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March 1999 Empirical work in Bangladesh shows that growth reduces poverty in both urban and rural areas - and is associated with rising inequality only in urban areas. It appears that promoting growth in rural areas rather than urban areas would reduce poverty more. Most empirical work on how growth affects poverty and inequality has been based on international panel data sets. Panels can also be used within a country, if the analysis is carried out at the regional level. Wodon does this for Bangladesh, where regional panel estimates indicate that growth reduces poverty in both urban and rural areas. Growth is associated with rising inequality only in urban areas. Simulations based on these estimates indicate how much poverty reduction could increase in the next 10 years if growth were promoted in rural areas rather than urban areas. This paper-a product of the Poverty Reduction and Economic Management Sector Unit, South Asia Region-was written as part of background work for the Bangladesh poverty assessment. The author may be contacted at qwodon@worldbank.org.

Economic stabilization.

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This first note in the series on the cost of gender inequality focuses on the losses in national wealth due to gender inequality in earnings. There is a substantial literature on the impact of gender inequality on economic growth and performance. By focusing on wealth, the approach usedfor measurement in this note is different. Wealth is the assets base that enables countries to produce income Gross Domestic Product or GDP). A country's wealth includes various types of capital. Produced capital comes from investments in assets such as factories, equipment, or infrastructure. Natural capital includes assets such as agricultural land and other renewable and non-renewable natural resources. However, the largest component of countries' wealth typically resides in their people. As noted in the recent World Bank study on the Changing Wealth of Nations, human capital measured as the present value of the future earnings of the labor force accounts for two thirds of global wealth. If gender equality in earnings were achieved, countries could increase their human capital wealth, and thereby their total wealth substantially. This would enable them to strengthen the sustainability of their development path. Gender inequality has major economic implications forwomen, communities, and countries in a range of areas. While the cost of gender inequality - in terms of human capital losses - for development is not solely due to losses in earnings, the impact of gender inequality on earnings is key. This is the area on which this note focuses.

Agricultural Productivity --- Gender --- Human Capital --- Inequality --- Labor Market --- Labor Markets --- Labor Policy --- Poverty Reduction --- Rural Development --- Rural Labor Markets --- Social Protections and Labor