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Revisiting Global Poverty
Measurement
Martin Ravallion
Georgetown University
1
Ravallion, Martin, and Shaohua Chen, 2017, “Welfare-Consistent Global
Poverty Measures.” NBER Working Paper 23739.
Ravallion, Martin, 2016, “Are the World’s Poorest Left Behind?” Journal
of Economic Growth.
Presentation at Economic Research Forum, Cairo, December 2017
2
Large reduction in the incidence of absolute
poverty in the developing world
0
400
800
1,200
1,600
2,000
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Number (in millions) living below World Bank international line
($1.90/person/day; 2011 PPP)
Two concerns about current measures of
global poverty
1. Ignoring social effects: taking relative deprivation seriously. Do current methods make economic sense?
Are the current stylized facts about poverty right?
Relative poverty in rich world; how much poorer is the developing word?
Rising inequality in many growing developing countries; slower progress than we think?
2. Ignoring the floor: making sure that none are left behind. Rights-based approaches: social inclusion
Are the poorest being left behind?
3
1: Social effects on welfare
4
5
0
1
2
3
4
5
3.2 3.6 4.0 4.4 4.8 5.2 5.6 6.0 6.4
Log of mean household consumption or income per person
Lo
g o
f th
e p
ove
rty r
ate
(%
be
low
$1
.25
a d
ay)
Stylized fact 1: Less poverty in richer countries
(Log) headcount index plotted against log mean
Two stylized facts about poverty
Stylized fact 2: Poverty is falling globally
6
0
400
800
1,200
1,600
2,000
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Number (in millions) living below World Bank international line
($1.90/person/day; 2011 PPP)
Both stylized facts are based on absolute
poverty measures
• Arthur Bowley (1915):
– “There is perhaps, no better test of the progress of a nation than that which shows what proportion are in poverty and for watching the progress the exact standard selected as critical is not of great importance, if it is kept rigidly unchanged from time to time.”
• This approach ignores social effects: taking relative deprivation seriously.
• Yet ample evidence that people care about relative income as well as absolute income.
7
Two worlds of poverty measurement
Two standard (near universal) approaches:
• Relative poverty lines set at (say) 50% of the mean or median have dominated practice in rich countries (except US)
z = k.m
(Call these “strongly relative” lines.)
• Absolute poverty lines—fixed in real terms—have dominated
practice in the developing world, and the US.
z = constant (in real value)
8
People care about relative consumption
• The value attached to consumption of a specific commodity depends in part on what others consume. “Keeping up with the Jones.”
• Janis Joplin: “Oh Lord, won't you buy me a Mercedes Benz? My friends all drive Porsches, I must make amends.”
• Duesenberry (1949), Easterlin (1974), Hirsch (1977), Frank (1985), Frey and Stutzer (2002), Luttmer (2005), Senik(2005), Knight et al. (2009), Clark et al. (2008), Rayo and Becker (2007), Cohn, et al. (2014).
Two questions
• Do current methods of global poverty measurement make economic sense?
• Are the two stylized facts about poverty robust to allowing for social effects on welfare?
Relative poverty in rich world; how much poorer is the developing word?
Rising inequality in many growing developing countries; slower progress than we think?
10
Three contributions
1. Formalize a deep identification problem in past literature basing international poverty lines on national lines => uncertainty about welfare-consistent measures.
2. Provide a new way of defining the comparison income in relative comparisons at national level, recognizing that comparisons need not be horizontal.
3. Implement empirically in new data on both national lines (140 countries) and surveys (1500 surveys spanning 150 counties since 1990).
11
Theoretical arguments
12
Under a plausible assumption about welfare
neither standard approach makes sense
• Suppose that people care about both their own consumption and their consumption relative to a comparison level, such as mean in country of residence.
• Then neither absolute nor relative poverty measures are welfare consistent, i.e., they do not treat people with the same level of welfare the same way.
13
What might welfare-consistent measures look like?
What does global poverty look like with such measures?
Poverty is absolute in the space of welfare
• Poverty measures that use a constant real line do not take account of the concerns people face about relative deprivation and social exclusion. These are specific to place and time.
