures that would insulate or offset temporary adverse impacts to the fullest extent possible. 18 This is best done by devoting resources to the establishment of effective social safety nets, 19 as an enduring part of a country’s poverty reduction strategy, rather than as a response to crisis. Countries that lack such resources/safety nets could be forced to either subject their poor to the short-term adverse effects of stabilization or to delay the pace with which macroeconomic adjustment proceeds (and put off the corresponding long-term benefits to economic growth and poverty reduction).

Countries in macroeconomic crisis typically have little choice but to stabilize quickly, but for countries in the “gray” area of partial stability, finding the right pace may prove difficult. In some cases, a lack of financing will drive the pace of stabilization. Where financing is not a constraint, however, policymakers will need to assess and carefully weigh various factors on a case-by-case basis in choosing the most appropriate pace of stabilization.

Elements of Macroeconomic Stability

Macroeconomic policies influence and contribute to the attainment of rapid, sustainable economic growth aimed at poverty reduction in a variety of ways. By pursuing sound economic policies, policymakers send clear signals to the private sector. The extent to which policymakers are able to establish a track record of policy implementation will influence private sector confidence, which will, in turn, impact upon investment, economic growth, and poverty outcomes.

Prudent macroeconomic policies can result in low and stable inflation . Inflation hurts the poor by lowering growth and by redistributing real incomes and wealth to the detriment of those in society least able to defend their economic interests. High inflation can also introduce high volatility in relative prices and make investment a risky decision. Unless inflation starts at very high levels, rapid disinflation can also have short-run output costs, which need to be weighed against the costs of continuing inflation.

By moving toward debt sustainability , policymakers will help create the conditions for steady and continuous progress on growth and poverty reduction by removing uncertainty as to whether a government will be able to service new debt. By keeping domestic and external debt at levels that can be serviced in a sustainable manner without unduly squeezing nondebt expenditure, policymakers can also ensure that adequate domestic resources are available to finance essential social programs.

Inappropriate exchange rate policies distort the composition of growth by influencing the price of tradable versus nontradable goods. Household survey data for a number of countries indicate that the poor tend to consume higher amounts of nontradable goods while generating relatively more of their income from tradable goods (Sahn, Dorosh, and Younger, 1997). Hence, in addition to distorting trade and inhibiting growth, an overly appreciated exchange rate can impair the relative incomes and purchasing power of the poor.

By building and maintaining an adequate level of net international reserves , a country can weather a temporary shock without having to reduce essential pro-poor spending. External shocks can be particularly detrimental to the poor because they can lower real wages, increase unemployment, reduce nonlabor income, and limit private and net government transfers. The level of “adequate” reserves depends on the choice of exchange rate regime.

Since the emphasis of this pamphlet is on the role of macroeconomic policy in supporting a country’s poverty reduction strategy, the discussion of macroeconomic policies in this section focuses on countries that have broadly achieved macroeconomic stability. Recent data indicate that many developing countries are presently in a state of macroeconomic stability (see Tables 1–3 at the end of this pamphlet). When formulating a country’s poverty reduction strategy, policymakers will need to assess and determine what is the most appropriate combination of key macroeconomic targets that would preserve macroeconomic stability in their particular circumstance. Three key issues are discussed in this section: (1) how to finance poverty-reducing spending in a way that doesn’t endanger macroeconomic stability; (2) what specific policies can be adopted to improve macroeconomic performance; and (3) policies to protect the poor from domestic and external shocks.

Financing Poverty Reduction Strategies

Once a country has developed a comprehensive and fully costed draft of its poverty reduction strategy, it will need to ensure that the strategy can be pursued and financed in a manner that does not jeopardize its macroeconomic stability and growth objectives. 20 To do so, policymakers need to integrate their poverty reduction and macroeconomic strategies into a consistent framework. The following paragraphs present a conceptual framework that could be useful to policymakers in determining whether their poverty reduction strategy is consistent with their macroeconomic objectives.

Given that it is difficult to determine beforehand what the growth target should be, policymakers may wish to consider developing alternative macroeconomic scenarios that take into consideration possible variations in the rate of economic growth. Such scenarios could be usefully discussed with stakeholders and development partners with a view to assessing the impact of lower-than-projected economic growth on key macroeconomic targets and poverty outcomes and to developing appropriate contingencies. The most likely or “base case” scenario would then be used as the basis for carrying out an initial attempt aimed at integrating the macroeconomic and poverty reduction strategies into a consistent framework. Once this has been accomplished, similar exercises could be carried out regarding the other contingency scenarios for reference during the implementation stage of the strategy.

Figure 1 shows the various macroeconomic linkages and constraints within a country and highlights the main trade-offs facing policymakers. The starting point is the initial articulation of the country’s poverty reduction strategy , based on discussions with representatives of the government, stakeholders, and development partners. Ideally, these discussions will have resulted in the development of a comprehensive action plan that identifies priority sectoral policies to be pursued in support of poverty reduction, including in the areas of education, health, and rural infrastructure. Given that poverty is multidimensional, the action plan will also likely include priority measures with regard to governance, structural reform, and other relevant areas, each of which may have budgetary implications.

The first step will be to provide a full costing of the envisaged poverty reduction strategy . A comprehensive system for budget formulation of poverty reduction strategies requires the development of Medium-Term Expenditure Frameworks (MTEF), which currently exist in only a limited number of countries (e.g., Ghana and Uganda). Details regarding how such costing exercises can be carried out are presented in Chapter 5 of the Poverty Reduction Strategy Sourcebook , “Public Spending for Poverty Reduction”. 21

The second step involves an assessment of the government’s spending program with regard to priority spending, nondiscretionary spending, and discretionary nonpriority spending. In doing so, policymakers should consider the scope for reallocating existing government spending into priority areas and away from nonproductive, nonpriority spending, as well as from areas where a rationale for public intervention does not exist.

The third step involves an assessment of domestic and external sources of budget finance. This would include a review of (1) the existing tax and nontax revenue base, in-cluding the effect of any changes in the tax system envisaged under the poverty reduction strategy; (2) the scope for financing public spending through net domestic borrowing in light of the need to maintain macroeconomic stability and to ensure adequate availability of credit to the private sector in support of private sector development and economic growth; and (3) the scope for external financing (e.g., grants, net external borrowing, and debt relief) that is realistic and sustainable under the present circumstances.

Once policymakers have carried out these assessments, they can then determine whether the desired poverty reduction strategy can be financed in a manner consistent with the country’s growth and stability objectives. In this regard, it is important to note that there are no rigid, pre-determined limits regarding a country’s fiscal stance (such as, for example, “the budget deficit must not be more than ‘x’ percent of GDP”). Rather, arriving at an appropriate, integrated poverty reduction and macroeconomic framework will require juggling a large number of parameters and weighing the trade-offs between multiple objectives. The linkages in Figure 1 are meant to illustrate that this is an iterative process. In this regard, quantitative frameworks that could assist policymakers in assessing the distributional implications of their macroeconomic policies would be particularly useful. Such frameworks, however, are presently only at a nascent stage of development (see Box 3 ).

If there remains an imbalance between spending and expected financing that could jeopardize the country’s macroeconomic growth and stability objective, one option would be to ascertain the extent to which additional external financing may be available. But, as discussed earlier, policymakers would need to assess the extent to which accommodating such expenditure could place pressure on the price of nontraded goods and jeopardize stability. Since the development of a poverty reduction strategy involves a participatory process that includes the country’s development partners, the case for additional donor support can be examined. To the extent possible, donors should be encouraged to make medium-term aid commitments in support of a country’s poverty reduction strategy so that the country can have confidence as it begins new spending programs that these activities can be sustained. 22

If the desired poverty reduction program cannot be financed in a manner consistent with the country’s economic stability and growth objectives, then policymakers will need to reconsider the parameters discussed above. Key questions would include: Is there further scope for domestic revenue mobilization? Can discretionary nonpriority spending be cut back more? Is there scope for cutting back certain priority spending without undermining the poverty reduction objective? Can the domestic financing target be relaxed without jeopardizing macroeconomic stability or private sector development objectives? Can the macroeconomic targets be modified in a manner that would not undermine the interrelated objectives of rapid economic growth, low and stable inflation, and poverty reduction? The answers to these questions will determine the extent to which the desired poverty reduction programs can be pursued in the current period.

Fiscal Policy

Fiscal policy can have a direct impact on the poor, both through the government’s overall fiscal stance and through the distributional implications of tax policy and public spending. Structural fiscal reforms in budget and treasury management, public administration, governance, transparency, and accountability can also benefit the poor in terms of more efficient and better targeted use of public resources. As indicated above, there is no rigid, pre-determined limit on what would be an appropriate fiscal deficit. An assessment would need to be based on the particular circumstances facing the country, its medium-term macroeconomic outlook, and the scope for external budgetary assistance. The terms on which external assistance is available are also important. There is a strong case, for instance, for allowing higher grants to translate into higher spending and deficits, to the extent that those grants can reasonably be expected to continue in the future, and provided that the resources can be used effectively.

With regard to the composition of public expenditure, policymakers will need to assess not only the appropriateness of the proposed poverty reduction spending program, but also of planned nondiscretionary, and discretionary nonpriority, spending. In so doing, they will need to take into particular consideration the distributional and growth impact of spending in each area and place due emphasis on spending programs that are pro-poor (e.g., certain programs in health, education, and infrastructure) and on the efficient delivery of essential public services (e.g., public health, public education, social welfare, etc.). In examining these expenditures, policymakers should evaluate the extent to which government intervention in general, and public spending in particular, can be justified on grounds of market failure and/or redistribution.

Policymakers must also ask themselves whether the envisaged public goods or services can be delivered efficiently (e.g., targeted at the intended beneficiaries) and, if not, whether appropriate mechanisms and/or incentives can be put in place to ensure such efficient delivery. Countries should begin by assessing in a frank manner their administrative capacity at both the national and subnational levels to deliver well-targeted, essential public services in support of poverty reduction. In this regard, policymakers should consider the extent to which both technical assistance and the private sector can play a role in improving the delivery of these services.

In the context of medium-term budget planning, policymakers should consider the scope for reallocating existing government spending into priority areas 23 and away from nonproductive spending, including areas where a rationale for public intervention does not exist. Operation and maintenance expenditure tied to capital spending should also be reviewed with a critical eye. The quality of public expenditure could be assessed in the context of a public expenditure review with the assistance of multilateral and/or bilateral donors. Policymakers could then assess the new poverty reduction projects and activities that have been identified in the context of the poverty reduction strategy and integrate them into the preliminary spending program. In so doing, they should attempt to rank the poverty programs in order of relative importance in line with the country’s social and economic priorities, the market failure/redistribution criteria identified above, and the country’s absorptive capacity in the light of existing institutional and administrative constraints. If spending cuts are deemed necessary in the context of the integrated poverty reduction/macroeconomic framework, policymakers should refer back to the ranking of the spending program based on the relative importance and priority assigned to each activity.

A key aspect of any poverty reduction strategy will be an assessment of the impact of the present tax and nontax system on the poor. An important medium-term objective for many developing countries will be to raise domestic revenue levels with a view to providing additional revenue in support of their poverty reduction strategies. 24 The existing revenue base should be reviewed relative to its capacity to provide for the poverty spending requirements from nonbank domestic financing. Revenues should be raised in as economically neutral a manner as possible, while taking into consideration equity concerns and administrative capacities ( see Box 4 ).

In a developing country , taking account of allocational effects means that the tax system in particular should not attempt to affect savings and investment—experience indicates that aggregate savings and investment tend to be insensitive to taxes, with the result that the tax system typically only affects the allocation of those aggregates across alternative forms. As regards equity, the tax system should be assessed with respect to its direct and indirect impact on the poor. It is difficult to have a tax system that is both efficient and progressive, particularly in those countries without a well-developed tax administration. Therefore, governments should seek to determine a distribution of tax burdens seen as broadly fair rather than use the tax system to achieve a drastic income redistribution.

Tax policy should aim at moving toward a system of easily administered taxes with broad bases and moderate marginal rates. To the extent that some revenue provisions may be regressive, they should be offset through the expenditure system (e.g., transitory, well-targeted food subsidies could offset the impact of a broad-based consumption tax and cushion the adverse impact of adjustment policies on the poor). Finally, where revenue systems are being administered by a civil service that is highly constrained in terms of human resources, technical support, and funding, countries should rely heavily on final withholding, and keep to the absolute minimum any exemptions, special provisions, or multiple rates.

The scope for domestic budgetary financing will depend on a number of factors, including the sustainable rate of monetary growth, the credit requirements of the private sector, the relative productivity of public investment, and the desired target for net international reserves. Sacrificing low inflation (through faster monetary growth) to finance additional expenditure is generally not an effective means to reduce poverty because the poor are most vulnerable to price increases. At the same time, since private sector development stands at the center of any poverty reduction strategy, governments need to take into account the extent to which public sector borrowing “crowds out” the private sector’s access to credit, thereby undermining the country’s growth and inflation objectives. At times, public sector borrowing can also “crowd in” private sector investment by putting in place critical infrastructure necessary for private enterprise to flourish. Given that at any point in time there is a finite amount of credit available in an economy, policymakers must therefore assess the relative productivity of public investment versus private investment and determine the amount of domestic budgetary financing that would be consistent with the need to maintain low inflation and support sustainable economic growth.

