Question

1.How to explain the simultaneous increase in income inequality and decrease in poverty rate?

2.Briefly describe why share cropping contract often observed in developing countries agriculture is inefficient.

Answer 1

SOLUTION :

Explaination 1 : Economic growth means an increase in national income, but does economic growth actually help to reduce relative poverty and income inequality – or can economic growth exacerbate existing income inequalities? It is well-known that GDP growth has been much higher in the policies properly implementation. However, GDP is only one metric. Ultimately, the success of good governece depends on whether the well-being of people, particularly that of poor, increased over time. In this context, let’s examine the impact of economic reforms on poverty and inequality.Economic growth will not necessarily solve unemployment. For example, growth cannot solve structural and frictional unemployment; this is unemployment caused by lack of skills and geographical immobilities.

Explaination 2 : The structure of agricultural production in developing countries has radically changed in the last two decades. Since the late 60s and 70s, the World Bank and its various agricultural research institutes have actively promoted the adoption of industrial (high chemical input) agricultural methods such as the Green Revolution ‘miracle’ seeds, promising landfall yields. These high technology methods were expected to benefit all farmers, including the poor. Since yields would increase, incomes were also expected to increase.The industrialization and export orientation of agriculture has not benefited them. In the globalised market, the small players have been marginalised, as will be illustrated below. Yet economically, they should not be ignored. Policies which have led to their marginalisation has meant the continuation of the vicious cycle of poverty for sectors of society, highly uneven development and hence the inability of many developing countries to attain satisfactory levels of overall development.