Despite hundreds of millions spent on more and better household surveys across Africa in recent decades, we only have a very rough idea about the levels and trends in income poverty and inequality in sub-Saharan Africa. Many reasons contribute to this unfortunate state of affairs.
Today poverty data are available for almost all countries in the world1. Because a country’s success is measured by the number of people it lifts out of poverty, identifying best performers is a fair exercise only if poverty indicators are fully comparable. One indicator used is the share of the population whose consumption (or income) level is below a nationally defined poverty line or the US 1.25 dollar PPP per day. But even if policy makers and other stakeholders can count on readily available statistics, the poverty numbers should not be taken at face value.
Data are useful if they give us a sense of reality
Poverty data are based on a set of arbitrary assumptions that may lead to erroneous conclusions.
Fifteen years ago, Easterly and Levine published “Africa’s Growth Tragedy”, highlighting the disappointing performance of Africa’s growth, and the toll it has taken on the poor. Since then, growth has picked up, averaging 5-6 percent a year, and poverty is declining at about one percentage point a year. The “statistical tragedy” is that we cannot be sure this is true.
Take economic growth, which is measured in terms of growth in GDP. GDP in turn is measured by national accounts. While there has been some progress, today, only 35 percent of Africa’s population lives in countries that use the 1993 UN System of National Accounts; the others use earlier systems, some dating back to the 1960s.
To show that this is not an arcane point, consider the case of Ghana, which decided to update its GDP last year to the 1993 system. When they did so, they found that their GDP was 62 percent higher than previously thought. Ghana’s per capita GDP is now over $1,000, making it a middle-income country.