The poverty transition: when, how and what next?

This paper draws attention to an aspect of poverty reduction in rapidly developing economies that have enjoyed a sustained period of economic growth accompanied by a decline in absolute poverty. The paper sets out to show the following: First, growth that leaves income distribution unchanged necessarily involves the poor in its early stages. Second, as income grows and absolute poverty declines, and in the absence of distributional changes, the gap between absolute and relative poverty diminishes until it disappears at an identifiable transition point, after which the relationship between the two poverty types is reversed. Although this is examined in the specific context of the Malaysian economy, the analysis has much wider application and implications for poverty alleviation in particular, and policy development in general, as the latter will involve a more difficult balancing of growth and equity than in the past. Copyright © 2007 John Wiley & Sons, Ltd.