• The overriding principle: poverty is absolute in the space of welfare: “…an absolute approach in the space of capabilities translates into a relative approach in the space of commodities” (Amartya Sen, 1983)
14
Welfare effects of relative consumption
• Welfare depends on relative consumption:
y=own consumption; m(>0)=comparison income; uy>0; uy/m>0
• The poverty line (z) is “absolute” in the welfare space, but “relative” in consumption space:
• Inverting gives the poverty line as a function of the mean:
• The elasticity to mean is positive but less than unity.
“weakly relative” measures.
• Then neither absolute lines nor relative lines can be correct!
)/,( mzzuuz
)/,( myyuu
),( zumzz
15
1.1
1
ln
ln0
MRSm + =
m
z(where MRS=uy/uy/m)
The perverse assumption of strongly relative
lines: Only relative income matters!
• Strongly relative lines–set at (say) 50% of the mean or median—imply that people care only about relative income; no value on own income!
• If utility is only determined by relative income (own income ydivided by mean income m) then:
• The monetary poverty line is the income you need to attain the poverty level of welfare:
• Inverting we have the poverty line as a constant proportion of the mean:
)/( mzuuz
mufz z )(
)/( myuu
16
Alternative interpretation: Capabilities and
the cost of social inclusion
• Following Atkinson and Bourguignon (2002) we can think of poverty as having both absolute and relative aspects in the income space.
– The former is a failure to attain basic survival needs: the capabilities of being adequately nourished and clothed for meeting physical needs of survival and normal activities.
– On top of this, a person must satisfy social needs, which depend on the prevailing living standards in the place of residence.
• Atkinson-Bourguignon: To be non-poor one needs to be neither absolutely poor (“survival” capabilities) nor relatively poor (social inclusion capabilities).
• Calibrated to data on national poverty lines. 17
It can be agreed that certain forms of
consumption serve an important social role
• Famously, Adam Smith pointed to the social-inclusion role of a linen shirt in eighteenth century Europe:
“..a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.”
• Anthropologists have often noted the social roles played by festivals, celebrations, communal feasts, clothing.– Seemingly high expenditures on celebrations and festivals by very poor
people in survey data for a number of countries (Rao, Banerjee-Duflo).
– Clothing can also serve a social role; conspicuous “designer label,” which he interpreted as status-seeking behavior.
– Qat in Yemen “refusing to take qat is tantamount to accepting ostracisation” (Milanovic, 2008, p.684).
18
However, the social role of consumption does
not imply strongly relative poverty lines
• The key assumption of strongly relative lines is that the cost of inclusion is a constant proportion of mean income.
• That is implausible. The social-inclusion needs of very poor people may well be low, but it is difficult to see why they would go to zero in the limit.
– Presumably a socially acceptable linen shirt would not have cost any less for the poorest person in eighteenth century Europe as for someone living at the poverty line.
– Very poor people are highly constrained in spending on things that facilitate their social inclusion, but that does not mean that their inclusion needs are negligible.
19
Weakly vs. strongly relative lines
Poverty line
Absolute line
Weakly relative Strongly relative
(Atkinson-Bourguignon)
Social inclusion cost for
poorest; e.g., Adam Smith’s
linen shirt, which costs just
as much for the poorest.
Mean
20
(0,0)
Stepping back: why do we see higher (real)
poverty lines in richer countries?
21
0
4
8
12
16
20
24
28
32
36
40
-0.4 0.0 0.4 0.8 1.2 1.6 2.0 2.4 2.8 3.2 3.6 4.0 4.4
Mean consumption per person per day (log scale; 2011 PPP)
Na
tio
na
l p
ove
rty lin
e (
$/d
ay/p
ers
on
; 2
01
1 P
PP
)
USA
),( zumzz
Deep identification problem: higher welfare norms or higher costs of inclusion?
Egypt
Two possible reasons for the relativist
gradient
1. Social effects: Relative deprivation or rising costs of social inclusion (avoiding shame). Then a relative line is called for if we are to be absolute in terms of welfare.
2. Social norms: Richer countries implicitly use a higher reference level of welfare for defining poverty. Then we would want to use a common global norm an absolute line in terms of real income.
22
But we can’t say which is right!
Model 1: Social effects
23
There are two commodities (more can be added), consumed in amounts ijx1 and ijx2 for person i in country/date j.
Derived utility depends on consumption relative to certain socially accepted thresholds (interpretable as “basic needs”) in each setting.
The threshold for a given commodity rises with the overall mean, jm , and also depends on the prices prevailing in j,
denoted ),( 21 jjj ppp (One might postulate other factors.)
