Does Low Inequality Cause Low Poverty? Evidence from High‐Income and Developing Countries

This paper examines the role of economic inequality in determining poverty globally. Although the immediate observation from the cross‐national data covering 1980 to 2005 suggests the relationship to be strong and positive for high‐income countries and unpredictable for developing countries, more comprehensive analyses detect it to be consistently positive. While high‐income and developing countries typically apply different poverty measurement methodologies with the former using relative and the latter using absolute poverty thresholds, variations in poverty outcomes go beyond these methodological differences. Rejecting any systematic role of economic growth, especially in cases of developing countries, these findings reaffirm the pivotal role that reduction in inequality can play in effectively curbing poverty, with important implications for redistributive policies.