The amount and type of available external resources to finance the budget will vary depending on the particular circumstances facing the country. Countries that have access to external grants need to consider what amount is available and sustainable under the present circumstances. The same is true in the case of external debt, but policymakers also need to determine whether the terms on such borrowing are appropriate and whether the added debt burden is sustainable. To the extent that a country is benefiting from, or may benefit from, external debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, net resource flows—flows that are predictable over the medium term—will be freed up to finance poverty-related budgetary expenditure. Domestic debt reduction could also represent a viable use of additional concessional foreign assistance, since it would both free up government resources to be directed at priority poverty expenditure, as well as free up additional domestic credit for use by the private sector.

There may be a limit to the amount of additional external financing that a country would deem to be appropriate, however. For example, there may be absorptive capacity constraints that could drive up domestic wages and prices, as well as appreciate the exchange rate and render the country’s exports less competitive, thereby threatening both stability and growth. The extent of such pressures will depend on how much of the additional aid is spent on imports versus domestic nontraded goods and services. There may also be uncertainty regarding aid flows, especially over the medium term, as well as considerations regarding long-term dependency on external official aid. In the absence of medium-term commitments of aid, policymakers may therefore wish to be cautious in assuming what levels of assistance would be forthcoming in the future.

Monetary and Exchange Rate Policies

Monetary and exchange rate policies can affect the poor primarily through three channels: inflation, output, and the real exchange rate. As mentioned above, inflation hurts the poor because it acts as a regressive tax and curbs growth. Fluctuations in output clearly have a direct impact upon the incomes of the poor, and monetary and exchange rate policies affect these fluctuations in two ways: first, changes in the money supply can have a short-run effect on real variables such as the real interest rate, 25 which in turn affect output; and second, a country’s chosen exchange rate regime can buffer, or amplify, exogenous shocks. Finally, the real exchange rate can affect the poor in two ways. 26 First, it influences a country’s external competitiveness and hence its growth rate. Second, a change in the real exchange rate (through, for example, a devaluation of the nominal rate) can have a direct impact on the poor. 27

Given that monetary and exchange rate policies affect the poor through their impact on inflation, output, and the real exchange rate, it might seem, at first glance, that such policies should therefore be used to target all three of these variables. However, although monetary and exchange rate policies may affect the poor through all of these channels, the monetary authorities cannot necessarily control the size and nature of the resulting impact. For example, changes in the money supply may affect output and employment in the short run, but they do so in a way that is at best uncertain and imperfectly understood. As a result, monetary authorities are typically unable to exploit this impact systematically. Similarly, monetary and exchange rate policies are unable to manipulate the real exchange rate beyond a short period of time. Therefore, actively using these policies to pursue a particular short-run exchange rate goal, which may be inconsistent with underlying economic fundamentals, could introduce instability.

Monetary and exchange rate policies should target those variables over which they have the most control, namely the long-run impact of inflation on the rate of growth. Broadly speaking, this can be achieved by setting one objective for monetary and exchange rate policies: the attainment and maintenance of a low and stable rate of inflation. In practice this means (1) choosing, and firmly committing to, an inflation rate target within the context of the overall poverty reduction strategy and the associated macroeconomic framework; (2) adopting the required policies to achieve the target; and (3) not using monetary and exchange rate policies to pursue, overtly or otherwise, additional or alternative objectives. Formulated and implemented in this way, monetary and exchange rate policies can form the basis for a stable macroeconomic environment.

Improving Inflation Performance

In some cases, it may be desirable to target a lower rate of inflation. What policies can help meet this objective? Ultimately, this question has to be answered on a case-by-case basis. However, policymakers should consider two general policies that are essential parts of any effort to improve inflation performance: strong and sustained fiscal adjustment; and the use of a nominal anchor and other measures (e.g., inflation targeting) to enhance policy credibility.

Fiscal Adjustment

A loose fiscal stance can put upward pressure on prices through two channels: aggregate demand and financing. Such a fiscal stance increases the demand for domestic goods, which, in the absence of a corresponding increase in supply, puts upward pressure on their prices. It can also increase demand for imports, putting downward pressure on the value of the domestic currency and, hence, (in a flexible exchange rate regime) upward pressure on the prices of imported goods. Further, if the fiscal stance is financed by printing money, this expands the money supply and tends to increase inflation.

In theory, if inflationary pressures from the fiscal stance are being transmitted exclusively through the financing channel, then inflationary pressures could be reduced without fiscal adjustment if alternative (sustainable) sources of financing, such as external financing, are available. In practice, however, some fiscal adjustment is typically also necessary because either the amount of alternative finance is insufficient and/or the fiscal stance is also putting upward pressure on prices through the aggregate demand channel. Indeed, evidence shows that successful disinflation episodes have typically been accompanied by sizable and sustained fiscal adjustment (Phillips, 1999). Therefore, countries that wish to target a significantly lower rate of inflation need to ensure that the corresponding fiscal adjustment is adequate.

Credibility and Nominal Anchors

Setting policy targets is important. Consistently achieving those targets is equally important. When targets under a policy are systematically missed, the policy loses credibility. If a policy lacks credibility, the private sector does not believe that the authorities are truly committed to their policy targets, and hence does not fully factor the authorities’ targets into its inflation expectations, for instance when setting wage bargains. This can result in an inflation bias—that is, higher inflation outcomes brought on solely by the lack of policy credibility itself.

Credibility can sometimes be enhanced by imposing restrictions on policy (i.e., limiting the degree of discretion of the monetary authorities), or by adopting specific institutional arrangements. For example, the adoption of a fixed exchange rate regime involves a commitment to exchange domestic currency for foreign currencies at a predefined rate. This imposes an automatic discipline upon domestic monetary policy. In effect, control over monetary policy is surrendered to the central bank of the country whose currency has been chosen as the peg—typically a low inflation country—which, in turn, imparts credibility to the domestic policy objective of achieving low inflation.

More generally, evidence shows that inflation performance has been better in countries using a nominal anchor (Phillips, 1999). Using a nominal anchor involves specifying and committing to a predetermined path for a nominal variable—such as the exchange rate (i.e., the fixed exchange rate discussed above is a nominal anchor) or a money aggregate—that is to a certain degree under the control of the authorities. 28 If the variable threatens to deviate from its targeted path the authorities take corrective action. 29 In this way, inflation, and inflationary expectations, can be anchored.

In some countries, fixed exchange rate regimes have clearly been effective in establishing and maintaining low inflation. More generally, there is empirical evidence that inflation performance has been better in countries running fixed exchange rate regimes (see, for example, Ghosh and others, 1999). However, the choice of a fixed exchange rate has to be based on broader considerations than simply its merits as a nominal anchor. In particular, the underlying structural features of an economy need to be supportive of a fixed regime broadly speaking (for example, the degree of price rigidity, the nature of its predominant exogenous shocks, the degree of political support, etc.—these issues are discussed below). Adopting a fixed exchange regime to serve only temporarily as a nominal anchor can be risky. Exiting a fixed regime once inflation performance is satisfactory can be difficult. Moreover, if a country’s economic conditions are not supportive, or political support for the policy insufficient, the peg could come under considerable pressure, which may, in the end, force a costly abandonment of the regime and undermine the original objective of stabilizing inflation.

Both types of nominal anchors restrict the use of monetary instruments. 30 A standard critique has been that, although the use of a nominal anchor may improve inflation performance, it comes at the cost of reducing the discretion of the authorities to respond to short-run shocks. In practice this trade-off may not be significant, however. Even if the monetary authorities have full discretion, 31 as discussed above, their ability to influence short-run output movements systematically is limited. Moreover, their ability to exercise discretion is likely to be limited by the need to preserve, or enhance, policy credibility.

Inflation targeting has been adopted as the monetary regime in an increasing number of industrialized and developing countries in recent years. It is typically and preferably associated with a flexible exchange rate system. Inflation targeting sets an inflation target for the central bank and gives the responsibility for achieving the target to the central bank. To enhance accountability, credibility, and efficiency, the central bank in an inflation targeting regime is generally required to be extremely transparent about its operations, explaining its decisions to the public, publishing, in most cases, a regular inflation report.

In the long run, however, only policies to which the authorities are fully committed can be credible. Imposing restrictions on policy when the necessary policy commitment is absent (or even when the private sector erroneously suspects a lack of commitment) can have disastrous results. For example, the private sector’s belief that a country’s authorities are not committed to defending its fixed exchange rate may lead to a speculative attack on the peg. Although devices may be used to accelerate the attainment of a policy’s credibility, there is no substitute for commitment to the policy, as demonstrated through sustained adherence to a prudent macroeconomic stance.

External Shocks and the Choice of Exchange Rate Regime

The choice of exchange rate regime—fixed or flexible—depends crucially on the nature of the economic shocks that affect the economy, as well as the structural features of the economy, which may either mitigate or amplify these shocks. Choosing a fixed exchange rate regime when these underlying features of the economy are not supportive leaves a country more exposed to the possibility of an external crisis, which can result in the ultimate abandonment of the peg. In addition, shocks to output can have a strong impact on the poor. Since different exchange rate regimes have different insulating properties vis-à-vis certain types of shocks, choosing the regime that best insulates the economy will serve to moderate fluctuations in output, and thereby best serve the poor.

For example, if the predominant source of disturbance to an economy is shocks to the terms of trade, a flexible exchange rate regime may be best because the nominal exchange rate is free to adjust in response to the shock and bring the real exchange rate to its new equilibrium (see, for example, Devarajan and Rodrik, 1992). Alternatively, if domestic monetary shocks predominate, such as shocks to the demand for money, output may be best insulated by a fixed exchange rate that allows these shocks to be absorbed by fluctuations in international reserves. Of course, one of the challenges facing the policymaker is to identify which shocks are in fact predominant in a particular economy.

The structural features of the economy may also affect the impact a particular shock has on the economy, as well as the insulating properties of exchange rate regimes. For example, if an economy is characterized by a significant degree of nominal wage rigidity, wages will not fully adjust (at least in the short run) in response to small real shocks, and hence the effect of those shocks on output will be amplified. In these circumstances, even if domestic monetary shocks are important, a flexible exchange rate regime may well be preferable (in contrast to the conclusions above). Another important structural feature is the degree of an economy’s openness. Typically the more open an economy is, the greater is its exposure to external shocks. This would argue generally in favor of a flexible exchange rate regime. However, if an open economy is sufficiently diversified (i.e., it trades a wide range of goods and services) and if its prices are sufficiently flexible, then a fixed exchange rate may be preferable because the volatility of flexible exchange rates may impede international trade, and thus lower external demand (although the evidence on this is mixed). In conclusion, these various pros and cons of fixed versus flexible exchange rate regimes need to be carefully assessed and weighed on a case-by-case basis—again, there is no universal “right answer.”

Policies to Insulate the Poor Against Shocks

Given that the poor are adversely affected by macroeconomic shocks, what should governments do about it? The question can be divided into two parts: How should economic policy be designed to cushion the impact of shocks on the poor, in particular during times of crisis and/or adjustment? What specific policies can governments undertake to insulate the poor from the consequences of shocks by removing existing distortive policies?

Social Safety Nets

Sound macroeconomic policies will help a country to reduce its exposure to macroeconomic shocks, but there is no cost-effective policy that will insure against all possible shocks. It is therefore crucial to have social safety nets in place to ensure that poor households are able to maintain minimum consumption levels and access to basic social services during periods of crisis. Social safety net measures are also necessary to protect the poor from shocks imposed on them during periods of economic reform and adjustment. 32 Safety nets include public work programs, limited food subsidies, transfers to compensate for income loss, social funds, fee waivers, and scholarships for essential services such as education and health. The specific mix of measures will depend on the particular characteristics of the poor and their vulnerability to shocks and should be well-targeted and designed in most cases to provide temporary support.

Equally important, the resources allocated to social safety nets should be protected during economic crises and/or adjustment, when fiscal tightening may be necessary. Governments should have budgetary guidelines approved by their legislatures that prioritize and protect poverty-related programs during periods of crisis and provide a clear course of action that ensures access of the poor to basic social services during periods of austerity (see Lustig, forthcoming). As will be discussed below, countercyclical fiscal policies can also ensure the availability of funds for financing safety nets during crises.

Another important factor to consider is that safety nets should already be operating before economies get hit by shocks so that they can be effective in times of distress (for a more detailed account, see World Bank, 2000). However, if a shock occurs before appropriate safety nets have been developed, then “second-best” social protection policies may be necessary. For instance, food subsidies have been found to be inefficient and often benefiting the non-poor, and most reform programs call for their reduction or even elimination. However, after a severe shock such as the 1997–98 East Asian financial crisis, when countries like Indonesia lacked comprehensive safety nets, existing food subsidies were probably the only means of preventing widespread malnutrition and starvation. In the context of a country’s reform process, however, these subsidies should be replaced with better targeted and less distorting transfers to the poor.

Removing Market Distortions and Distortive Policies

In addition to pursuing favorable economic policies and putting in place appropriate social safety nets, there are specific structural reforms that governments can undertake to insulate the poor from the adverse consequences of shocks. Most of these have to do with addressing the mechanisms through which macroeconomic shocks are transmitted to the poor. ( see Box 5 ).

To the extent that asset market distortions prevent the poor from saving and insulating themselves against shocks, policies to remove these distortions can be valuable. 33 For instance, foreign exchange controls can force the poor to hold their assets in domestic currency, whose value typically declines with adverse shocks. Relaxing these controls in a well-managed fashion could give the poor access to safer assets, such as foreign currency, that could protect them from devaluations, a typical outcome following negative shocks. 34 Similarly, severe financial repression, such as controlled interest rates, can impede the poor’s ability to save. 35 If properly managed, financial liberalization policies can therefore have the additional benefit of increasing self-insurance for the poor.