The thresholds for consumption are denoted: ),(11 jjj pmzz and ),(22 jjj pmzz
for goods 1 and 2 respectively.
Model 1 cont.
24
Utility is )/,/( 2211 jijjijij zxzxuu ,
which is maximized subject to the usual budget constraint:
ijjijjij xpxpy 2211 .
The poverty line is the cost of the threshold bundle,
jjjjj zpzpz 2211 ,
which rises with jm .
Globally, everyone living at the poverty line can afford the relevant threshold bundle, assuming a common utility level,
)1,1(uu z .
Thus the lines are welfare consistent.
Model 2: Social norms
25
In this model there are no social effects on welfare, so the utility of person i in country/date j depends on own consumption, as ),( 21 ijijij xxuu (with the function u having
standard properties), which is again maximized subject to
ijjijjij xpxpy 2211 .
As usual, the maximum attainable utility is given by the indirect utility function ),( jij pyv .
The other key difference with Model 1 is that the reference level of utility needed to not be considered poor is now taken
to be a rising function of the mean; let this be ),( jj
z
j pmfu .
The solution of ),( jj
z
j pzvu for jz is an increasing function
of jm (as well as jp ).
Where does come from in Model 2?
26
We can posit a “first-best” distribution for a given mean.
This can be characterized as maximizing some weighted aggregate of utilities, with the weights reflecting the government’s social preferences.
One can then define z
ju as the lowest utility found in this
optimal plan, with an implied jz .
The first-best is not, however, implemented given other constraints (notably on information and administrative capabilities), so the current actual distribution has incomes below jz .
In other words, the prevailing national poverty line is the minimum income in the government’s ideal distribution of income for that country and time, given the total income.
Naturally, when the latter rises, the minimum also rises.
zju
The big uncertainty about global poverty!
• The problem is that we do not know which of these two interpretations—social effects on welfare or differing social norms in defining poverty—is right.
• And we may never resolve the matter from conventional empirical evidence. – There have been many claims about the existence of various social
effects on subjective welfare responses, though problems remain in credibly identifying such effects.
• This uncertainty makes it compelling to consider both approaches when measuring global poverty.
27
Proposed bounds to global poverty
• Absolute poverty measures can be interpreted as the lower bound to the true welfare-consistent measure.
– The lower bound assumes that the relativist gradient only reflects differing social norms.
• A weakly relative measure of poverty provides its upper bound, allowing for social effects on welfare.
– The upper bound assumes that the relatavist gradient stems solely from social effects on welfare—extra spending needed to attain the same level of welfare in richer countries.
• Those living between the two bounds are still poor by standards typical of the country they live in.
• The true welfare-consistent absolute line lies somewhere between the two bounds.
28
What comparison income?
• Neither mean nor median is plausible.• Who are the “Joneses”? People can look upward,
horizontally or downward in making relative comparisons.• Thought experiment: pick pairs at random and select the
point you take between the two incomes for comparison.
= the contribution of the (k, l) pair drawn in country j to the assessment of the comparison income for j
• With a large sample, unbiased estimate of:• Solution:
• Special case: downward comparisons:
29
jjj mGm ])21(1[*
jj mG )1(
),max(),min()1(),( ljkjljkjljkj yyyyyy
j jN
k
N
l
ljkj
j
j yyN
m1 1
2
* )(1
Implications for growth and poverty
30
We can write the poverty measure in the generic form:
]),,(/[ *
j
z
jjjj LumzmPP with 0/ zmP
jL = vector of parameters fully describing the Lorenz curve.
Holding z
ju and jL constant, we then have (taking log
derivatives):
0)1()/ln(
ln
ln
ln
j
jj
j
j
j
zm
P
m
P
As long as the poverty measure is weakly relative ( 1j ),
distribution-neutral growth in the mean will reduce it.
31
Effect of an increase in Gini index is theoretically ambiguous.
This will depend in part on precisely how the Lorenz curve shifts and there are infinitely many possibilities.
Consider situations in which:
]),,(/[ *
j
z
jjjj GumzmPP with 𝑃𝐺′ > 0. Then:
0/0ln
ln
])21(1[
)21(.
)/ln(
ln
ln
ln
zdmj
j
jj
jjj
jj
j
dmj
j
G
P
G
G
zm
P
G
P
Sign cannot be determined from the assumptions so far. o If 5.0 or relative comparisons are upward-looking
( 5.0 ) then poverty will increase with a higher Gini index (holding the mean constant).
o With downward revisions the effect could go either way.
