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Global Poverty

Poverty measurement workshop

R.Andrés Castañeda (based on the slides Dean Jolliffe and Espen Prydz)

The World Bank

2019-07-18

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Measuring Global Poverty: Basic Approach followed by the World Bank

Focus tends to be on the international poverty line, but ...

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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

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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.
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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…

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Comparability issue: Income and consumption

  • 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

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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.
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  • 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

  • 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
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Complementary data needed to estimate poverty

Household surveys are necessary but not sufficient. We also need

  • Purchasing power parity (PPP) indices
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Complementary data needed to estimate poverty

Household surveys are necessary but not sufficient. We also need

  • Purchasing power parity (PPP) indices

  • Population (census) data

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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)

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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

  • 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.

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Global prospects for 2030

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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….

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thank_you

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Measuring Global Poverty: Basic Approach followed by the World Bank

Focus tends to be on the international poverty line, but ...

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