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Monitoring the SDGs with purchasing power parities

Edie Purdie's picture

The ICP blog series explores ideas and issues under the International Comparison Program umbrella – including innovations in price and data collection, discussions on purpose and methodology, as well the use of purchasing power parities in the growing world of development data. Authors from across the globe, whether ICP practitioners or researchers making use of ICP data, are encouraged to submit relevant blogs for consideration to [email protected].

It has been over three years since countries adopted the UN’s 2030 Agenda for Sustainable Development and its 17 Sustainable Development Goals. From the outset, a number of targets were identified to help pinpoint the desired outcomes within these broad areas – 169 in total. Monitoring progress towards each of these targets relies on data originating in countries, and which are often collected in partnership with regional and international organizations. The World Bank’s Atlas of Sustainable Development Goals used such data to visualize trends and comparisons across the globe, drawing on data from World Development Indicators and many other sources.

Purchasing Power Parity (PPP) data, from the International Comparison Program, play an important role in this monitoring: by eliminating the effect of price level differences between countries they allow us to measure living standards and other economic trends in real, comparable terms.  PPPs are utilized in a number of the official SDG indicators, but also in other associated indicators, which help us to explore the underlying issues and impacts of the goals and targets more deeply.  The four charts presented here exemplify the crucial insights PPPs help provide in SDG monitoring and analysis.

Goal 1 seeks to eradicate poverty in all its forms by 2030. Extreme poverty is measured using the international poverty line of $1.90 a day using 2011 PPPs. The use of PPPs ensures that the poverty line represents the same standard of living in every county. Higher poverty lines used by the World Bank better measure poverty in lower-middle and upper-middle income countries.  Using these poverty lines, we can visualize the shifts in population living at various standards of living.

More than money: Counting poverty in multiple forms

Dhiraj Sharma's picture

Consider two households that have the same level of consumption (or income) per person but they differ in the following ways. All the children in the first household go to school, while the children in the second household work to support the family. The first household obtains drinking water from a tap connected to the public distribution network, whereas the second household fetches water from a nearby stream. At night, the first home is illuminated with electricity, whereas the second home is dark. A lay person would easily recognize which of these two families is better off. Yet, traditional measures of household well-being would put the two households on par because conventionally, household well-being has been measured using consumption (or income).

Nearly 1 in 2 in the world lives under $5.50 a day

Dean Mitchell Jolliffe's picture

Today, less than 10 percent of the world population lives in extreme poverty. Based on information about basic needs collected from 15 low-income countries, the World Bank defines the extreme poor as those living on less than $1.90 a day. However, because more people in poverty live in middle-income, rather than low-income, countries today, higher poverty lines have been introduced. These lines are $3.20 and $5.50 a day, which are more typical of poverty thresholds for middle-income countries.

Measuring India’s economy using PPPs shows it surpassed France 25 years ago

Edie Purdie's picture

The ICP blog series explores ideas and issues under the International Comparison Program umbrella – including innovations in price and data collection, discussions on purpose and methodology, as well the use of purchasing power parities in the growing world of development data. Authors from across the globe, whether ICP practitioners or researchers making use of ICP data, are encouraged to submit relevant blogs for consideration to [email protected].

Earlier this summer, new data published by the World Bank showed that the Gross Domestic Product (GDP) of India had recently surpassed that of France, and that it was on track to overtake the UK economy too. Many news outlets jumped upon this new ranking of India’s economy, now sixth from top. But most media articles did not mention that the World Bank’s other measure, which compares GDP across countries using purchasing power parities (PPPs), has placed India ahead of both France and the UK for the last 25 years.