We will examine this issue empirically
Implications for growth and redistribution
Empirical implementation
32
Data on national
poverty lines
• N=145
• Developing countries: Official lines and/or WB Poverty Assessments countries
• Developed countries: Relative lines (except US)
• US official line
• Also implicit lines from Jolliffe-Prydz
33
0
10
20
30
40
50
60
70
80
0 10 20 30 40 50 60 70 80
Mean ($ per person per day; 2011 PPP)
Po
ve
rty lin
e (
$ p
er
pe
rso
n p
er
da
y; 2
01
1 P
PP
)
USA
Luxembourg
Switzerland
Norway
CanadaAustralia
UKSpain
ItalySlovenia
Austria
Iceland FrNeBe
Japan
0
4
8
12
16
20
24
-0.4 0.0 0.4 0.8 1.2 1.6 2.0 2.4 2.8 3.2 3.6
Log mean ($ per person per day; 2011 PPP)
Po
ve
rty lin
e (
$ p
er
pe
rso
n p
er
da
y; 2
01
1 P
PP
)
DRC
Slovenia
Gu Honduras
Argentina
Chile
LithuaniaHungary
Lebanon
South AfricaBotswana
SlovakRep.
Turkey
Brazil
Uganda
Haiti
RwandaMadagascar
Iraq
Poland
Panama
CI
ChinaIndia Namibia
BeninKyrgyz
ES
Liberia
Costa Rica
Estonia
ParaguayVenezuela Latvia
EcuadorBhutanCAR
B&H
Mont.
Egypt
Uruguay
Czech
Colombia
Sn.
Ym
Az
SL
Belarus
SbFiji
$PPP, 2011
Calibration to national poverty lines
34
(1) (2) (3) (4) (5) (6)
Full
sample
Non-
OECD
Full
sample
Non-
OECD
Full
sample
Non-
OECD
OLS OLS OLS OLS IV IV
Intercept ( ) 1.072***
(0.313)
0.891***
(0.217)
0.856***
(0.163)
0.887***
(0.233)
1.001***
(0.234)
1.102***
(0.054)
Gini-discounted
mean ( )
0.781***
(0.106)
0.697***
(0.085)
0.704***
(0.018)
0.695***
(0.050)
0.687***
(0.029)
0.650***
(0.054)
Weight on
higher income
in any pair ( )
-0.115
(0.111)
-0.002
(0.097)
n.a. n.a. n.a. n.a.
R2 0.958 0.813 0.956 0.813 0.956 0.804
SEE 1.698 1.540 1.723 1.534 1.733 1.536
N 145 121 145 121 143 119 Notes: White standard errors in parentheses; ***: 1%; **: 5%; *: 10%; OLS: Ordinary Least Squares; IV:
Instrumental variable.
)1(])21(1[ n,..,=j mG= z jjjj
)0,00.1$7.0max(90.1$ * j
U
j m z
The identification problem
35
mG= z jjjj )1(
Error term includes z
ju which varies across countries with *
jm .
OLS converges in large samples to where 0 is the
regression coefficient of j on z
ju and 0 is the regression
coefficient of z
ju on *
jm .
Thus OLSˆ . The gradient w.r.t. the mean derived from the
national lines will overestimate the value required for welfare consistency.
Upper bound assumes no bias due to latent heterogeneity in country-specific reference welfare levels ( 0 ).
Lower bound assumes maximum bias, so that 0 , giving a standard absolute line.
Upper and lower bounds
Poverty line
Slope=0.7
$1.90/day
$0.90
36
)0,00.1$7.0max(90.1$ * j
U
j m z
Gini-adjusted mean
Upper
bound
Lower
bound
Distributional data
• PovcalNet for developing countries; LIS and EUSILC for advanced countries.
• 1,500 household surveys for 150 countries over 1990-2013.
• Consumption or income per capita. Consumption preferred to income when there is a choice.
• 2011 ICP + best available price index over time within each country.
• Extrapolations/interpolations to line up estimates into reference years.
37
Global poverty measures
38
On track for
SDG1, but
last few % may
be harder
0
10
20
30
40
50
60
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Glo
bal headcount in
dex o
f povert
y (
%)
Lower bound
(absolute; $1.90/day)
Upper bound
(weakly relative)
Slower progress against relative poverty, and rising share who are no longer absolutely poor but still relatively poor.
