The paper "Economics of Development" is a wonderful example of an assignment on macro and microeconomics. Inequality can be measured using size distributions (quintiles and deciles), Lorenz curves, Gini coefficients and aggregate measures of inequality, and functional distributions. The measurement is based on indices of inequality which are used to evaluate a particular income distribution as well as for making comparisons between different distributions. Measurement of poverty starts by identifying the poor by drawing a borderline between been income levels that are considered to be for the poor and those for the non-poor.
There are two approaches used in defining the poverty line, based on whether poverty is viewed as relative or absolute deprivation. If poverty is regarded to be absolute deprivation, the poverty line is defined without considering the general living standard. If poverty is seen to be relative, then the poverty line is defined by taking the living standard into consideration. Why reducing poverty and inequality can be beneficial to the growthBoth poverty and inequality have a negative impact on growth. High poverty leads to low growth since the poor cannot make a significant contribution to economic growth.
For instance, deprived people do not have jobs and lack access to services such as healthcare and education. As such, they cannot actively participate in activities that enhance growth. Similarly, societies that are characterized by inequality have a large segment of the population which is poor. What this means that this segment does not contribute significantly to economic growth. Moreover, in unequal societies, governments have to redistribute taxes that would have been used to enhance growth to cater to the needs of the poor.
Therefore reducing poverty and inequality can make the poor more vibrant and reduce the burden of supporting them. This in turn means that contribution of the poor as well as resources that would be channeled to helping them are used for development, which would in turn enhance growth. How to make workfare work For workfare to work, the programme should not lower or seriously weaken incentives for the targeted poor people to acquire human capital and other assets. That is, the earnings from workfare programs should not be so high that they undermine the ability of the poor who need human capital to get it.
Also, the workfare program should have significant net benefits so as to attract the targeted population to join. Additionally, the arrangement for the programme should be such that it is harder to screen the poor without the workfare condition. The workfare program should also be designed in such a way that there is a lower opportunity cost of time for the people who are not targeted (so that they do not come to enjoy the benefits of the workfare program).
Also, there should be social less stigma attached to taking part in the workfare programme so that the poor do not feel ashamed to join it.