Industrial development and economic growth: Implications for poverty reduction and income

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Industrial development and economic growth:
Implications for poverty reduction and income
inequality
Matleena Kniivilä*
1. Introduction
The share of poor people in the global population has declined during recent
decades. According to Chen and Ravallion (2004), one-third of the popula-
tion of the world lived in poverty in 1981, whereas the share was 18 per cent
in 2001. The decline is largely due to rapid economic growth in population-
rich countries like China and India. There are, however, remarkable differ-
ences between countries and between regions in the developing world. Some
regions and countries, notably in East Asia, are rapidly catching up to indus-
trialized countries. Others, especially in Sub-Saharan Africa, are lagging far
behind and the share of poor people in the population has even increased in
some countries.
Industrial development has had an important role in the economic
growth of countries like China, the Republic of Korea (Korea), Taiwan
Province of China (Taiwan), and Indonesia. Along with accelerated growth,
poverty rates have declined in many countries. Some countries have managed
to achieve growth with equity, whereas in others inequality has remained
high. In this chapter, the growth stories of seven countries – China, India,
Korea, Taiwan, Indonesia, Mexico and Brazil – are described and discussed.
The main emphasis is on describing their growth processes and strategies, the
role of industrial development, the contribution of a range of policies to
growth performance, and the impact of growth on poverty and income
inequality. The study begins with a short theoretical discussion of the impact
of industrial development on growth and the impact of growth on poverty
and income inequality and then proceeds to the country examples. The final
section discusses the lessons learnt.