Poverty, Poverty Reforms for Resource-use and Economic Efficiency: Neglected Issues

It is widely believed that in developing countries, open-access to natural resources, inadequate private property rights, and lack of development of market systems adds to the incidence of poverty. Increased economic efficiency is seen as a powerful force for reducing the extent of poverty in developing countries in the long run. While this may be so, it ignores the depth and incidence of poverty that can be generated during adjustments to policy reforms. This possibility constrains policy choices as is shown theoretically for natural resource policies and for agricultural adjustment policies giving Asian examples. Social, behavioral and institutional features are also considered that may result in poverty lock-in of some groups. It is essential to consider dynamic processes and not to rely solely on comparative statics when assessing economic policies to reduce poverty and increase economic efficiency. It is also important to take into account institutional constraints on policy choices.