Economic Inequality and Poverty Dynamics: What does Literature tell us?

Abstract

Purpose of the study: This paper summarizes the existing literature on the inequality-poverty dynamics dilemma by presenting discoveries and novel ways to close a gap in the literature. The study focused on whether economic differences slow or stop people from falling into or staying out of poverty over time. Methodology: The study extensively reviews the literature on measures of economic inequality and poverty dynamics. Main Findings: Findings from the reviewed literature revealed that economic inequality is a crucial determinant of the transition to poverty. Inequality contains poverty, and poverty persists because of the presence of inequality. The direction of the association between poverty and economic inequality is still debatable in the literature, with no general consensus. Some findings show that the direction of the relationship is negative; others say it is positive, bidirectional, and inconclusive. Research limitations/implications: Poverty dynamics and economic inequality research is scarce because the required data sets are complex and expensive to obtain from surveys in developing countries. Novelty/Originality of this study: Many poverty studies concentrate on the incidence of poverty at single or multiple moments in time. Therefore, analyzing knowledge of the degree of poverty and how it varies over time is critical for the dynamics of poverty. However, in the academic literature, few empirical articles are devoted to studying the relationship between economic inequality and poverty dynamics. The findings of this study will uniquely contribute to the discourse on growth-poverty inequality in the 2030 Sustainable Development Goals 1 and 10.