Policies that increase borrower information and relax barriers to access to credit markets can help the poor reduce consumption volatility, since credit availability makes them less dependent on current income. Also, to the extent that collateralized credit allocation amplifies the effects of negative shocks by reducing small- and medium-sized firms’ access to credit when asset prices fall (Kiyotaki and Moore, 1977, and Izquierdo, 1999), policies promoting better financial-sector credit allocation mechanisms based on project profitability and borrower information could reduce the incidence of this particular transmission channel and its indirect effects on the poor (i.e., lower employment opportunities). 36

Finally, and most important, governments can do a lot to reduce the pro-cyclical nature of their fiscal policies by saving rather than spending windfalls following positive shocks and ideally using those savings as a buffer for expenditures against negative shocks. A cautious approach would be for the government to “treat every favorable shock as temporary and every adverse one as permanent,” although judgment would also depend on, among other things, the availability of financing (Little, and others, 1993). However, even this rule of thumb may not be enough. Governments need to find ways of “tying their hands” to resist the pressure to spend windfall revenues (Devarajan, 1999). For example, when the source of revenue is publicly owned, such as oil or other natural resource, it may be appropriate to save the windfall revenues abroad, with strict rules on how much of it can be repatriated. Countries such as Colombia, Chile, and Botswana have tried variants of this strategy, with benefits not just for overall macroeconomic management, but also for protecting the poor during adverse shocks, since saved funds during good times can be applied to financing of safety nets during crisis.

1 There has been an emerging consensus on how to make actions at the country level, and the support of development partners, more effective in bringing about sustainable poverty reduction. This consensus indicates a need for poverty reduction strategies that are country-driven, with broad participation of civil society, elected officials, key donors, and relevant international finance institutions; outcome-oriented; and developed from an understanding of the nature and determinants of poverty. Under the new framework, the country-led strategy would be presented in a Poverty Reduction Strategy Paper (PRSP), which is expected to become a key instrument for a country’s relations with the donor community. 2 Macroeconomic stability is a situation where key economic relationships are broadly in balance and sustainable. 3 The sourcebook is available at http://www.worldbank.org/poverty/ strategies/sourctoc.htm. 4 These points are reflected in the design of programs supported by the IMF’s Poverty Reduction and Growth Facility (PRGF), which are derived from a country’s own poverty reduction strategy. The strategy itself should be based upon fully integrated macroeconomic, structural, and social policies. See Key Features of IMF Poverty Reduction and Growth Facility (PRGF) Supported Programs , August 16, 2000, available at http://www.imf.org/external/ np/prgf/2000/eng/key.htm. 5 Examples include the relationship between infant mortality rates and per capita income, the ratio of female to male literacy and per capita income, and average consumption and the incidence of income poverty. In all three cases, national poverty indicators improved as per capita income rose. See the discussion in the World Bank’s World Development Report , 2000. 6 Devarajan, Swaroop, and Zou (1997) and Devarajan, Easterly, and Pack (forthcoming). 7 There is little empirical evidence, however, that public sector capital expenditure has a positive impact on growth, reflecting the tendency for such investment in the past to be wasteful or inefficient. This does not mean public investment is unimportant—only that efficiency considerations must be central in any public investment program. See Easterly and Rebelo (1993), Devarajan, Swaroop, and Zou (1997). 8 Empirical evidence confirms a strong negative relationship between inflation and economic growth at all but the lowest levels of inflation. See Fischer (1993), Bruno and Easterly (1998), Ghosh and Phillips (1998), and Sarel (1996). 9 For any given increment in per capita income, the impact on poverty will depend on how that increment is distributed across the population. While growth is almost always accompanied by a reduction in income poverty, and negative growth is accompanied by an increase in poverty, for any given growth rate the impact on poverty can vary substantially. 10 Ravallion (1997), Datt and Ravallion (1992), and Kakwani (1993). 11 To the extent that people with high income save a larger proportion of their income than do those with low income, policies that redistribute income in favor of the lower-income population may impede savings and, to the extent that such savings are channeled into productive investment, long-term growth. 12 This refers to developing economies, where often income (and wealth) inequality is particularly acute. In general, there is likely to be a point beyond which greater equity is incompatible with adequate labor and enterprise incentives, which, in turn, would be detrimental to growth. See Alesina and Rodrik (1994); B�nabou (1996); Birdsall and Londo�o (1997); Deninger and Squire (1998); Perotti (1992, 1993, and 1996); and Persson and Tabellini (1994). 13 By increasing the human capital of the poor, redistributive policies can increase the productivity of the workforce, thereby enhancing growth. Others have argued that there is also a political economy channel as well—in countries with greater income equality there is greater political support for public policies that are more conducive to growth. See Alesina and Rodrik (1994), and Persson and Tabellini (1994). For empirical support for this effect, see Deininger (1999); Thomas and Wang (1998); Klasen (1999); and Dollar and Gatti (1999). For dissenting views, see Forbes (2000) and Li, Xie, and Zou (1999). 14 It is also often argued that if growth results in the expansion of low-skilled employment, then the poor are more likely to be the beneficiaries of the growth. One recent cross-country study (Fallon and Hon, 1999) found that the more labor-intensive the growth pattern, the faster the decline in the incidence of poverty. 15 Datt and Ravallion (1998), Thorbecke and Jung (1996), Timmer (1997), and Bourguignon and Morrisson (1998). 16 In certain cases, the return to a steady growth state may also require structural reform and measures to improve the functioning of markets. 17 Broadly speaking, this means leaving the underlying stance of macroeconomic policy unchanged (or, in some cases, the stance may be adjusted temporarily to mitigate the impact of the shock) and adjusting policy targets in a way that takes into account the impact of the shock. However, if such a policy stance cannot be financed in a noninflationary way, then some adjustment will also be necessary. 18 Indeed, a key feature of programs supported by the IMF’s Poverty Reduction and Growth Facility (PRGF) is to assess the distributional impact of key macroeconomic policies and to put in place countervailing measures needed to protect the poor. See Key Features of IMF Poverty Reduction and Growth Facility (PRGF) Supported Programs , August 16, 2000 at http://www.imf.org/external/np/prgf/2000/eng/key.htm. 19 Social safety nets are designed to mitigate possible adverse effects of reform measures on the poor. These instruments include temporary arrangements, as well as existing social protection measures reformed and adapted for this purpose, such as limited food subsidies, social security arrangements for dealing with various life cycle and other contingencies, and targeted public works. See Chu and Gupta (1998). 20 Even if the strategy can be fully financed with concessional resources, policymakers will need to assess the degree to which poverty-reducing spending may place pressure on the price of nontraded goods and thereby threaten stability. 21 The Sourcebook can be found at http://www.worldbank.org/poverty/ strategies/sourctoc.htm. 22 Ensuring there is appropriate flexibility in fiscal targets and supporting authorities’ efforts to secure commitments of higher donor flows when warranted are key features of the IMF’s PRGF-supported programs. See Key Features of IMF Poverty Reduction and Growth Facility (PRGF) Supported Programs , August 16, 2000, at http://www.inf.org/external/np/prgf/2000/ eng/key.htm. 23 "Priority areas" are defined as those activities identified as crucial for poverty reduction. 24 For a discussion of tax policy and developing countries, see Tanzi and Zee (2000). 25 The real interest rate represents the real cost of borrowing—that is, the cost in terms of goods—and is approximately equal to the nominal interest rate minus the expected rate of inflation. 26 The real exchange rate represents the relative price of a basket of goods in two countries. It is commonly measured by multiplying the nominal exchange rate by the ratio of consumer price indices in the two countries. If the real exchange rate appreciates, the basket of goods becomes more expensive in the home country. This can happen if either the home currency appreciates, or if the home country’s prices rise relative to those of the foreign country. 27 For example, as indicated earlier, recent studies have shown that in some countries, the income of the poor is more associated with tradable goods and consumption with nontradable goods than the income and consumption patterns of other income groups. In these countries, this implies that a depreciation or devaluation of the domestic currency would make the country’s exports more attractive and stimulate demand for tradable goods. Since the poor’s incomes are tied to the production and export of tradables, this would, in turn, increase their income while the cost of their consumption of nontradables would remain unchanged. 28 Other nominal variables can also serve as anchors. What is essential is that the variable targeted be nominal, and not real, since real variables cannot provide an anchor for nominal prices. For example, countries that have targeted the real exchange rate have generally had worse inflation performance than other countries. See Phillips (1999). 29 The two most commonly used nominal anchors are a fixed exchange rate and a money aggregate (such as reserve money or broad money). Under a fixed exchange rate regime, whenever the market rate threatens to depart from the predetermined rate, the monetary authorities buy or sell foreign exchange for the domestic currency to ensure that the exchange rate remains fixed. Similarly, under a monetary anchor the monetary authorities specify a predetermined path for a monetary aggregate, and tighten or loosen the monetary stance when the aggregate threatens to depart from that path. 30 Under a fixed exchange rate, the monetary authorities give up control of the money supply. Under a monetary anchor, the authorities cannot pursue an exchange rate target. 31 If there are no explicit policy targets, the monetary authorities have full discretion. This differs from the concept of independence of the monetary authorities. 32 Reform programs should be designed with the poor and vulnerable in mind. The mix and sequencing of reform measures should be designed to minimize the hardships brought about by the program. The appropriate mix and sequencing cannot, however, ensure that the adverse effects will be removed entirely and, hence, social safety nets are needed to mitigate possible short-run adverse effects on the poor. In some cases, it may be appropriate to delay reforms until adequate safety net measures can be put in place. See Chu and Gupta (1998). 33 Contrary to what some may believe, the poor do save, to smooth consumption over time, as well as to guard against adverse shocks. For a recent analysis, see Deaton and Paxson (2000). 34 Also, capital controls that drive a wedge between domestic and world real interest rates make it possible to extract an inflation tax, which especially hurts the poor. 35 For many countries, domestic asset holdings of the poor are mainly composed of currency, so it would seem that this channel is not relevant. But this may just reflect that low controlled interest rates provide a disincentive to save in bank deposits. Removing financial distortions could shift the allocation of domestic assets in favor of deposits and, to the extent that market interest rates account for expected inflation, insulate the poor’s savings from inflation. 36 Collateralization may be initially the only way for small firms to gain access to credit markets, but its amplification effects should not be understated. Instead, policies that reduce informational problems (i.e., the reason for collateralization) should be implemented.

The following three tables show macroeconomic data, such as GDP growth, for a range of developing countries. The tables reveal that many developing countries are in a state of macroeconomic stability.

Agenor, Pierre-Richard, Shantayanan Devarajan, William Easterly, Hippolyte Fofack, Delfin Go, Alejandro Izquierdo, Lodovico Pizzati, 2000, “A Macroeconomic Framework for Poverty Reduction Strategies,” Development Research Group and World Bank Institute (unpublished; Washington: World Bank).

Alesina, Alberto, and Dani Rodrik, 1994, “Distributive Politics and Economic Growth,” Quarterly Journal of Economics , Vol. 109 (May), pp. 465–90.

Balassa, Bela, 1981, “The Newly Industrializing Developing Countries after the Oil Crisis,” Weltwirtschaftliches Archiv, Vol. 117, No.1, pp. 142–94.

Behrman, Jere, Suzanne Duryea, and Miguel Szeleky, 1999, “Schooling Investments and Macroeconomic Conditions: A Micro-Macro Investigation for Latin America and the Caribbean” (unpublished; Washington: Inter-American Development Bank).

Bénabou, Roland, 1996, “Inequality and Growth,” in NBER Macroeconomics Annual: Volume II , ed. by Ben Bernanke and Julio Rotemberg (Cambridge, Mass.: MIT Press).

Birdsall, Nancy, and Juan Luis Londoño, 1997, “Asset Inequality Matters: An Assessment of the World Bank’s Approach to Poverty Reduction,” American Economic Review , Vol. 87(May), pp. 32–37.

Bourguignon, François, and Christian Morrisson, 1998, “Inequality and Development: The Role of Dualism,” Journal of Development Economics , Vol. 57 (December), pp. 233–57.

Bourguignon, François, William H. Branson, and Jaime de Melo, 1989, Macroeconomic Adjustment and Income Distribution: A Macro- Micro Simulation Model (Paris: OECD Development Centre).

Bruno, Michael, and William Easterly, 1998, “Inflation Crises and Long-Run Growth,” Journal of Monetary Economics , Vol. 41(February), pp. 3–26.

Calvo, Guillermo, 1998, “Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops,” Journal of Applied Economics , Vol. 1 (November), pp. 35–54.

Chu, Ke-young, and Sanjeev Gupta, eds., 1998, Social Safety Nets: Issues and Recent Experiences (Washington: International Monetary Fund).

Collier, Paul, and Jan Willem Gunning, 1999, “Explaining African Economic Performance,” Journal of Economic Literature , Vol. 37 (March), pp. 64–111.

———, and associates, 1999, Trade Shocks in Developing Countries (Oxford: Oxford University Press).

Datt, Gaurav, and Martin Ravallion, 1992, “Growth and Redistribution Components of Changes in Poverty Measures: A Decomposition with Applications to Brazil and India in the 1980s,” Journal of Development Economics , Vol. 38 (April), pp. 275–95.

———, 1998, “Farm Productivity and Rural Poverty in India,” Journal of Development Studies , Vol. 34 (April), pp. 62–85.

