Maxim Pinkovskiy and Xavier Sala-i-Martin (PSiM herafter) have confidently claimed that “The conventional wisdom that Africa is not reducing poverty is wrong” and that “African poverty is falling and is falling rapidly.” This sounds like good news. But is it right?
We must first be clear about what we mean when we say “poverty is falling”. What many people mean is falling numbers of poor. However, PSiM refer solely to the poverty rate—the percentage of people who are poor. (There is no mention of this important distinction in their paper.) And it is not falling over their whole period of their analysis, which goes back to 1970. Rather they find that the poverty rate has been falling since the mid-1990s.
Here we agree: aggregate poverty rates have fallen in Sub-Saharan Africa (SSA) since the mid-1990s. Shahoua Chen and I came to exactly the same conclusion in our research, for the World Bank’s global poverty monitoring effort, although our methods differ considerably and (no surprise) I prefer our methods.
However, Chen and I also point out that the decline in the aggregate poverty rate has not been sufficient to reduce the number of poor, given population growth. That is important.
PSiM obtain lower poverty rates than us and they appear to have a somewhat steeper decline. These differences reflect the different methods.
Two points to note here: (i) Chen and I show that the poverty decline in SSA tends to be larger for lower poverty lines (in the region $1-$2.50 a day) and (ii) PSiM’s method attributes the entire difference between GDP and household consumption to the current consumption of households, and they assume that its distribution is the same as in the surveys. These assumptions are very unlikely to hold, and they give an overly optimistic picture.
In effect, PSiM are using a lower poverty line than us.
I did a check using PovcalNet. If one uses a line of $0.90 a day then one gets a decline in SSA's headcount index from 42% in 1996 to 34% in 2005, which looks very similar to their results using "$1 a day".
The number of poor in SSA living under $0.90 a day rose over this period, though only slightly (252 million in 1996 and 256 million in 2005). This, too, is consistent with the results of Chen and Ravallion, though higher poverty lines tend to show larger increases in the aggregate poverty count.
Another important difference is that Chen and I are more cautious about the data limitations. There are not enough good household surveys available yet to be confident that this is a robust new trend of a falling poverty rate for SSA. PSiM are not so restrained, as is plain from their title!
PSiM do not tell readers just how few survey data points they have actually used after 1995. Indeed, readers of their paper may be surprised to hear that there is any uncertainty about the trend decline since the mid-1990s; their main graph has 30 annual data points since 1995. But these are not real data points in any obvious sense; rather they are synthetic (model-based) extrapolations based on national accounts and growth forecasts.
We have national household surveys for all but 10 of the 48 countries in SSA since 1995. However, for only 18 countries do we have more than one survey since 1995; for 30 countries, there are is at most one survey since 1995.
As we warn explicitly in our paper, this is not yet sufficient survey data to be confident about the (promising) downward trend for Africa’s aggregate poverty rate that PSiM have announced with such confidence.
Hopefully we will see a confirmation of the emerging downward trend for Africa in the years ahead, as more (genuine) data emerge.