class: center, middle, inverse, title-slide # Global Poverty ## Poverty measurement workshop ### R.Andrés Castañeda (based on the slides Dean Jolliffe and Espen Prydz) ### The World Bank ### 2019-07-18 --- ## Measuring Global Poverty: Basic Approach followed by the World Bank Focus tends to be on the international poverty line, but ... -- There are two main ingredients, 1. Indicator of wellbeing (income or consumption) 2. Selection of poverty line, expresses in common currency -- - These ingredients are aggregated to a summary of index for a _common_ year - Global headcount of extreme poverty in 2012 (Ferreira et al., 2015) - Key Assumptions - Measure of wellbeing comparable across countries and over time - Common poverty line is comparable across countries and over time. --- ## National household surveys – foundation of the global poverty estimate - NSOs collect household survey data for national poverty policies, not global poverty measurement. - Typically reflecting country context, some countries collect data on consumption, expenditure, and/or income - Data is collected at the household level, differing adjustments for adult-equivalence (and/or economies of - scale) - Some efforts to standardize - Some regional efforts to bring more uniformity of instrument - WB staff often ‘teach’ Deaton-Zaidi guidelines for consumption - PovCal requests data in per-capita terms - But, important comparability issues remain… --- ## Comparability issue: Income and consumption .pull-left[ - Income and consumption are different concepts (savings, volatility) - Surveys often have zero incomes; seldom zero consumption. - Zeros exert significant influence on extreme poverty measures; more so as goal of eliminating poverty nears. - Example: Poverty in Mexico 2012 (at $1.25/day, 2005 PPPs) was 3% based on income, 1% based on consumption ] .pull-right[ <img src="./img/mexico.png" width="1025" style="display: block; margin: auto;" /> ] --- ## Comparability issue: How consumption is measured differs (both between and within countries) - Differences in questionnaire affect consumption: - Diaries vs. recall - Nonfood varies (some include rent, durables, and/or health; others do not) - Count of pre-coded food items affects aggregate - Recall frame affects responses (e.g.,. Telescoping, “Great Indian Debate”) - Many other important differences: Timing of fieldwork, Training, Supervision, Cleaning/editing rules; - etc. ??? - INDIA EXAMPLE: Since 1950s - India used uniform 30-day recall period (URP), then switched recall frame - twice. In 2009, switched to “modified mixed reference period” (MMRP), short for some, long for others. - MMRP-based consumption gives poverty rate of 12 percent for 2011/12. - URP results in poverty rate of 21 percent for 2011/12 (used in WB estimate) - Difference of 109 million poor people in India’s and global estimates. --- ## Comparability (cont.): Measurement methods differ .pull-left[ <img src="./img/recall_period.png" width="1140" style="display: block; margin: auto auto auto 0;" /> ] .pull-right[ - Household consumption surveys vary widely (over time & countries) - Beegle et al. (2012) provide experimental evidence on the effect - Exact same instrument except increase recall period - => 12% drop in avg consumption - => 8 point (%) increase in pov - Same recall period, but long list collapsed to comprehensive groups => 24% drop in avg consumption => 32% drop in shared prosperity - Research can inform questionnaire design & provide bridges across otherwise non-comparable data ] --- ## Complementary data needed to estimate poverty Household surveys are necessary but not sufficient. We also need - Purchasing power parity (PPP) indices -- - Population (census) data -- - Inflation and national accounts growth (consumption or GDP) ??? PPP: Make poverty lines and welfare comparable across countries - To estimate total number of poor - population frame for survey sample - Inflation data to keep measures of wellbeing in real terms - NA data to "line up" surveys into reference years --- ## Data Details: Consumption vectors scaled to common reference year .pull-left[ - Most countries do not collect household surveys on annual basis, need to line up data to common point in time. - If a survey is not available in the reference year, closest survey(s) are extrapolated to reference year using NAS growth rates. - GDP growth used in AFR, Private Consumption Expenditures used in other regions. ] .pull-right[ <img src="./img/reference_year.png" width="816" style="display: block; margin: auto auto auto 0;" /> ] --- ## Global prospects for 2030 <img src="./img/forecast_2030.png" width="2300" style="display: block; margin: auto auto auto 0;" /> --- ## Data and Assumptions - Are the measures of economic wellbeing comparable? - Is the value of the international poverty line ($1.90) comparable across countries? - Is the value of the $1.90-line comparable with the previous international poverty line ($1.25)? - And a couple of other interesting data questions…. --- class: center