Document Type

Discussion Paper

Publication Date

3-2026

CFDP Number

2503

CFDP Pages

31

Journal of Economic Literature (JEL) Code(s)

O1, O4, P0

Abstract

Since the late 1980s, extreme poverty has declined sharply, life expectancy and schooling have increased, and electoral democracy has expanded. However poverty reduction has slowed in recent years, particularly following the COVID-19 pandemic, amid intensifying conflict, fragility, climate risks, democratic backsliding, and the erosion of global trends—including trade integration and geopolitical stability—that once supported growth. These dynamics raise three interrelated questions: what barriers impede further progress; where will future growth in lower-income countries come from; and how can growth be broadly shared. Taking stock of 15 chapters forthcoming in Volume 6 of the Handbook of Development Economics, we discuss how external conditions, state capacity and policy choices shape development; analyze the shifting growth drivers, including trade, technology and the rise of services; discuss persistent inequality and distributional tensions; and conjecture that investing in institutions and people pays off.

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