Numbers of poor
39
Absolutely poor
Relatively poor but not absolutely poor
0
400
800
1,200
1,600
2,000
2,400
2,800
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Glo
ba
l co
un
t o
f th
e n
um
be
r o
f p
oo
r (m
illio
n)
Lower
bound
Upper
boundRising numbers of relatively poor
but not absolutely poor
A source of the Arab Spring?
40
Absolutely poor measured using the Ravallion et al. $1.25 a day line; Relatively poor using the Ravallion-Chen weakly relative lines
0
20
40
60
80
100
120
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Number of poor in Middle-East and North Africa (millions)
Relatively poor
Of which absolutely poor
Breakdown of the global count for upper bound
41
0
500
1,000
1,500
2,000
2,500
3,000
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Co
un
t o
f th
e n
um
be
r o
f p
oo
r (m
illio
ns)
High income countries
Absolute poverty in
developing world
Relatively poor in
developing world
Global count
The purely relative poverty rate in the
developing world has overtaken the rich world
42
0
10
20
30
40
50
60
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Developing countries
(upper bound: absolute + relative)
Developing countries
(lower bound: absolute only)
High-income countries
Developing countries
(upper minus lower: relative only)
Po
ve
rty r
ate
(%
be
low
re
leva
nt lin
e)
Relationship to the overall mean
43
-6
-4
-2
0
2
4
6
3.6 4.0 4.4 4.8 5.2 5.6 6.0 6.4 6.8 7.2 7.6 8.0
Log mean (latest survey)
Upper bound
Lower bound
Log h
eadcount
index (
late
st
surv
ey)
Descriptive cross-country regressions for
changes in poverty measures
44
Growth rate in the headcount index
Lower bound poverty lines
( ))(( LzFg
Upper bound poverty lines
( ))(( UzFg
Growth rate in
the survey
mean ( )(mg )
-2.239***
(0.280)
-2.394***
(0.283)
-0.434***
(0.050)
-0.453***
(0.048)
-1.664***
(0.193)
)(mg x log initial
mean
n.a n.a n.a n.a 0.240***
(0.037)
Growth rate in
the Gini index
( )(Gg )
n.a. 2.478***
(0.461)
n.a. 0.427***
(0.130)
0.460***
(0.112)
R2 0.337 0.455 0.316 0.404 0.499
SEE 0.079 0.072 0.016 0.015 0.014
N 136 136 144 144 144
Notes: White standard errors in parentheses; ***: 1%; **: 5%; *: 10%. Growth rates are
annualized log differences; iitititi xxxg /)/ln()( .
Elasticity is close to
zero in rich countries
2: Monitoring progress in assuring
that none are left behind
45
2.1: Theoretical arguments
46
A widely held view: poorest left behind
• “The poorest of the world are being left behind. We need to reach out and lift them into our lifeboat.” U.N. Secretary-General Ban Ki-moon, 2011
• “The World’s Poorest People are Not Being Reached.” IFPRI
• “Poverty is not yet defeated. Far too many are being left behind.” Guy Ryder, ILO
• And in 2015 the Vatican’s representative to the U.N. reaffirmed that the poorest of the world are being left behind.
47
Yet others appear to tell a different story
• We hear adages such as “a rising tide lifts all boats” or claims that “growth is good for the poor” (Dollar and Kraay) or that there has been a “breakthrough from the bottom” (Radelet).
• These views are generally based on survey-based evidence suggesting a falling incidence of absolute poverty in the developing world over recent decades.
48
How can we understand this difference?
The counting approach vs.
The rights-based approach
• We have seen the counting approach to measuring poverty. (The counting approach includes counts with unequal weights, such as PG, SPG, Watts.)
49
• The rights-based approach focuses on the consumption floor—the lowest expected level of living.
• If the poorest person sees a gain (loss) then (by definition) the consumption floor must rise (fall).
• The counting approach may miss what is happening at the floor.
0
10
20
30
40
50
60
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Glo
ba
l h
ea
dco
un
t in
de
x o
f p
ove
rty (
%)
Lower bound
(absolute)
Upper bound
(weakly relative)
Same reduction in the poverty count but
different implications for the poorest
50
Poorest left behind Same reduction in the incidence of poverty but without leaving the poorest behind
Measure of
welfare
Cumulative % of
population
Measure of
welfare
Cumulative % of
population
Poverty
line
Poverty
line Floor stays put
Rising floor
Arguments for studying the floor
• Rights-based approaches to justice
– Justice must be concerned with each citizen not averages
– Rights must be secured for all; none left behind.
