Relation of Economic Growth with Poverty and Inequality in Developing Countries

Because of 16’s economical vicissitude and increasing gaps between countries in production affairs, almost all of economic schools have special attention on poverty and that’s efficacious factors, as a cause and consequence of underdevelopment. Part of the ongoing debate on poverty reduction strategies bear on the issue of the actual contribution of economic growth to poverty reduction. There is no doubt that faster economic growth is associated with faster poverty reduction. But what is the corresponding elasticity? With contemplate the importance of poverty present study aims to find answers of a main question. How much is the influence of economic growth on Inequality and poverty? Sake to find answer, we attempt to collect data of 50 developed and developing countries (include Iran) for 3 period (1993-1996, 1997-2000 and 2001-2004). Based on this data set, three different econometric models are estimated. The first model alluded to measure elasticity between poverty reduction and growth. It consists of regressing observed changes in the proportion population with less than 1$ per day on observed changes in GDP growth and unemployment rate. The second model has a same structure like previous model, but we employ other indicator to measuring absolute poverty this indicator is proportion of population that live under national poverty line. The final model includes the observed change in income inequality, as measured by the Gini coefficient, economic growth and unemployment rate. To survey impressionability of absolute poverty and income inequality from economic growth, we estimate these econometric models by Panel Date approach. Estimations results show that, in that periods, Variables like unemployment rate, economic growth and Gini index have significant and considerable role in reduction of absolute poverty, similarly, economic growth and unemployment have same effects on income inequality. Undoubted, predisposing the economic growth and sustainable employment can effectively reduce poverty of nations.