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Ending Poverty and Boosting Shared Prosperity: Key Elements of a Development Agenda

Zia Qureshi's picture

At its Spring Meeting, the Development Committee endorsed the eradication of poverty and the promotion of shared prosperity as the twin goals of the World Bank Group mission. What development agenda is implied by these goals? What are the key elements of a development policy framework that should inform WBG strategy to achieve these goals?

Economic growth has been central to the progress achieved in reducing poverty and boosting the incomes of the bottom segments of the population. The change in poverty can be decomposed into the growth of average incomes and the change in inequality. Cross-country analysis shows that, in the medium- to long-term, upwards of 70 percent of the variation in poverty can be attributed to economic growth.  Similarly, the rise in the incomes of the bottom 40 percent of the population can be decomposed into the change in the income per capita of the country and the change in the share of total income that is received by the bottom 40 percent. A review of the data for changes in the income per capita of the bottom 40 percent over the past two decades reveals that, in most cases, overall economic growth played the predominant role.

Why energy poverty may differ from income poverty

Shahid Khandker's picture

There is a continuing controversy over what constitutes energy poverty and whether it is synonymous with income poverty or lack of access to electricity.  Several approaches are used to define and measure energy poverty, taking into account both demand and supply of alternative energy sources, including biomass, LPG, and electricity.  But as yet, no consensus has emerged for measuring and monitoring energy poverty and explaining why and how it differs from income poverty.

Like income poverty, energy poverty may be defined by the minimum energy consumption needed to sustain lives.  But unlike income poverty—based on the concept of a poverty line defined by the minimum consumption of food and non-food items necessary to sustain a livelihood—energy poverty lacks a well-established energy poverty line to determine the minimum amount of energy needed for living.  Current indicators used by such organizations as the World Bank and the International Energy Agency (IEA) measure energy poverty indicators as outputs (e.g., lack of electricity connections) rather than outcomes (e.g., electricity consumption and associated welfare gains).

Microcredit Borrowers in Bangladesh Are Not Necessarily Trapped in Poverty and Debt as many contended in recent years

Shahid Khandker's picture

With spectacular growth of microfinance institutions (MFIs) in Bangladesh, there is a growing concern that borrowers might be borrowing from multiple sources and more than they are able to repay, and hence, they are trapped in poverty and debt.  Microfinance programs, operating in Bangladesh for more than two decades, have reached more than 10 million households in 2008, nearly half the rural population, with an annual disbursement close to US$1.8 billion and an outstanding balance of US$1.5 billion.  Multiple program membership has increased over the years: it was nonexistent in 1991/92, 11.9 percent in 1998/99 and 36 percent in 2010/11. 

However, a recent study shows that increased borrowing, even from multiple sources, has not lowered loan recovery rates. 

Also, another recent study observes that microcredit borrowers are not necessarily trapped in poverty and debt. This study analyzes data from a long panel survey over a 20-year period, and finds that although many participants have been with microcredit programs for many years they are not necessarily trapped in debt as the accrued assets due to borrowing outweigh accumulated debt for many borrowers.

Two Goals for Fighting Poverty

Martin Ravallion's picture

It is widely agreed that eliminating extreme poverty in the world should take priority in thinking about our development goals going forward. The '$1 a day' poverty line is a simple metric for monitoring progress toward that goal. It was chosen in 1990 as a typical line for low-income countries (as explained in Dollar a day revisited). By this measure, poverty in the world as a whole is judged by a common standard anchored to the national lines found in the poorest countries. On updated data, the current value of this international line is $1.25 a day at 2005 purchasing-power parity. Today about 1.2 billion people in the world live in households with consumption per person below this frugal line. Thankfully, the world has made progress in bringing this count down; 1.9 billion people lived below $1.25 a day in 1990.

Notice that I say 'consumption' not income. A standard measure of household consumption is preferable as a measure of current economic welfare than income, and is typically measured more accurately than income. Fortunately, two-thirds of developing countries now have consumption-based poverty measures, although some regions, such as Latin America, are lagging in this respect.