Deaton, A., and C. Paxson, 2000, “Growth and Saving Among Individuals and Households,” Review of Economics and Statistics , Vol. 82 (May), pp. 212–25.

Deininger, Klaus, 1999, “Asset Distribution, Inequality, and Growth,” Development Research Group (Washington: World Bank).

________, and Lyn Squire, 1998, “New Ways of Looking at Old Issues: Inequality and Growth,” Journal of Development Economics Vol. 57 (December), pp. 259–87.

Devarajan, Shantayanan, 1999, “Cameroon,” in Trade Shocks in Developing Countries , ed. by Paul Collier and Jan Gunning (Oxford: Oxford University Press).

________, William R. Easterly, and Howard Pack, forthcoming “Is Investment in Africa Too Low or Too High?”, Journal of African Economies .

Devarajan, Shantayanan, and Dani Rodrik, 1992, “Do the Benefits of Fixed Exchange Rates Outweigh Their Costs? The CFA Zone in Africa,” in Open Economies: Structural Adjustment and Agriculture , ed. by Ian Goldin and L. Alan Winters (Cambridge, New York, and Melbourne: Cambridge University Press).

Dollar, David, and Roberta Gatti, 1999, “Gender Inequality, Income and Growth: Are Good Times Good for Women?” Policy Research Report on Gender and Development Working Paper Series No. 1. (Washington: World Bank).

Dollar, David, and Aart Kraay, 2000, “Growth Is Good for the Poor,” World Bank Development Research Group (unpublished; Washington, D.C., World Bank).

Easterly, William, and Aart Kraay, 1999, “Small States, Small Problems?” Policy Research Working Paper No. 2139, Development Research Group (Washington: World Bank).

Easterly, William, and Sergio Rebelo, 1993, “Fiscal Policy and Economic Growth: An Empirical Investigation,” Journal of Monetary Economics , Vol. 32 (December), pp. 417–58.

Fallon, Peter, and Vivian Hon, 1999, “Poverty and Labor-Intensive Growth.” Note prepared for World Development Report 2000/2001 (unpublished; Washington: World Bank).

Fischer, Stanley, 1993, “The Role of Macroeconomic Factors in Growth,” Journal of Monetary Economics , Vol. 32 (December), pp. 485–512.

Forbes, Kristin, 2000, “A Reassessment of the Relationship Between Inequality and Growth,” American Economic Review , Vol. 90 (September), pp. 869–887.

Ghosh, Atish, Anne-Marie Gulde, Jonathan Ostry, and Holger Wolf, 1999, “Does the Nominal Exchange Rate Regime Matter?” (unpublished; Washington: International Monetary Fund).

Ghosh, Atish, and Steven Phillips, 1998, “Warning: Inflation May Be Harmful to Your Growth,” IMF Staff Papers , International Monetary Fund, Vol. 45 (December), pp. 672–710.

Hausmann, Ricardo, 1999, “Managing Terms of Trade Volatility,” World Bank PREM Note No. 18, February (Washington: World Bank).

Inter-American Development Bank (IADB), 1995 “Overcoming Volatility,” Economic and Social Progress in Latin America (Baltimore: Johns Hopkins University Press).

Izquierdo, Alejandro, 1999, “Credit Constraints and the Asymmetric Behavior of Asset Prices and Output under External Shocks,” (Doctoral Dissertation, University of Maryland).

Kakwani, Nanak, 1993, “Poverty and Economic Growth with Application to Côte d’Ivoire,” Review of Income and Wealth , Vol. 39 (June) pp. 121–139.

Kiyotaki, Nobuhiro, and John Moore, 1997, “Credit Cycles,” Journal of Political Economy , Vol. 105 (April), pp. 211–48.

Klasen, Stephan, 1999, “Does Gender Inequality Reduce Growth and Development? Evidence from Cross-Country Regressions,” Policy Research Report on Gender and Development Working Paper Series No. 7. (Washington: World Bank).

Li, Hongyi, Danyang Xie, Heng-fu Zou, 1999. “Dynamics of Income Distribution,” Development Research Group, (unpublished; Washington: World Bank).

Little, I., R. Cooper, W. M. Corden, and S. Rajapatirana, 1993, Boom, Crisis and Adjustment: The Macroeconomic Experience of Developing Countries (Oxford: Oxford University Press).

Lustig, Nora, forthcoming. “Crises and the Poor: Socially Responsible Macroeconomics.” Economia, Journal of the Latin American and Caribbean Economic Association.

Malmberg Calvo, Christina, 1998, Options for Managing and Financing Rural Transport Infrastructure, World Bank Technical Paper No. 411 (Washington: World Bank).

Masson, Paul, Miguel Savastano, and Sunil Sharma, 1997, “The Scope for Inflation Targeting in Developing Countries,” IMF Working Paper No. 97/130 (Washington: International Monetary Fund).

Mitra, Pradeep, 1994, Adjustment in Oil-Importing Developing Countries (Cambridge: Cambridge University Press).

Perotti, Roberto, 1992, “Income Distribution: Politics and Growth,” American Economic Review , Vol. 82 (May), pp. 311–16.

———, 1993, “Political Equilibrium, Income Distribution, and Growth.” Review of Economic Studies , Vol. 60 (October), pp 755–76.

———, 1996, “Redistribution and Non-consumption Smoothing in an Open Economy,” Review of Economic Studies , Vol. 63 (July), pp 411–33.

Persson, Torsten, and Guido Tabellini, 1994, “Is Inequality Harmful for Growth?” American Economic Review , Vol. 84 (June), pp. 600–21.

Phillips, Steven, 1999, “Inflation: The Case for a More Resolute Approach” in Economic Adjustment and Reform in Low-Income Countries: Studies by the Staff of the International Monetary Fund,” ed. by Hugh Bredenkamp and Susan Schadler (Washington: International Monetary Fund).

Ramey, Garey, and Valerie A. Ramey, 1995, “Cross-Country Evidence on the Link between Volatility and Growth,” American Economic Review , Vol. 85 (December), pp. 1138–51.

Ravallion, Martin, 1997, “Can High-Inequality Developing Countries Escape Absolute Poverty?” Policy Research Working Paper No. 1775 (Washington: World Bank).

Sahn, David, Paul Dorosh, and Stephen Younger, 1997, Structural Adjustment Reconsidered: Economic Policy and Poverty in Africa , (New York: Cambridge University Press).

Sarel, Michael, 1996, “Nonlinear Effects of Inflation on Economic Growth,” Staff Papers , International Monetary Fund, Vol. 43 (March), pp. 199–215.

Tanzi, Vito, and Howell Zee, 2000, “Tax Policy for Emerging Markets: Developing Countries,” IMF Working Paper No. 00/35 (Washington: International Monetary Fund).

Thomas, Vinod, and Yan Wang, 1998, “Missing Lessons of East Asia: Openness, Education, and the Environment,” Latin America and Caribbean Studies: Proceedings series (Washington: World Bank).

Thorbecke, Erik, and Hong-Sang Jung, 1996, “A Multiplier Decomposition Method to Analyze Poverty Alleviation,” Journal of Development Economics , Vol. 48 (March), pp. 279–300.

Timmer, C. Peter, 1997, “How Well Do the Poor Connect to the Growth Process?” Consulting Assistance on Economic Reform Discussion Paper No. 178. (Cambridge, Mass.: Harvard Institute for International Development).

White, Howard, and Edward Anderson, forthcoming, “Growth Versus Distribution: Does the Pattern of Growth Matter?”, Institute of Development Studies, University of Sussex.

World Bank, 1982, Accelerated Development in Sub-Saharan Africa (Washington: World Bank).

World Bank, 2000, World Development Report (New York and Washington: Oxford University Press and World Bank).

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The World Bank Group is committed to fighting poverty in all its dimensions. We use the latest data, evidence and analysis to help countries develop policies to improve people's lives, with a focus on the poorest and most vulnerable.

Around 700 million people live on less than $2.15 per day, the extreme poverty line. Extreme poverty remains concentrated in parts of Sub-Saharan Africa, fragile and conflict-affected areas, and rural areas.

After decades of progress, the pace of global poverty reduction began to slow by 2015, in tandem with subdued economic growth. The Sustainable Development Goal of ending extreme poverty by 2030 remains out of reach.

Global poverty reduction was dealt a severe blow by the COVID-19 pandemic and a series of major shocks during 2020-22, causing three years of lost progress. Low-income countries were most impacted and have yet to recover. In 2022, a total of 712 million people globally were living in extreme poverty, an increase of 23 million people compared to 2019. 

We cannot reduce poverty and inequality without also addressing intertwined global challenges, including slow economic growth, fragility and conflict, and climate change.

Climate change is hindering poverty reduction and is a major threat going forward. The lives and livelihoods of poor people are the most vulnerable to climate-related risks.

Millions of households are pushed into, or trapped in, poverty by natural disasters every year. Higher temperatures are already reducing productivity in Africa and Latin America, and will further depress economic growth, especially in the world’s poorest regions.

Eradicating poverty requires tackling its many dimensions. Countries cannot adequately address poverty without also improving people’s well-being in a comprehensive way, including through more equitable access to health, education, and basic infrastructure and services, including digital.

Policymakers must intensify efforts to grow their economies in a way that creates high quality jobs and employment, while protecting the most vulnerable.

Jobs and employment are the surest way to reduce poverty and inequality. Impact is further multiplied in communities and across generations by empowering women and girls, and young people.

Last Updated: Apr 02, 2024

Closing the gaps between policy aspiration and attainment

Too often, there is a wide gap between policies as articulated and their attainment in practice—between what citizens rightfully expect, and what they experience daily. Policy aspirations can be laudable, but there is likely to be considerable variation in the extent to which they can be realized, and in which groups benefit from them. For example, at the local level, those who have the least influence in a community might not be able to access basic services. It is critical to forge implementation strategies that can rapidly and flexibly respond to close the gaps.

Enhancing learning, improving data

From information gathered in household surveys to pixels captured by satellite images, data can inform policies and spur economic activity, serving as a powerful weapon in the fight against poverty. More data is available today than ever before, yet its value is largely untapped. Data is also a double-edged sword, requiring a social contract that builds trust by protecting people against misuse and harm, and works toward equal access and representation.

Investing in preparedness and prevention

The COVID-19 pandemic demonstrated that years of progress in reducing poverty can quickly disappear when a crisis strikes. Prevention measures often have low political payoff, with little credit given for disasters averted. Over time, populations with no lived experience of calamity can become complacent, presuming that such risks have been eliminated or can readily be addressed if they happen. COVID-19, together with climate change and enduring conflicts, reminds us of the importance of investing in preparedness and prevention measures comprehensively and proactively.

Expanding cooperation and coordination

Contributing to and maintaining public goods require extensive cooperation and coordination. This is crucial for promoting widespread learning and improving the data-driven foundations of policymaking. It is also important for forming a sense of shared solidarity during crises and ensuring that the difficult policy choices by officials are both trusted and trustworthy.

Overall, with more than 60 percent of the world’s extreme poor living in middle-income countries, we cannot focus solely on low-income countries if we want to end extreme poverty. We need to focus on the poorest people, regardless of where they live, and work with countries at all income levels to invest in their well-being and their future.

The goal to end extreme poverty works hand in hand with the World Bank Group’s goal to promote shared prosperity. Boosting shared prosperity broadly translates into improving the welfare of the least well-off in each country and includes a strong emphasis on tackling persistent inequalities that keep people in poverty from generation to generation.

Our work at the World Bank Group is based on strong country-led programs to improve living conditions—to drive growth, raise median incomes, create jobs, fully incorporate women and young people into economies, address environmental and climate challenges, and support stronger, more stable economies for everyone.

We continue to work closely with countries to help them find the best ways to improve the lives of their least advantaged citizens.

Last Updated: Oct 17, 2023

How the Pandemic Drove Increases in Poverty | Poverty & Shared Prosperity 2022

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Poverty Reduction and Economic Growth

Reducing poverty in developing countries has been a longstanding and central concern of development economics. Over the past two decades, there has been a noticeable shift in the approach taken by development economists to address this question. Researchers have increasingly focused their efforts on randomized controlled trials — an experimental approach commonly used in medical research — to determine the effectiveness of anti-poverty programs and interventions. This shift was highlighted by the 2019 Nobel Prize in Economics awarded to Abhijit Banerjee, Esther Duflo and Michael Kremer, which recognized their work for breaking down the issue of fighting global poverty into "smaller, more manageable, questions – for example, the most effective interventions for improving educational outcomes or child health." One question that remains, though, is how much overall reduction in the poverty rate one can expect from projects, programs or policy interventions that raise the well-being of those in absolute poverty at a given level of income, versus how much poverty reduction comes from broad-based economic growth.

1.1 Billion people have been lifted out of extreme poverty in the last 25 years. Broad-based growth is the most important source of poverty reduction.

