Economic Growth and Poverty Reduction: Do Poor Countries Need to Worry about Inequality?

There is a seemingly widespread view that inequality should not be a concern in countries striving to fight absolute poverty. Although inequality may well be high or rising in some developing countries, this increase is seen as the unavoidable by-product of the economic growth needed to reduce poverty. The message for policy is that poor countries—including their poor—need not worry too much about inequality. Does the evidence from country experience support this view? This brief first looks at the relationship between economic growth on the one hand and poverty and inequality on the other. It then examines how inequality influences the relationship between growth and poverty and distinguishes between different types of inequality. Finally, some thoughts are offered on appropriate policies.