This study investigated the changes in poverty of rural households in Bangladesh in the postliberalization
era. The study used household survey data from secondary sources and calculated
poverty indices, decomposition, and elasticity. The study found that income distribution across rural
households was uneven in the post-liberalization period. Although agricultural trade liberalization
generated significant growth, inequality also increased and the rich gained more from this growth
than the poor. Therefore, poverty reduction in the post-liberalization period was not as significant as
the economic growth. Among rural households, non-farm households gained more than farm
households from post-liberalization growth because of a relatively large reduction in consumer price
compared to increases in productivity of rice. Similarly, net buyers gained more than net sellers
from a large reduction in rice price. The study suggests that holding inequality constant at the
1985–1986 level, rural poverty in Bangladesh could be reduced to zero with the growth experienced
during 1985–1986 to 2005. The study argues that a reduction in poverty at a substantial level is a
big challenge for policymakers because of an increase in inequality along with economic growth.
Therefore, the government should formulate policies to reduce inequality in order to reduce poverty
significantly.