• In the last quarter century 1.1 billion people , about one-seventh of the world’s population, have been lifted out of extreme poverty. Yet progress has been uneven across different regions and significant challenges remain. A dramatic reduction of extreme poverty in East Asia, particularly in China, accounts for an important share of the advances in combating global poverty, with poverty reductions in South Asia also contributing their share. In contrast, progress has been much slower in Sub-Saharan Africa (see here ). The World Bank counts all persons in a household as “poor” if the household per capita daily consumption or income is below a “poverty line.” It uses three different thresholds, $1.90, $3.20, and $5.50 per person per day, where local currency values are translated into 2011 dollar values, and taking into account the fact that goods and services are cheaper in poorer countries (so-called “purchasing power parity” currency conversion rates). The World Bank notes a marked reduction in extreme poverty (less than $1.90 per day) over the past quarter century, with a decrease from 36 percent in 1990 to 10 percent in 2015. Still, over 700 million people around the world continued to live in extreme poverty in 2015.
• One way to consider the relationship between economic growth and poverty is to look across countries and compare median incomes and the share of the population living in poverty. The median income is the income level at which half the population has an income higher than this amount and half the population has an income below this amount. Statisticians focus on median income rather than average income because a small number of people with very high levels of income alter the average much more than the median and can give rise to a distorted picture of the income profile of a country. 
• In theory, two countries could have the same median income and yet have very different poverty rates. Differences in how income is distributed within countries could make it so that two countries with the same median income could have very different poverty rates. For an extreme example, consider a country with a median income of $5,000 per capita (the equivalent of about $13.70 per person per day); This country could have no one living with an income of less than $5.50 per day, effectively having a rate of zero poverty under a $5.50 dollar-a-day threshold; Alternatively, half of the population could be living with an income less than $5.50 a day (in which case no one would have an income in the range between $5.50 and $13.70) — and, in this case, there would be a 50 percent poverty rate. Thus, there is not necessarily a tight relationship between the median income in a country and its poverty rate. 
• However, in actuality, there is an extremely tight relationship between median income and poverty rates across countries. Using data for 633 observations on 141 countries and the poverty threshold of $5.50 per person per day, the correlation between poverty rates and poverty predicted on the basis of median income alone is 99 percent (the richest 28 countries that have very low poverty rates are excluded from this analysis). This means that pretty much all of the variation in poverty rates across countries can be accounted for by their differences in median income. This implies that one might expect significant reductions in the share of the population living in poverty when countries move to higher levels of median income. To illustrate, I estimate on the basis of this relationship that if a country at the average income of the lowest quartile of countries were to grow by two percent a year for 20 years (which is roughly the average growth in the post WWII era) its rate of poverty would fall by about half to 35.9 percent at the $1.90 a day poverty level (see here ). 
• The chart illustrates the relationship between median income and the share of a country's population living in poverty. It shows the lowest poverty rate observed for 141 countries for a variety of years between 1980 and 2015 at different levels of median income or median consumption per capita. (Consumption and income data are all in terms of 2011 U.S. dollar values adjusted for differences in purchasing power across countries.) No country with median income per capita below $2558 per year ($7.00 per day) had less than a third of the population living in poverty (see chart). Only one country with median income or consumption below $3535 had a poverty rate less than 10 percent. No country with median income or consumption below $1045 had less than 75 percent of the population living in poverty (e.g. Angola, with 2008 median consumption of $1035, had a poverty rate of 80 percent).  
• Changes in countries’ median incomes or median consumption and changes in their respective poverty rates are also very highly correlated. An analysis of the change in a country’s income or consumption over a decade or more and its associated change in the poverty rate over that same period for the 114 countries with reliable data on these longer spells illustrates this, with a correlation of about 93 percent. Of course, some countries had more poverty reduction than what would be predicted given their income or consumption growth (e.g. Indonesia, Nepal) while others had less (e.g. Mali, Swaziland) but, by and large, poverty reduction was very accurately predicted by the change in median income. 
• None of this analysis turns on the magnitude or efficacy of countries’ anti-poverty programs. But that is precisely the point. One can predict extremely accurately the level and change in absolute poverty (at a variety of threshold poverty levels) without any references to changes in the distribution of income below the median level, which would be the type of change that one might imagine anti-poverty programs target. There is no evidence that these programs have, of yet, been an important source of differences in the rates of poverty or in the pace of overall poverty reduction.  
• Determining what promotes sustained growth for poor countries and how to implement policies that increase or sustain growth, however, remain deep research and policy challenges. The Nobelists (and many others) have rightly pointed out that one does not get reliable guidance on appropriate policies to promote growth from the earlier generation of simple analyses that associate certain preconditions with subsequent growth, especially those analyses that do not take into account more complex differences across countries’ experiences and circumstances. More recently, economists have attempted to come up with more practical advice by studying the episodic nature of developing country growth spurts (as here ) as well as what is associated with more sustained growth accelerations and decelerations ( here , here and here among many others). Moreover, “growth diagnostic” approaches (an example of one such approach here ) attempt to map the specific facts and conditions of a country to policy recommendations. While this represents progress in providing useful guidance for policy makers, all agree there is more research to be done to improve these approaches. The hope is to provide empirics and tools that produce a better chance of good decisions on the range of important choices developing country politicians and policy makers have to make.

What this Means:

Broad-based growth, defined as the process that raises median income, is far and away the most important source of poverty reduction. There is no instance of a country achieving a headcount poverty rate below 1/3 of its population (at moderate poverty line of $5.50) without achieving the median consumption of that of Mexico. This is not to say that there do not exist anti-poverty programs that are cost-effective and hence should be expanded, or, conversely, that there are anti-poverty programs that are not cost-effective (or even have zero impact on poverty) and should be cut back or eliminated. Analyses of these types of programs would enable a more efficient use of resources devoted to poverty reduction. But large and sustained improvements in global poverty will almost certainly have to focus on how to raise the productivity of the typical person in a poor country, which is a key source of national income growth.

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Extreme poverty: How far have we come, and how far do we still have to go?

The world has made immense progress against extreme poverty, but it is still the reality for almost one in ten people worldwide..

Two centuries ago, the majority of the world population was extremely poor. Back then, it was widely believed that widespread poverty was inevitable. But this turned out to be wrong. Economic growth is possible, and poverty can decline. The world has made immense progress against extreme poverty.

But even after two centuries of progress, extreme poverty is still the reality for every tenth person in the world. This is what the ‘international poverty line’ highlights – this metric plays an important (and successful) role in focusing the world’s attention on the very poorest people in the world.

The poorest people today live in countries that have achieved no economic growth. This stagnation of the world’s poorest economies is one of the largest problems of our time. Unless this changes, hundreds of millions of people will continue to live in extreme poverty.

The state of poverty today

There are poor people in every country, people who live in poor housing and who struggle to afford basic goods and services like heating, transport, and healthy food for themselves and their families.

The definition of poverty differs from country to country, but in high-income countries, the poverty line is around $30 per day . 1

Even in the world’s richest countries, a substantial share of people – between every 10th and every 5th person – lives below this poverty line.

In the map below, and in all international poverty statistics on Our World in Data, the data is adjusted for inflation and cross-country differences in the price level. The expandable section below the map provides a more detailed explanation of how.

Basics of global poverty measurement

Throughout this article – and in global income and expenditure data generally – the statisticians who produce these figures are careful to make these numbers as comparable as possible.

Non-monetary sources of income are taken into account

Many poor people today and in the past rely on subsistence farming and do not have a monetary income. To take this into account and make a fair comparison of their living standards, the statisticians that produce these figures estimate the monetary value of their home production and add it to their income/expenditure.

Differences in purchasing power and inflation are taken into account

The data is expressed in international dollars . This is a hypothetical currency that results from price adjustments across time and place. 2  An international dollar is defined as having the same purchasing power as one US-$ in the US . This means no matter where in the world a person is living on int.-$30, they can buy the goods and services that cost $30 in the US. None of these adjustments are ever going to be perfect, but in a world where price differences are large, it is important to attempt to account for these differences as well as possible, and this is what these adjustments do. 3

Throughout this text, I’m always adjusting incomes for price changes over time and price differences between countries in this way. All dollar values discussed here are presented in int.-$; the UN does the same for the $2.15 poverty line. Sometimes I leave out ‘international’ as it is awkward to repeat it all the time; but every time I mention any $ amount in this text, I’m referring to international-$ and not US-$. 4

Global data is a mix of income and expenditure data

There is no global survey of incomes: researchers need to rely on the available national surveys. Such surveys are designed with cross-country comparability in mind, but because they reflect the circumstances and priorities of individual countries, there are some important differences across countries. In most high-income countries, the surveys capture people’s incomes, while in poorer countries, these surveys tend to capture people’s consumption.

The two concepts are closely related: the income of a household equals their consumption plus any saving (or minus any borrowing). When speaking about these statistics, it would therefore be accurate to speak about ‘the income of people in richer countries and the monetary value of consumption in poorer countries’. But since it’d be a bit much to repeat this every time, researchers simply speak of ‘living standards’ or ‘income’ instead. I do the same in this text.

We can apply this $30-a-day-poverty-line to the global income distribution to see the share in poverty as judged by the definition of poverty in high-income countries. 5

The latest global data tells us that the huge majority – 84% of the world population – live on less than $30 per day. That means 6.7 billion people.

Why is an extremely low poverty line necessary?

Extreme poverty is defined by the UN as living on less than $2.15 a day. Why do we need a poverty line that is so extremely low?

It is not enough to measure global poverty solely by a higher poverty line because a large number of people are living in extreme poverty. Without an extremely low poverty line, we would not be able to see that a large share of the world lives in such deep poverty.

If we’d only rely on the poverty line from high-income countries, we would hide the differences between people with very different living standards. Whether someone was living on almost $30 a day or on thirty times less would not matter – they would all be considered ‘poor’.

It is however a good idea to add additional poverty lines. As the following chart shows, this can draw attention to the large income differences between people and highlights how many live on extremely low incomes. 6

The $2.15 poverty line, set by the UN, shows that globally close to one in ten people live in extreme poverty. In all these statistics, the researchers are not only taking people’s monetary income into account, but also their non-monetary income and home production. One reason why this is important is because many poor people are small-scale farmers who produce their own food. 7

The UN’s global poverty line is valuable because it has been successful in drawing attention to the terrible depths of extreme poverty of the poorest people in the world. 8

In a related essay , I focus on global poverty as defined by a higher poverty line.

The big lesson of the last 200 years: Economic growth is possible, poverty is not inevitable

What needs explanation is not poverty, but prosperity. Deep poverty was the condition that the majority of humanity has always lived in. In the pre-modern days, hunger was widespread , and every second child died no matter where in the world it was born.

Historian Michail Moatsos has recently produced a new global dataset that goes back two centuries. The chart shows his data. According to his research three-quarters of the world lived in extreme poverty in 1820. This means they "could not afford a tiny space to live, some minimum heating capacity, and food that would not induce malnutrition.” 9

The chart looks simple, but it would be a mistake to think that it was simple to produce this data. Underlying it is a wealth of careful historical research that Moatsos made use of. Historians gathered data for people around the world over two centuries to reconstruct how many of them were able to afford a set of very basic goods and services and aggregated this detailed information into this final picture. You find more information on the methodology in the footnote. 10

Economic growth made it possible to leave poverty behind

Economic growth made it possible to leave the widespread extreme poverty of the past behind. It made the difference between a society in which the majority were lacking even the most basic goods and services – food, decent housing and clothes, healthcare, public infrastructure and transport – and a society in which these products are widely available.

Growth means that a society produces an increasing quantity and quality of economic goods and services. The key to economic growth is the development of technology that makes it possible to increase productivity by which these goods and services are produced.

Because the total production in an economy equals the total income in that country – as everyone’s spending is someone else’s income – incomes grow at the same rate as production increases.

The 9 charts show the data for different regions in the world. On the horizontal axis of each chart, you find the average income (GDP per capita) and on the vertical axis you see the share living in extreme poverty. The starting point of each trajectory shows the data for 1820 and it tells us that two centuries ago the majority of people lived in extreme poverty, no matter where in the world they were at home. 11 Since then, all world regions achieved growth – the production of goods and services increased – and the share living in poverty declined.

[See also my related article: 'What is Economic Growth? ]

Most extremely poor people today are living in Africa

How far do we still have to go?

The previous chart showed that Sub-Saharan Africa is the poorest region. Almost 40% of the population lives in extreme poverty.

Not all African countries are struggling. In fact, most African countries have achieved good growth after the end of the oppressive colonial regimes that hindered the growth of African economies. But in a number of countries, the situation is bad. These countries remain as poor as they were in the past. Since the economy is stagnant, poverty is too.

In the chart below, you see that mean incomes have actually fallen in some of the world’s poorest countries. 12

To see the consequences of this, let’s first focus on one country that achieved large growth and then contrast it with a country that did not.

A country that achieved large growth is the UK: the orange distribution on the left shows incomes in the UK two centuries ago; the majority lived in extreme poverty. The green distribution shows how the distribution of incomes has changed since then. Two centuries of economic growth lifted the majority of people out of the deep poverty of the past. 13

The next chart shows the income distribution of the UK in 2019 in green – just as in the previous chart – and in red the income distribution of Madagascar, a country that did not achieve growth.

The majority of people in Madagascar still live in extreme poverty. Very similar to the global situation two centuries ago, three-quarters of Madagascar’s population are living in extreme poverty.

Not just economic growth, but also the distribution of that growth matters. If the inequality of income increases, the poorest can be left behind.

But without economic growth, there is no chance at all to leave poverty behind. The data from Madagascar makes clear that a reduction of inequality cannot end extreme poverty in a poor country. If inequality in Madagascar would be entirely eradicated, then everyone would live on the average income. In Madagascar, this is $1.60 a day. For poor countries, the only way to end poverty is an increase in incomes – economic growth.

The majority of the world is making good progress against poverty, but not all: some of the very poorest economies are stagnating

The history of extreme poverty is, at the same time, one of humanity’s greatest achievements and failures.

The majority of the world left extreme poverty behind. To me, this ranks among the most impressive and most important achievements in humanity’s history.

