World Bank researchers have been trying to assess the extent of extreme poverty across the world since 1979 and more systematically since the World Development Report 1990, which introduced the dollar-a-day international poverty line. From the beginning, the idea was to measure income poverty with respect to a demanding line which, first, reflects the standards of absolute poverty in the world’s poorest countries and, second, corresponded to the same real level of well-being in all countries. The first requirement led researchers to anchor the international poverty line on the national poverty lines of very poor developing countries. And the second requirement led them to use purchasing power parity exchange rates (PPPs) – rather than nominal ones - to convert the line into the US dollar and, more importantly, into the currencies of each developing country.
The big splash from the April 2014 summary release provided users with a glimpse of the International Comparison Program's (ICP) 2011 results and findings, as revealed in Haishan Fu's blog post and related press release. Users can now explore the full set of the 2011 ICP results released in June 2014.
These results provide data on purchasing power parities (PPPs) of currencies, expenditure shares of gross domestic product (GDP), total and per capita expenditures in United States dollars (USD) both in exchange rate terms and PPP terms, and price level indices. This dataset covers 26 expenditures categories for goods and services for 199 participating economies from Africa, Asia and the Pacific, the Caribbean, the Commonwealth of Independent States, Latin America, Eurostat-OECD, Western Asia, singleton economies, and the Pacific Islands. Also included are estimated results for non-participating economies.
Figure 1 below presents a multidimensional comparison of per capita GDP - scaled to the relative size of each economy - against its price level index (PLI) with the world equal to 100. The PLI, the ratio of a PPP to a corresponding exchange rate, is used to compare price levels between economies.
A fascinating feature of purchasing power parity (PPP) is more people hold an opinion on it than know what it means. This was in ample display last week, when the Global Office of the International Comparison Program (ICP), hosted by the World Bank, announced the latest PPP data for the world, pertaining to 2011.
Putting aside complexities, PPPs may be viewed as an estimate what one US dollar can buy in different countries. In case a dollar in Ghana can buy three times what it can buy in the United States, then a person who earns 1,000 dollars each month in Ghana is said to earn 3,000 in terms of ‘PPP-adjusted dollars’.
On behalf of the International Comparison Program (ICP) Executive Board and the World Bank, I’d like to thank everyone who’s contributed to the success of the 2011 round. The results are now available in report form, as a data download, and through interactive applications.
The largest global statistical program
The ICP is hosted by the World Bank, and estimates purchasing power parities, or PPPs, for use as currency converters to compare the size and price levels of economies around the world. In terms of geographic scope, implementation time frame and institutional partnerships, many people consider it to be the largest ever global statistical initiative. It’s conducted under the authority of the United Nations Statistical Commission, and the 2011 ICP round collected over 7 million prices from 199 economies in eight regions, with the help of 15 regional and international partners. It’s the most extensive effort to measure PPPs ever undertaken.
Given the complex nature of the ICP and the fact that it has become the largest worldwide statistical operation, the program decided that the December release will be postponed until March 2014, in an effort to produce the utmost quality results. Read more ...
The preliminary results from the 2011 round of the International Comparison Program (ICP) will be released in December 2013 followed by a more in-depth report in March 2014. The first release will provide Purchasing Power Parities (PPPs), price level indexes, and real expenditures for gross domestic product (GDP) and major aggregates for over 190 countries. Major economic indicators on the global economy produced by the World Bank are based on PPPs which are used to provide internationally comparable price and volume measures for GDP and its expenditure components. The same PPPs are used to determine comparable poverty levels across countries based on the $1.25 per day poverty line.
The international community has endorsed the Millenium Development Goal of reducing the poverty rate in the developing world by 50% over the 25 years, 1990-2015. While the target is arbitrary, it is nonetheless important to have a stretch goal like this to challenge us all to make the world a better place. To measure progress, naturally we need pretty good estimates of global poverty. The World Bank is the leading bean counter in this exercise. It just today released new estimates of global poverty that have the potential to illuminate the progress, but also the potential to confuse a lot of people. The research department of the World Bank has changed its global poverty line from $1 per day to $1.25 per day and has found about 468 million more poor people than it had previously estimated. About 135 million of these newly found poor are in China. How does one make sense of these new numbers? Here are some pointers: