Absolute poverty lines

Development indicators
Gianni Vaggi and Clara Capelli
University of Pavia November 2013
Poverty
Choosing and estimating poverty lines
•
Monetary (e.g. a certain level of consumption)
•
Nonmonetary (e.g. a certain level of literacy)
• Relative/national poverty lines: in relation to the overall
distribution of income or consumption in a country. Strictly
related to inequality (Sen 1983).
• Absolute poverty lines: anchored to some absolute standard (see
the cost of basic needs approach). Sometimes "absolute poverty" is
used as a synonym of "extreme poverty".
Measuring extreme poverty at world level:
The 1990 WDR
•
Standards of living (incomes and consumption), plus measures of
nutrition, life expectancy, child mortality and school enrollment rates.
•
Poverty lines: "A consumption-based poverty line can be thought
of comprising two elements:
• the expenditure necessary to buy a minimum standard of
nutrition and other basic necessities;
•
a further amount that varies from country to country, reflecting
the cost of participating in the everyday life of society“.
A person can appear in public without shame (Adam Smith 1776).
1985 Total population: 4,8 billion.
More than 1 billion people under the poverty line.
The Absolute Poverty Lines
•
1990 WDR: $ 1 per day in 1985 US$ (Ravaillon, Datt, Van De
Walle): first global poverty threshold;
•
2000: $ 1.08 per day in 1993 US$ prices(Chen and
Ravaillon);
•
2008 "Dollar a Day Revisited" (Ravaillon, Chen, Sangraula): the line
is set at $1.25 (PPP 2005);
•
$2 poverty line ($2.15 in 2000, $2.50 in 2008).
Measuring the international poverty line
1990 Country-poverty lines of six developing countries clustered around $370
(1985 PPP) a year : the 1-dollar-a-day story was born.
2000 1.08 dollar a day. 75 poverty lines examined, 15 lowest taken(Nepal
Tajikistan and 13 SSA countries) ; a person is poor if she consumes
less than an American spending 1.08 USD at 1993 prices.
•
All data derive form national household consumption surveys, which are
based on a sample of the whole population.
•
If you use GDP from national account extreme poverty is much lower(see
Sala i Martin)
Choosing and estimating poverty measures
Once the line has been set, poverty is to be measured in terms of its:
Incidence /headcount index:
share of the population whose income or
consumption is below the poverty line.
Depth/poverty gap:
how far off household are from the poverty line,
is the mean shortfall from the poverty line (counting the non-poor
as zero shortfall) expressed as a percentage of the poverty line
Choosing and estimating poverty measures
incidence, depth and severity:
People living on less than 1.25 a day (millions):
•
•
1,909 in 1990;
1,289 in 2008;
Poverty Headcount ratio at 1.25 a day:
•
•
43.1% in 1990;
22.4% in 2008;
Source: PovcalNet
Source: WDI, 2012
Economia dello Sviluppo
Regional focus
•
The greatest reduction in poverty occurred in East Asia and
Pacific:
•
•
•
From 77% in 1981 to 14% in 2008;
In absolute terms, the poor population dropped by 800 million;
Such decline is mostly attributable to China (from 84% to 13%, 660
million people).
•
In South Asia, poverty rate fell from 61% to 36%;
•
Sub-Saharan Africa’s performance was poor: the poverty rate was
approximately 50% in 1981, it rose to nearly 60% in 1993 and then
dropped to 47.5% in 2008. The number of people below the poverty
line has nearly doubled in this time span and started declining only
from 2005 onwards.
Economia dello Sviluppo
•
Most of the people who have escaped extreme poverty are still
"poor", i.e. they live below the $2a-day line;
•
People living below this line dropped from 70% in 1981 to 43% in
2008;
•
In absolute terms, the number is constant at 2.5 billion people;
•
The largest decrease occurred in East Asia and Pacific, thanks to
China;
•
At global level, the number of people living on $1.25-$2 a day nearly
double, hitting 1.2 billion.
Economia dello Sviluppo
China/1
GDP per capita, USD, Atlas method
Source: WB Database
Economia dello Sviluppo
China/2
$1.25-a-day Poverty Line, Headcount Ratio
Source: WB Database
Economia dello Sviluppo
China/3
$2.50-a-day Poverty Line, Headcount Ratio
Source: WB Database
Economia dello Sviluppo
India/1
GDP per capita, USD, Atlas method
Source: WB Database
Economia dello Sviluppo
India/2
$1.25-a-day Poverty Line, Headcount Ratio
Source: WB Database
Economia dello Sviluppo
India/3
$2.50-a-day Poverty Line, Headcount Ratio
Source: WB Database
Economia dello Sviluppo