Poverty Under the Kuznets Process

The behavior of poverty indexes is analyzed in the context of models of development proposed by Kuznets (1955) and Todaro (1969). It is found that under the Kuznets process, the class of poverty indexes developed by Foster et al. (1984) will always either increase or decrease with development. However, the class of poverty indexes introduced by Sen (1976) can exhibit an inverse-U shape, very similar to inequality indexes. In Todaro-type models of migration equilibrium, an increase in urban formal sector job openings results in rural-urban migration that is consistent with the Kuznets process. However, an increase in urban formal sector wages leads to consequences that do not satisfy the demands of the Kuznets process. In this situation, the results illustrate a cautionary tale: both class types of indexes increases with development.