But, as we’ve seen, the fight against extreme poverty is far from over. Almost one in ten people still live in extreme poverty right now.

The worry with extreme poverty today is that some of the world’s poorest countries are not growing. Unless this changes, hundreds of millions of people will continue to live in extreme poverty.

Crucially this was true before the pandemic hit – even before COVID, researchers expected that half a billion people would remain in extreme poverty by 2030. The global recession that followed the pandemic exacerbated this further.

When it comes to the consequences of climate change , this is what I am most worried about. Richer people will be able to adapt in many ways. It is the extremely poor population that will be hardest hit.

The economic stagnation of some of the world's poorest countries is not as widely known as it should be. I think it deserves more attention. If the stagnation of the very poorest economies persists, we will see a growing divide at the lowest end of the global income distribution. While the living standards of the majority of the world are rising, some of the world’s very poorest people remain in extreme poverty.

Whether or not the poorest countries achieve growth is among the most important questions for the coming years. It will decide whether humanity wins its long fight against extreme poverty or not.

Last updated in 2023

This article was first published on November 22, 2021. It was last updated in August 2023.

For the moment, it is important to note that this $30 per day poverty line is defined in international-$ and therefore comparable with the ‘International Poverty Line’ discussed in the following section. More details about how to compare incomes across countries, the income concept here, and the definition of this poverty line follow further below in this text.

This is possible by relying on the work of the International Comparison Project , which monitors the prices of goods and services around the world.

Angus Deaton and Alan Heston (2010) discuss the methods behind such price adjustments and many of the difficulties and limitations involved.

Deaton, A., and Heston, A. 2010. “Understanding PPPs and PPP-Based National Accounts.” American Economic Journal: Macroeconomics 2 (4): 1–35. A working paper version is available online here .

Keep in mind that in the special case of the US, the US-$ equals the international-$.

Remember that these statistics take the cost of living into account – a person who lives on less than int-$30 is a person who cannot afford the goods and services that cost US-$30 in the US .

If you want to explore this data for any world region or any individual country, you can do so here .

See also the previous box on poverty measurement. This is, of course, also true of the historical research.

Indeed, there is an argument for using an even lower poverty line. To understand what is happening to the very poorest in the world, we need to look even lower than $2.15. This is because one of the biggest failures of development is that over the last decades, the incomes of the very poorest people have not risen. A big part of the reason for why this issue doesn’t get discussed enough is that the International Poverty Line we rely on is too high to see this fact.

Michail Moatsos (2021) – Global extreme poverty: Present and past since 1820. Published in OECD (2021), How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

The sources for the measures shown in this chart and the following chart are:

Jutta Bolt and Jan Luiten van Zanden (2021) – The GDP data in the chart is taken from The long view on economic growth: New estimates of GDP, How Was Life? Volume II: New Perspectives on Well-being and Global Inequality since 1820 , OECD Publishing, Paris, https://doi.org/10.1787/3d96efc5-en .

The latest datapoint for the poverty data refers to 2018, while the latest datapoint for GDP per capita in the chart below refers to 2016. In that chart, I have chosen the middle year (2017) as the reference year.

The historical poverty research was done by economic historian Michail Moatsos and is based on the ‘cost of basic needs’-approach as suggested by Robert Allen (2017) and recommended by the late Tony Atkinson.

The ‘cost of basic needs’-approach was recommended by the ‘World Bank Commission on Global Poverty’, headed by Tony Atkinson, as a complementary method in measuring poverty. The report for the ‘World Bank Commission on Global Poverty’ can be found here .

Tony Atkinson – and after his death, his colleagues – turned this report into a book that was published as Anthony B. Atkinson (2019) – Measuring Poverty around the World. You find more information on Atkinson’s website .

The CBN-approach Moatsos’ work is based on was suggested by Allen in Robert Allen (2017) – Absolute poverty: When necessity displaces desire. In American Economic Review, Vol. 107/12, pp. 3690-3721, https://doi.org/10.1257/aer.20161080

Moatsos describes the methodology as follows: “In this approach, poverty lines are calculated for every year and country separately, rather than using a single global line. The second step is to gather the necessary data to operationalize this approach, alongside imputation methods in cases where not all the necessary data are available. The third step is to devise a method for aggregating countries’ poverty estimates on a global scale to account for countries that lack some of the relevant data.” In his publication – linked above – you find much more detail on all of the shown poverty data.

The speed at which extreme poverty declined increased over time, as the chart shows. Moatsos writes, “It took 136 years from 1820 for our global poverty rate to fall under 50%, then another 45 years to cut this rate in half again by 2001. In the early 21st century, global poverty reduction accelerated, and in 13 years, our global measure of extreme poverty was halved again by 2014.”

Parts of Western Europe and the US had already achieved some growth in the decades before this chart begins so that the share in poverty had already fallen, but even in 1820 the majority was still living in extreme poverty there

In the centuries and millennia before, no region in the world had achieved sustained economic growth (see, for example, my post on the Malthusian Trap and links therein). The chart here focuses on the very exceptional two last centuries when economic growth reduced widespread poverty.

You can explore related data in detail in this chart for growth measured as GDP per capita and in our Poverty Data Explorer .

The data shown in the small plots of the income distribution in the UK and Madagascar is again taken from PovcalNet – the predecessor to the World Bank's Poverty and Inequality Platform – Gapminder, and Michail Moatsos 2021.

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Extreme poverty in the time of COVID-19

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Homi kharas and homi kharas senior fellow - global economy and development , center for sustainable development meagan dooley meagan dooley former senior research analyst - global economy and development , center for sustainable development.

June 2, 2021

Introduction

The short-term economic and well-being costs of COVID-19 have been severe. Though we hope the pandemic will be a temporary shock, in the interim it has pushed many vulnerable households living at the margins back into poverty. Due to lockdowns and social distancing measures, people have lost jobs and livelihoods, leaving them unable to pay for housing and food. Schools have been closed and some children may not return, shutting off one of the main pathways out of poverty for low-income children. Women and girls have been especially impacted by these school closures. Mothers at all socio-economic levels have dropped out of the labor force to supervise online learning and care for children and older relatives, and many will not reenter. Even before the pandemic, women and girls of reproductive age were overrepresented among the poor, making these setbacks all the more concerning. 1

We likely will not know the full impacts of COVID-19 on poverty for a few years, as most poverty data comes from household surveys, which have been difficult to carry out during the last year. However, we do know that economic growth is the largest driver of poverty reduction. Conversely, economic recessions drive a rise in poverty, other things being equal. In 2020, however, other things were not equal; national and local governments were able to mitigate the impact of COVID-19 on their poorest people to varying degrees and assessing the economy-wide impact of these measures cannot yet be done systematically. What can be done at this juncture is to use new estimates for economic growth through 2030 to capture the potential impact of COVID-19 on poverty in the long run.

For example, some countries, like India, saw a substantial fall in economic activity in 2020, but are expected to see a strong economic recovery in 2021, despite the recent fresh wave of infections. India, in our view, will soon return to its pre-COVID-19 poverty trends. Other countries, like Nigeria and the Democratic Republic of the Congo, will likely be slow to recover, and could experience low growth for the next decade. As a result, they may see higher poverty headcounts in 2030 than in 2019.

While these facts are sobering, this long-term poverty stagnation is not inevitable. Countries have responded to the pandemic with a number of social protection measures to try and protect the most vulnerable. There has been a proliferation of mobile cash transfer programs, taking advantage of big data and machine learning to better target those in need. The needs are great, but not insurmountable; the amount needed to lift people out of extreme poverty is less than the current annual official development assistance (ODA) budget. Eliminating extreme poverty will increasingly depend on better targeting as well as greater resource mobilization. We believe that geographic targeting of specific people in specific places offers considerable potential.

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• Munoz Boudet et al. (2018). “Gender Differences in Poverty and Household Composition through the Life-Cycle: A Global Perspective.” World Bank Policy Research Working Paper No. 8360.

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Ending Poverty Through Education: The Challenge of Education for All

About the author, koïchiro matsuura.

From Vol. XLIV, No. 4, "The MDGs: Are We on Track?",  December 2007

T he world made a determined statement when it adopted the eight Millennium Development Goals (MDGs) in 2000. These goals represent a common vision for dramatically reducing poverty by 2015 and provide clear objectives for significant improvement in the quality of people's lives. Learning and education are at the heart of all development and, consequently, of this global agenda. MDG 2 aims to ensure that children everywhere -- boys and girls -- will be able to complete a full course of good quality primary schooling. MDG 3 targets to eliminate gender disparity in primary and secondary education, preferably by 2005, and at all levels by 2015. Indeed, learning is implicit in all the MDGs: improving maternal health, reducing child mortality and combating HIV/AIDS simply cannot be achieved without empowering individuals with knowledge and skills to better their lives. In addition, MDG 8 calls for "more generous official development assistance for countries committed to poverty reduction". The MDGs on education echo the Education for All (EFA) goals, also adopted in 2000. However, the EFA agenda is much broader, encompassing not only universal primary education and gender equality, but also early childhood education, quality lifelong learning and literacy. This holistic approach is vital to ensuring full enjoyment of the human right to education and achieving sustainable and equitable development. What progress have we made towards universal primary education? The EFA Global Monitoring Report 2008 -- Education for All by 2015: Will we make it? -- presents an overall assessment of progress at the halfway point between 2000 and 2015. There is much encouraging news, including: • Between 1999 and 2005, the number of children entering primary school for the first time grew by 4 per cent, from 130 million to 135 million, with a jump of 36 per cent in sub-Saharan Africa -- a major achievement, given the strong demographic growth in the region. • Overall participation in primary schooling worldwide grew by 6.4 per cent, with the fastest growth in the two regions farthest from achieving the goal on education -- sub-Saharan Africa, and South and West Asia. • Looking at the net enrolment ratio, which measures the share of children of primary school age who are enrolled, more than half the countries of North America, Western, Central and Eastern Europe, East Asia and the Pacific, and Latin America and the Caribbean have rates of over 90 per cent. Ratios are lower in the Arab States, Central Asia and South and West Asia, with lows of 33 per cent (Djibouti) and 68 per cent (Pakistan). The challenge is greatest in sub-Saharan Africa, where more than one third of countries have rates below 70 per cent. • The number of children out of school has dropped sharply, from 96 million in 1999 to around 72 million by 2005, with the biggest change in sub-Saharan Africa and South and West Asia, which continue to harbour the largest percentages of children not in school. South and West Asia has the highest share of girls out of school. The MDG on education specifies that both boys and girls should receive a full course of primary schooling. The gender parity goal set for 2005, however, has not been achieved by all. Still, many countries have made significant progress. In South and West Asia, one of the regions with the widest disparities, 93 girls for every 100 boys were in school in 2005 -- up from 82 in 1999. Yet, globally, 122 out of the 181 countries with data had not achieved gender parity in 2005. There is much more to be done, particularly in rural areas and urban slums, but there are strong trends in the right direction. This overall assessment indicates that progress in achieving universal primary education is positive. Countries where enrolments rose sharply generally increased their education spending as a share of gross national product. Public expenditure on education has climbed by over 5 per cent annually in sub-Saharan Africa and South and West Asia. Aid to basic education in low-income countries more than doubled between 2000 and 2004. Progress has been achieved through universal and targeted strategies. Some 14 countries have abolished primary school fees since 2000, a measure that has promoted enrolment of the most disadvantaged children. Several countries have established mechanisms to redistribute funds to poorer regions and target areas that are lagging in terms of access to education, and to offset economic barriers to schooling for poor households. Many countries, including Burkina Faso, Ethiopia, India and Yemen, have introduced specific strategies to encourage girls' schooling, such as community sensitization campaigns, early childhood centres to release girls from caring for their siblings, free uniforms and learning materials. These strategies are working and reflect strong national commitment to achieving universal primary education. Enrolment, however, is only half the story; children need to stay in primary school and complete it. One way of measuring this is the survival rate to the last grade of primary education. Although data are not available for every country, globally the rate of survival to the last grade is 87 per cent. This masks wide regional variations, with medians of over 90 per cent all over the world, except in South and West Asia (79%) and sub-Saharan Africa (63%). Even then, some children drop out in the last grade and never complete primary education, with some countries showing a gap of 20 per cent between those who enter the last grade and those who complete it. One of the principal challenges is to improve the quality of learning and teaching. Cognitive skills, basic competencies and life-skills, as well as positive values and attitudes, are all essential for development at individual, community and national levels. In a world where the acquisition, use and sharing of knowledge are increasingly the key to poverty reduction and social development, the need for quality learning outcomes becomes a necessary essential condition for sharing in the benefits of growing prosperity. What children take away from school, and what youth and adults acquire in non-formal learning programmes, should enable them, as expressed in the four pillars of the 1996 Delors report, Learning: The Treasure Within, to learn to know, to do, to be and to live together. Governments are showing growing concern about the poor quality of education. An increasing number of developing countries are participating in international and regional learning assessments, and conducting their own. Evidence shows that up to 40 per cent of students do not reach minimum achievement standards in language and mathematics. Pupils from more privileged socio-economic backgrounds and those with access to books consistently perform better than those from poorer backgrounds with limited access to reading materials. Clear messages emerge from these studies. In primary education, quality learning depends, first and foremost, on the presence of enough properly trained teachers. But pupil/teacher ratios have increased in sub-Saharan Africa and South and West Asia since 1999. Some 18 million new teachers are needed worldwide to reach universal primary education by 2015. Other factors have a clear influence on learning: a safe and healthy physical environment, including, among others, appropriate sanitation for girls; adequate learning and teaching materials; child-centred curricula; and sufficient hours of instruction (at least 800 hours a year). Initial learning through the mother tongue has a proven impact on literacy acquisition. Transparent and accountable school governance, among others, also affects the overall learning environment. What then are the prospects for achieving universal primary education and gender parity? The EFA Global Monitoring Report 2008 puts countries into two categories depending on their current net enrolment rate: 80 to 96 per cent, and less than 80 per cent. For each category, it then assesses whether current rates of progress are likely to enable each country to reach the goal by 2015. Noting that 63 countries worldwide have already achieved the goal and 54 countries cannot be included in the analysis due to lack of adequate data, the status is as follows: Out of the 95 countries unlikely to achieve gender parity by 2015, 14 will not achieve it in primary education and 52 will not attain it at the secondary level. A further 29 countries will fail to achieve parity in both primary and secondary education. The international community must focus on giving support to those countries that are currently not on track to meet the MDGs and the EFA goals, and to those that are making progress. On current trends, and if pledges are met, bilateral aid to basic education will likely reach $5 billion a year in 2010. This remains well below the $9 billion required to reach universal primary education alone; an additional $2 billion are needed to address the wider context of educational development. Ensuring that adults, particularly mothers, are literate has an impact on whether their children, especially their daughters, attend school. In today's knowledge-intensive societies, 774 million adults are illiterate -- one in four of them women. Early learning and pre-school programmes give children a much better chance to survive and succeed once they enter primary school, but such opportunities are few and far between across most of the developing world, except in Latin America and the Caribbean. Opportunities for quality secondary education and ongoing learning programmes provide motivation for students to achieve the highest possible level of education and view learning as a lifelong endeavour. The goals towards which we are striving are about the fundamental right to education that should enable every child and every adult to develop their potential to the full, so that they contribute actively to societal change and enjoy the benefits of development. The challenge now is to ensure that learning opportunities reach all children, youth and adults, regardless of their background. This requires inclusive policies to reach the most marginalized, vulnerable and disadvantaged populations -- the working children, those with disabilities, indigenous groups, linguistic minorities and populations affected by HIV/AIDS.