• Mahatma Gandhi’s talisman:
– “Recall the face of the poorest and weakest person you have seen and ask if the step you contemplate is going to be any use to them.”
• Sustainable Development Goals: “ensure no one is left behind.”
• UN Report on World Social Situation: Leave No One Behind
51
Safety net as a consumption floor
• Social policies also aim to raise the floor above the biological minimum for survival.
• Statutory minimum wage rates: first appeared in late 19th
century in an effort to help raise the consumption floor.
• Basic-income guarantee (BIG): From the 1970s, we started to see arguments in support of a fixed cash transfer to every adult. A firm floor.
• Social policy as a “right of citizenship” rather than something to be targeted based on “need.”
• The ILO calls for a comprehensive Social Protection Floor:“nationally defined sets of basic social security guarantees”.
• Social policies in developing countries (China and India) aim to raise the floor. Do they?
52
We can measure success at leaving none behind
• The floor is certainly not all we care about, but we cannot continue to ignore it in monitoring poverty.
• Lowest observed consumption in a survey is not true floor. Lower bound of permanent consumption is what we are after:
where
• Success in assuring no one is left behind can be monitored from existing data sources under certain assumptions. – Beyond some y* there is no longer any chance of being the poorest
person in terms of latent permanent consumption.
– For those living below y* the probability of observed consumption being the true lower bound of permanent consumption falls monotonically as observed consumption rises until y* is reached.
• For linear:
53
n
iii yyyyE
1
min )()( )Pr()( minyyy ii
)/1()( ***min PGSPGyyyE )( iy
Ravallion, Martin, 2016, “Are the World’s Poorest Being Left Behind?,” Journal of Economic Growth, 21(2): 139–164.
2.2: Empirical implementation
54
Yes, the poorest have been left behind!Fewer people living near the floor, but little change in the floor
55
0
2
4
6
8
10
12
0 10 20 30 40 50 60 70 80 90 100
Percentile
Ab
so
lute
ga
in 1
98
1-2
01
1 ($
pe
r p
ers
on
pe
r d
ay)
-40
-20
0
20
40
60
80
100
0 2 4 6 8 10 12 14 16 18 20
Pe
rce
nt o
f th
e p
op
ula
tio
n
Consumption or income per person ($ per day, 2005 prices)
1981
2011
Difference (2011-1981)
Rising absolute
inequality
Near zero gain at bottom
And globally it looks like this!Rising absolute inequality coming from top few %
Source: based on estimates by Lakner and Milanovic.56
0
10
20
30
40
50
60
70
0 10 20 30 40 50 60 70 80 90 100
Percentile of the global income distribution
Abso
lute
real g
ain
1988-2
008 (
$/p
ers
on/d
ay)
Much less progress in raising the
consumption floor
57
0
1
2
3
4
5
6
1980 1984 1988 1992 1996 2000 2004 2008 2012
Overall mean for
developing world
Consumption floor: expected level of lowest consumption
Mean consumption ($ per person per day)
$0.67 on average
No sign that the new
Millennium raised the floor
)/1()( ***min PGSPGyyyE
Falling floor in Middle-East and North Africa!
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1980 1984 1988 1992 1996 2000 2004 2008 2012
Exp
ecte
d v
alu
e o
f th
e c
on
su
mp
tio
n flo
or ($
pe
r d
ay)
Conclusions
59
Toward better global poverty measures
• Social effects on welfare imply that we require relative measures integrated into our poverty assessments. – We require lower and upper bounds to reflect the uncertainty.
– On calibrating the bounds to national poverty lines we find that:
1. By either bound, poverty is overwhelmingly found in the developing world. Purely relative poverty rate is now higher in developing world.
2. The developing world is making progress against poverty using either bound, and more so than the advanced countries.
• Leaving none behind requires that we can monitor progress in raising the consumption floor. Under certain assumptions, this is feasible with current data.
60
Further reading:
Martin Ravallion, The Economics of
Poverty: History, Measurement and
Policy, Oxford University Press, 2016
economicsandpoverty.com
Thank you for your attention!
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