Urbanization? Of course! But how?

Luc Christiaensen's picture

The world reached 50 percent urbanization some years ago. By 2020, the less-developed world will have followed suit. Harvard economist Edward Glaeser’s vivid 2011 paperback “The Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier and Happier” leaves no doubt about it. Cities set in motion a virtuous machinery of agglomeration economies, with economic growth and happiness following suit.

Not so fast, argue equally many learned scholars! Didn’t Vernon Henderson, another acclaimed urban economist, report in the Journal of Economic Growth that higher levels of urbanization are not necessarily associated with higher rates of economic growth. And, hasn’t Africa been urbanizing rapidly over the past 15 years without much poverty reduction?

As the world turns to ending extreme poverty and fostering shared prosperity, the impact of urbanization, and different urbanization patterns, on poverty and inequality, clearly requires more attention. Can urbanization, for example, occurgo too quickly, inducing poverty to urbanize, instead of to declininge?  Or can it be too concentrated geographically, generating faster growth (from larger agglomeration economies and economies of scale), but also higher inequality? Or is maximizing poverty reduction from urbanization simply a matter of smart urban management?

Make MDGs about the HOW, not just the WHAT

Jody Zall Kusek's picture
As the old Japanese proverb goes: Vision without action is a daydream, while Action without vision is a nightmare. This could not be more prophetic as we turn our attention to what’s next for the Millennium Development Goals (MDGs). Now, after more than ten long years since the launch of the eight United Nations MDGs, we have real targets that move toward ending hunger and, for example, improving maternal health.

Lifting people out of poverty through ‘managed’ urbanization

Jos Verbeek's picture
The Global Monitoring Report (GMR) is the World Bank’s and the International Monetary Fund’s vehicle to not only report on progress toward the Millennium Development Goals (MDGs) but, equally importantly, to analyze a theme relevant for development in general and the MDGs in particular.

Mixed picture on MDG attainment

Jos Verbeek's picture

This year’s report card on where the world, the regions, and the developing countries are with regard to attaining the various Millennium Development Goals (MDGs), shows quite a diverse picture. As the Global Monitoring Report 2013 points out, progress toward the MDGs has not been universal and there are many poor countries that are still very far away from the targets where we want them to be by 2015. 

If we take a look at progress towards attainment of the MDGs, we can conclude that four out of 21 targets have been met by 2010, well ahead of the 2015 deadline. Note that even though there are 8 Goals, there are 21 targets and about 56 indicators through which the world tries to monitor their progress.

DIY: Measuring Global, Regional Poverty Using PovcalNet, the Online Computational Tool behind the World Bank’s Poverty Statistics

Shaohua Chen's picture
World Bank Group President Jim Yong Kim recently announced ambitious goals to end poverty and boost shared prosperity, with a target to reduce the percentage of absolute poor – those living on or less than $1.25 a day (in 2005 PPP) – to 3 percent by 2030. The Bank, he said, will also focus on expanding opportunities for those living at the bottom 40 percent of the income or consumption distribution in each country.

Aid allocation: Should equally poor countries be treated equally?

Paolo Verme's picture

Donor countries are routinely confronted with the problem of how to allocate the aid budget. The debate on aid allocation has called for various types of indicators including institutional capacities and governance but in the practice of aid allocation a multitude of factors, such as strategic geopolitical interests, budget constraints and internal political considerations, still play an important role in most countries. However, if we focus on welfare indicators and on current practices of aid allocation, there are two monetary indicators that have gained prominence over the last few decades: GDP per capita and the poverty rate. GDP per capita is a natural choice of an indicator that is well understood and widely available. The poverty rate is a more recent choice explained by the new status that poverty acquired as a development objective. For a combination of events such as the fall of the Berlin wall in 1989, the publication of the World Development Report on poverty in 1990 and the establishment of the Millennium Development Goals in 2000, multilateral organizations have increasingly adopted poverty reduction as the overarching development goal. This new focus on poverty and the increased availability of expenditure surveys worldwide have also enabled the use of poverty measures to rank countries and allocate aid.