Globally, the world has set its sights on sustainable human development, the only prospect for reducing inequalities and improving the quality of life for present and future generations. In this perspective, Governments, donors and international agencies must continue working jointly towards achieving universal primary education and the broader MDG agenda with courage, determination and unswerving commitment. To find out more about the EFA Global Monitoring Report 2008, please visit ( www.efareport.unesco.org ).

The UN Chronicle  is not an official record. It is privileged to host senior United Nations officials as well as distinguished contributors from outside the United Nations system whose views are not necessarily those of the United Nations. Similarly, the boundaries and names shown, and the designations used, in maps or articles do not necessarily imply endorsement or acceptance by the United Nations.

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How 5 N.Y.C. Neighborhoods Are Struggling With Climate Change

New data projects are linking social issues with global warming. Here’s what that means for these New York communities.

By Hilary Howard

Photographs by Jade Doskow

Some of the effects of climate change on New York City neighborhoods are clear: extreme heat. Persistent flooding.

But as city leaders explore which neighborhoods are most vulnerable to a warming world, they are also focusing on less obvious factors like poverty, chronic health conditions and language barriers that can deepen the impact of climate change.

Several new data-gathering efforts are helping shed light on how socioeconomic issues can add to a community’s overall risk as droughts, floods and wildfires become more extreme and sea levels rise.

The findings indicate that in the city, the neighborhoods most unprepared for climate change have a lot in common: They are poor; have congestion and histories of redlining or industrial pollution; and for many of their residents, English is a second language.

“You find these same situations in all these locales: very little tree covering, heavily exposed pollutants and projects and industry that’s been zoned to be placed there,” said Mychal Johnson, a founding member of the nonprofit South Bronx Unite , which helped develop the U.S. Climate Vulnerability Index , an expansive mapping project that compiled public data from across the country.

And in April, the New York City Mayor’s Office of Climate & Environmental Justice published a similar project and interactive map .

Using these tools and other similar indexes, here are some of the most vulnerable regions in the city.

‘A very vicious cycle’

Congestion in the south bronx.

The Cross-Bronx Expressway cuts off the South Bronx from the rest of the borough, with cars and trucks — over 187,000 daily — spewing pollution.

The construction of the thoroughfare in the middle of the last century displaced 60,000 residents and helped condemn much of the area around it to poverty, as well as elevated rates of asthma.

Disproportionate levels of health consistent with high levels of poverty make climate change harder on residents of the South Bronx, said Earle Chambers, an epidemiologist at the Albert Einstein College of Medicine.

Extreme heat, a major issue in the South Bronx , is especially tough on those with chronic illnesses. And New Yorkers with asthma were in danger last summer when wildfires in Canada turned the skies red over New York. Those with financial hardships were further challenged, visiting emergency rooms — a guaranteed way to seek treatment regardless of income or insurance — in record numbers.

In the South Bronx, where 94 percent of residents are Black or Hispanic, the percentage of residents living below the poverty level is about twice the city average, as is the percentage of adults 25 and over who did not graduate from high school, according to a census analysis of neighborhoods in the South Bronx region, including Grand Concourse, Melrose, Mott Haven, Point Morris and Hunts Point, by Social Explorer , a demographic data firm.

Adult asthma rates in the South Bronx are significantly higher than the city average — 6 percent compared with 3.8 percent citywide — and over a third of residents are obese and considered to be at risk for diabetes and heart disease.

Living near a congested highway can produce a domino effect of challenges, said Arif Ullah, the executive director of South Bronx Unite.

“If a child has asthma or heart disease, there are more absences from school, which means a risk of not graduating, which could affect job prospects,” Mr. Ullah said. “It’s just a very vicious cycle.”

Ritchie Torres, the Democratic congressman who represents the area, along with Senator Chuck Schumer, Democrat of New York, secured $2 million for the city and state to study covering parts of the expressway with parks and other amenities.

Such a project would help “right the historical wrong” of the expressway being built in the South Bronx to begin with, Dr. Chambers said.

‘Trees as a high-leverage solution’

The lack of forest cover in red hook, brooklyn.

Red Hook, an isolated, low-lying waterfront neighborhood, still affected by an industrial history and by emissions from a nearby cruise ship terminal , also has a shortage of trees.

In 2012, hundreds of trees were felled or damaged by Hurricane Sandy, which flooded the area and knocked out the power and water at the Red Hook Houses, New York City’s second-largest public housing complex. In order to make repairs there , officials cut down about an additional 400 trees.

Trees serve as a buffer for storm water, filter the air, provide oxygen and store carbon dioxide. In addition to shading people, they also shade buildings, which helps reduce energy consumption.

But trees struggle to thrive in Red Hook. The water table is high, meaning the ground is often saturated, and most of the soil is red clay, which can be dense, making it difficult for trees to take root.

(NYC Parks, which is behind a citywide tree-planting and maintenance effort , has planted 565 trees in the neighborhood since 2015, and intends to plant 40 more this spring.)

Some residents have taken it upon themselves to nurture the street trees. Red Hook Conservancy , a nonprofit, organizes groups to clean out tree beds and nourish them with mulch or compost.

Students are doing their part, too. Six graders at nearby Harbor Middle School undertook a project to design and build guards to protect tree beds.

Lynn Shon, a teacher at the school, led the project. “Students looked at data and discovered that flooding, sea level rise and extreme heat were problems disproportionately impacting Red Hook, along with the urban heat island effect ” (when cities tend to be warmer than rural areas), she said. “They were able to identify trees as a high-leverage solution.”

A food desert, surrounded by water

Edgemere, queens, lacks fresh produce (but has plenty of flooding)..

Shantae Johnson moved to Edgemere five years ago because of the cheap rent, she said. Ms. Johnson, a single mother, was on a tight budget, which revolved around feeding her seven children.

She soon realized there were no grocery stores in the flood-prone neighborhood. In Edgemere, a beach community, a simple chore like food shopping is already a major operation. But as flooding becomes more commonplace, navigating the waterlogged areas makes the task even more onerous.

“We have the double whammy effect,” said Sonia Moise, president of the area’s civic association , referring to flooding from two directions: the Atlantic Ocean to the south and Jamaica Bay to the north.

Every week, Ms. Johnson would lug her shopping cart onto the subway and travel from the Rockaway Peninsula in southern Queens to Union Square in Manhattan (over an hourlong trip) to do her grocery shopping.

“It took a toll on me,” she said.

But two years ago, Ms. Johnson caught a break. She stumbled upon a community garden during a walk. Soon, she had her own patch of land and was growing spinach and basil. She harvested so much squash last summer that she filled her freezer and gave away the rest.

The garden changed her life, Ms. Johnson said. “I get friendship, community, food and an oasis,” she said.

The Garden by the Bay is a precious resource in amenity-poor Edgemere, where the closest grocery store is over a mile away, Ms. Moise said.

The food desert here is just one problem, said Jackie Rogers, the president of the 15,000-square-foot garden, which has five community plots and 23 for individual use. “We check all the boxes when it comes to deserts,” she said. “Food, transportation, education, recreation, lack of infrastructure.”

On the food front, there is some good news: This fall, a 20,000 square-foot grocery store is scheduled to open. It will be part of a mixed-use affordable housing complex with over 2,000 apartments.

Ms. Rogers would like to see more amenities and infrastructure upgrades — like more raised streets — first. “I’m sounding the alarm,” she said. “We need resiliency here.”

A need for English classes and information

In throgs neck, the bronx, big demands on a little library.

During extreme weather, staying informed is key to staying safe. But for New Yorkers who do not speak English or lack internet services, doing so can be a challenge.

Public libraries can help. And in the event of a storm or flood, many libraries go into disaster relief mode, becoming communications hubs and distribution centers for clothing, food and medicine.

“Librarians are always collaborating to connect people to resources, that’s what we do,” said Emily Drabinski, president of the American Library Association.

But in Throgs Neck, an isolated community with little public transit, there is just one library for tens of thousands of people. The Throgs Neck Library, housed in a squat one-story building in the poorest part of the neighborhood just off the Cross Bronx Expressway, offers limited services.

Yet the need is there, said Leida Velazquez, the branch manager. Over the past year, she has seen an increase in patrons using the computers, as well as requests for assistance in applying for identification cards, jobs and food stamps benefits. “I’ll print applications for them,” she said.

With the recent influx of migrants, there is also a strong demand for English classes at the branch. But the building is too small to offer them, Ms. Velazquez said, so she often refers people to the Bronx Library Center. Getting there requires two buses and takes over an hour.

The demand for library services and support in this area of Throgs Neck underscores its need. According to Social Explorer, nearly a third of residents in the census tract closest to the library are below poverty level. And about one out of four residents has no other computing device besides a smartphone. Nearly half of people 5 and older speak a language other than English at home.

Across the city, budget cuts have caused many branches to make do with skeletal staffs and outdated HVAC systems, which could hamper their ability to function as cooling centers , said Lauren Comito, the executive director of Urban Librarians Unite. And more cuts could be on the way .

“If we want libraries to prepare for climate disaster, we will need more funding and to train staff,” she said.

‘Volatile and Dangerous’

A legacy of toxins in east williamsburg and greenpoint, brooklyn.

In the late 19th century, more than 50 oil refineries sat on the banks of Newtown Creek, a 3.8 mile waterway between Brooklyn and Queens. Now, the Brooklyn side of the creek is home to one of the largest oil spills in American history, and of two of the city’s four Superfund Sites (areas so toxic they qualify for government intervention).

But for Willis Elkins, the executive director of Newtown Creek Alliance , an environmental nonprofit, the most urgent threat to the area is a 117-acre storage facility.

There, two large tanks store liquefied natural gas, which can be converted to fuel for heating during cold-weather emergencies. “Liquefied gas is incredibly volatile and dangerous to store and transport,” Mr. Elkins said.

“The liquid gas is not even 1,000 yards from where we live,” said Elisha W. Fye, the vice president of the resident council of Cooper Park Houses, a public housing complex that sits next to the site.

Area residents have concerns about groundwater flooding people’s homes with toxins. Remnants of coal tar , a substance that was used when the site was an oil refinery, still bubble up at low tide, said Mr. Elkins, who added that other chemicals have also been detected around the site, which sits in a flood zone.

Mr. Fye, 70, has been part of several successful community efforts to block upgrades to the site, which is owned by National Grid, a company that provides gas to 1.9 million customers in New York City and on Long Island.

Several activists and energy experts want the site to shut down. But National Grid maintains that the site provides energy reliability in the event of extreme weather, and that the Greenpoint facility “meets or exceeds all safety regulations,” Karen Young, a spokeswoman for the company, said.

National Grid is investing millions in a new fire suppression system for the site; its old one was flooded and destroyed during Hurricane Sandy. And it is seeking millions more in proposed rate hikes for other upgrades.

If approved, residents in Brooklyn, Queens and Staten Island could see their monthly heating bills increase by more than $65 by 2026, and local gas infrastructure would remain in place well into the 2080s, which is against the state’s climate goals, said Kim Fraczek, the director of the Sane Energy Project , a group that has helped shut down several of National Grid’s expansion efforts.

Ms. Young said that most of the revenue from increased rates would cover federal and state safety mandates .

But Ms. Fraczek would like to see a more specific accounting, she said. “It’s an economic issue, it’s an environmental justice issue.”

Hilary Howard is a Times reporter covering how the New York City region is adapting to climate change and other environmental challenges. More about Hilary Howard

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Scientists have already established that the summer of 2023 was the warmest in the Northern Hemisphere since around 1850. Now, researchers say it was the hottest in 2,000 years .

The Federal Energy Regulatory Commission, an obscure climate agency , approved sweeping changes to how America’s electric grids are planned and funded . The new rule could help speed up wind and solar energy.

Officials in California have told scientists to stop testing a device  that might one day be used to artificially cool the planet by making clouds brighter , reflecting planet-warming sunlight back into space.

A Cosmic Perspective:  Alarmed by the climate crisis and its impact on their work, a growing number of astronomers  are using their expertise to fight back.

Struggling N.Y.C. Neighborhoods:  New data projects are linking social issues with global warming. Here’s what that means for five communities in New York .

Biden Environmental Rules:  The Biden administration has rushed to finalize 10 major environmental regulations  to meet its self-imposed spring deadline.

F.A.Q.:  Have questions about climate change? We’ve got answers .

Southern Poverty Law Center rebukes CPD for lack of action for officers tied to Oath Keepers

CHICAGO (WLS) -- A powerful civil rights group is demanding strong action by the Chicago Police Department against at least eight officers who have been connected to the ultra-right wing group the Oath Keepers, who have been the focus of January 6 U.S. Capitol violence.

The Southern Poverty Law Center is pushing back against CPD's lack of action against officers found to be affiliate with the Oath Keepers. Several city council members have signed onto the letter the SPLC sent Tuesday to Mayor Brandon Johnson and CPD Superintendent Larry Snelling.

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"The Chicago Police Department that is called to protect the safety of all residents. When we have members that are associated with hate speech, extremism and hate crimes. We do think is important that there is an independent investigation," said Ald. Byron Sigcho-Lopez.

The SPLC letter rips a police internal investigation of how deep the roots are between a handful of known officers and the January 6 riot activities of the Oath Keepers.

More than a year ago, the I-Team reported that pressure was mounting on police to publicly identify officers with links to radical, violent hate groups, including the Oath Keepers and the Proud Boys.

A half dozen officers have admitted to joining the Oath Keepers to CPD internal affairs investigators, and others have been connected to far-right organizations known for hate positions and violence. But the SPLC says police officials and the mayor are not doing enough investigate the officers who are aligned with racist and extremist groups.

SPLC is demanding public hearings by the Chicago City Council, and increased transparency, especially before this summer's Democratic National Convention.

"We cannot have any kind of discrimination when it comes to public safety. Every resident the city of Chicago deserves to be safe on their homes, in whatever they are, again, with the Pride Parade coming. We are really concerned about these threats. On the LGBTQ community again, and these groups Oath Keepers and Proud Boys are very clear in their positions, discriminating and providing hate and promoting hate speech against LGBTQ communities or other minorities. So we do believe that it's critical that there is a full investigation," Sigcho-Lopez said.

The letter from the SPLC is also blasts police investigative methods, suggesting the department gave only scant attention to allegations against officers and didn't seriously pursue whether they had done anything wrong.

There has been no immediate comment from city police or the mayor's office.

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What is climate change mitigation and why is it urgent?

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• Climate change mitigation involves actions to reduce or prevent greenhouse gas emissions from human activities.
• Mitigation efforts include transitioning to renewable energy sources, enhancing energy efficiency, adopting regenerative agricultural practices and protecting and restoring forests and critical ecosystems.
• Effective mitigation requires a whole-of-society approach and structural transformations to reduce emissions and limit global warming to 1.5°C above pre-industrial levels.
• International cooperation, for example through the Paris Agreement, is crucial in guiding and achieving global and national mitigation goals.
• Mitigation efforts face challenges such as the world's deep-rooted dependency on fossil fuels, the increased demand for new mineral resources and the difficulties in revamping our food systems.
• These challenges also offer opportunities to improve resilience and contribute to sustainable development.

What is climate change mitigation?

Climate change mitigation refers to any action taken by governments, businesses or people to reduce or prevent greenhouse gases, or to enhance carbon sinks that remove them from the atmosphere. These gases trap heat from the sun in our planet’s atmosphere, keeping it warm. 

Since the industrial era began, human activities have led to the release of dangerous levels of greenhouse gases, causing global warming and climate change. However, despite unequivocal research about the impact of our activities on the planet’s climate and growing awareness of the severe danger climate change poses to our societies, greenhouse gas emissions keep rising. If we can slow down the rise in greenhouse gases, we can slow down the pace of climate change and avoid its worst consequences.

Reducing greenhouse gases can be achieved by:

• Shifting away from fossil fuels : Fossil fuels are the biggest source of greenhouse gases, so transitioning to modern renewable energy sources like solar, wind and geothermal power, and advancing sustainable modes of transportation, is crucial.
• Improving energy efficiency : Using less energy overall – in buildings, industries, public and private spaces, energy generation and transmission, and transportation – helps reduce emissions. This can be achieved by using thermal comfort standards, better insulation and energy efficient appliances, and by improving building design, energy transmission systems and vehicles.
• Changing agricultural practices : Certain farming methods release high amounts of methane and nitrous oxide, which are potent greenhouse gases. Regenerative agricultural practices – including enhancing soil health, reducing livestock-related emissions, direct seeding techniques and using cover crops – support mitigation, improve resilience and decrease the cost burden on farmers.
• The sustainable management and conservation of forests : Forests act as carbon sinks , absorbing carbon dioxide and reducing the overall concentration of greenhouse gases in the atmosphere. Measures to reduce deforestation and forest degradation are key for climate mitigation and generate multiple additional benefits such as biodiversity conservation and improved water cycles.
• Restoring and conserving critical ecosystems : In addition to forests, ecosystems such as wetlands, peatlands, and grasslands, as well as coastal biomes such as mangrove forests, also contribute significantly to carbon sequestration, while supporting biodiversity and enhancing climate resilience.
• Creating a supportive environment : Investments, policies and regulations that encourage emission reductions, such as incentives, carbon pricing and limits on emissions from key sectors are crucial to driving climate change mitigation.

Photo: Stephane Bellerose/UNDP Mauritius

Photo: La Incre and Lizeth Jurado/PROAmazonia

What is the 1.5°C goal and why do we need to stick to it?

In 2015, 196 Parties to the UN Climate Convention in Paris adopted the Paris Agreement , a landmark international treaty, aimed at curbing global warming and addressing the effects of climate change. Its core ambition is to cap the rise in global average temperatures to well below 2°C above levels observed prior to the industrial era, while pursuing efforts to limit the increase to 1.5°C.

The 1.5°C goal is extremely important, especially for vulnerable communities already experiencing severe climate change impacts. Limiting warming below 1.5°C will translate into less extreme weather events and sea level rise, less stress on food production and water access, less biodiversity and ecosystem loss, and a lower chance of irreversible climate consequences.

To limit global warming to the critical threshold of 1.5°C, it is imperative for the world to undertake significant mitigation action. This requires a reduction in greenhouse gas emissions by 45 percent before 2030 and achieving net-zero emissions by mid-century.

What are the policy instruments that countries can use to drive mitigation?

Everyone has a role to play in climate change mitigation, from individuals adopting sustainable habits and advocating for change to governments implementing regulations, providing incentives and facilitating investments. The private sector, particularly those businesses and companies responsible for causing high emissions, should take a leading role in innovating, funding and driving climate change mitigation solutions. 

International collaboration and technology transfer is also crucial given the global nature and size of the challenge. As the main platform for international cooperation on climate action, the Paris Agreement has set forth a series of responsibilities and policy tools for its signatories. One of the primary instruments for achieving the goals of the treaty is Nationally Determined Contributions (NDCs) . These are the national climate pledges that each Party is required to develop and update every five years. NDCs articulate how each country will contribute to reducing greenhouse gas emissions and enhance climate resilience.   While NDCs include short- to medium-term targets, long-term low emission development strategies (LT-LEDS) are policy tools under the Paris Agreement through which countries must show how they plan to achieve carbon neutrality by mid-century. These strategies define a long-term vision that gives coherence and direction to shorter-term national climate targets.

Photo: Mucyo Serge/UNDP Rwanda

Photo: William Seal/UNDP Sudan

At the same time, the call for climate change mitigation has evolved into a call for reparative action, where high-income countries are urged to rectify past and ongoing contributions to the climate crisis. This approach reflects the UN Framework Convention on Climate Change (UNFCCC) which advocates for climate justice, recognizing the unequal historical responsibility for the climate crisis, emphasizing that wealthier countries, having profited from high-emission activities, bear a greater obligation to lead in mitigating these impacts. This includes not only reducing their own emissions, but also supporting vulnerable countries in their transition to low-emission development pathways.

Another critical aspect is ensuring a just transition for workers and communities that depend on the fossil fuel industry and its many connected industries. This process must prioritize social equity and create alternative employment opportunities as part of the shift towards renewable energy and more sustainable practices.

For emerging economies, innovation and advancements in technology have now demonstrated that robust economic growth can be achieved with clean, sustainable energy sources. By integrating renewable energy technologies such as solar, wind and geothermal power into their growth strategies, these economies can reduce their emissions, enhance energy security and create new economic opportunities and jobs. This shift not only contributes to global mitigation efforts but also sets a precedent for sustainable development.

What are some of the challenges slowing down climate change mitigation efforts?

Mitigating climate change is fraught with complexities, including the global economy's deep-rooted dependency on fossil fuels and the accompanying challenge of eliminating fossil fuel subsidies. This reliance – and the vested interests that have a stake in maintaining it – presents a significant barrier to transitioning to sustainable energy sources.

The shift towards decarbonization and renewable energy is driving increased demand for critical minerals such as copper, lithium, nickel, cobalt, and rare earth metals. Since new mining projects can take up to 15 years to yield output, mineral supply chains could become a bottleneck for decarbonization efforts. In addition, these minerals are predominantly found in a few, mostly low-income countries, which could heighten supply chain vulnerabilities and geopolitical tensions.

Furthermore, due to the significant demand for these minerals and the urgency of the energy transition, the scaled-up investment in the sector has the potential to exacerbate environmental degradation, economic and governance risks, and social inequalities, affecting the rights of Indigenous Peoples, local communities, and workers. Addressing these concerns necessitates implementing social and environmental safeguards, embracing circular economy principles, and establishing and enforcing responsible policies and regulations .

Agriculture is currently the largest driver of deforestation worldwide. A transformation in our food systems to reverse the impact that agriculture has on forests and biodiversity is undoubtedly a complex challenge. But it is also an important opportunity. The latest IPCC report highlights that adaptation and mitigation options related to land, water and food offer the greatest potential in responding to the climate crisis. Shifting to regenerative agricultural practices will not only ensure a healthy, fair and stable food supply for the world’s population, but also help to significantly reduce greenhouse gas emissions.  

Photo: UNDP India

Photo: Nino Zedginidze/UNDP Georgia

What are some examples of climate change mitigation?

In Mauritius , UNDP, with funding from the Green Climate Fund, has supported the government to install battery energy storage capacity that has enabled 50 MW of intermittent renewable energy to be connected to the grid, helping to avoid 81,000 tonnes of carbon dioxide annually. 

In Indonesia , UNDP has been working with the government for over a decade to support sustainable palm oil production. In 2019, the country adopted a National Action Plan on Sustainable Palm Oil, which was collaboratively developed by government, industry and civil society representatives. The plan increased the adoption of practices to minimize the adverse social and environmental effects of palm oil production and to protect forests. Since 2015, 37 million tonnes of direct greenhouse gas emissions have been avoided and 824,000 hectares of land with high conservation value have been protected.

In Moldova and Paraguay , UNDP has helped set up Green City Labs that are helping build more sustainable cities. This is achieved by implementing urban land use and mobility planning, prioritizing energy efficiency in residential buildings, introducing low-carbon public transport, implementing resource-efficient waste management, and switching to renewable energy sources. 

UNDP has supported the governments of Brazil, Costa Rica, Ecuador and Indonesia to implement results-based payments through the REDD+ (Reducing emissions from deforestation and forest degradation in developing countries) framework. These include payments for environmental services and community forest management programmes that channel international climate finance resources to local actors on the ground, specifically forest communities and Indigenous Peoples. 

UNDP is also supporting small island developing states like the Comoros to invest in renewable energy and sustainable infrastructure. Through the Africa Minigrids Program , solar minigrids will be installed in two priority communities, Grand Comore and Moheli, providing energy access through distributed renewable energy solutions to those hardest to reach.

And in South Africa , a UNDP initative to boost energy efficiency awareness among the general population and improve labelling standards has taken over commercial shopping malls.

What is UNDP’s role in supporting climate change mitigation?

UNDP aims to assist countries with their climate change mitigation efforts, guiding them towards sustainable, low-carbon and climate-resilient development. This support is in line with achieving the Sustainable Development Goals (SDGs), particularly those related to affordable and clean energy (SDG7), sustainable cities and communities (SDG11), and climate action (SDG13). Specifically, UNDP’s offer of support includes developing and improving legislation and policy, standards and regulations, capacity building, knowledge dissemination, and financial mobilization for countries to pilot and scale-up mitigation solutions such as renewable energy projects, energy efficiency initiatives and sustainable land-use practices. 

With financial support from the Global Environment Facility and the Green Climate Fund, UNDP has an active portfolio of 94 climate change mitigation projects in 69 countries. These initiatives are not only aimed at reducing greenhouse gas emissions, but also at contributing to sustainable and resilient development pathways.

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