Published on Let's Talk Development

Parsing the challenges of measuring poverty and shared prosperity

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The data and processes needed to measure global poverty and gauge improvements in the prosperity of the bottom 40% of people in each country present complex challenges and provoke considerable debate amongst poverty experts.  

From the comparability of household surveys and their use in policy design to the utility of purchasing power parity data as a unifying standard for measuring the poor, the devil in global poverty analysis is in the details. It’s also vital to understand the World Bank’s recently adopted twin goals in a broader context, to see how they fit into a broader array of monitorable indicators that each come with their own specific features and insights. We must also listen to client governments and outside partners when they prefer to go beyond income to look at multidimensional social welfare functions.

A Measured Approach to Ending Poverty and Boosting Shared Prosperity: Concepts, Data, and the Twin Goals -- A Policy Research Report (PRR),’ launched earlier this week, tackles  all  the above questions.  It was prepared by a team that includes myself, Dean Jolliffe, Shaohua Chen, Aart Kraay, Christian Meyer, Mario Negre, Espen Prydz, Renos Vakis, and Kyla Wethli. Many others also contributed in valuable ways.

Achieving the goal of getting global poverty to 3 percent or less by 2030 (based on a $1.25 a day measure) and raising the prosperity of the bottom 40 percent everywhere is far from assured, but it’s not impossible.  “Business as usual” is unlikely to take us there, particularly once we recognize that we face multiple sources of downside risk. Our chapter on uncertainty confronts the  potential impact of  darkening macroeconomic clouds of fragility and conflict, of governance transitions, of the impact of climate change and extreme weather, and of global disease risk and pandemics.  The chapter shows how easily progress towards the goals could be derailed.  We argue, however, that prospects improve if the goals can be “twinned” – ending poverty becomes less  a tall order if overall economic growth is accompanied by particularly strong progress amongst the bottom 40 percent.  One thing is clear:  without deep analysis and good quality data, even gauging progress on the goals with any semblance of accuracy will remain elusive.In this report we attempt to deconstruct the goals, to clarify what they mean and to point to their interpretation.

For the first time, our report, along with the new Global Monitoring Report (also released this week) examines the bottom 40% and finds that their growth has been on the rise in many countries. We illustrate that measurement of this goal poses multiple challenges. In particular projections and estimations are only as good as the data at hand, and the Bank and the development community must exercise restraint and a healthy sprinkling of caveats when drawing conclusions.

The measurement challenges extend well beyond the household survey data that underpin poverty and prosperity measures.  In particular, GDP per capita estimates derived from national accounts data, often point to different trends in average income than do estimates from survey data.  How and why such discrepancies arise need to be better understood. New rounds of the Purchasing Power Parity (PPP) indices, including the 2011 round released earlier this year, can challenge our assessment of global poverty and its distribution across the world.  The detailed price data that underpin these indices require careful scrutiny.  Ultimately our assumptions could be profoundly shifted .

If we are to be rigorous and honest about our calculations and our responsibility to measure the twin goals as accurately as we possibly can, we need to noisily campaign for stronger data systems at the country level as well as for more frequent collection. This will require many more foot soldiers with clip boards, survey solutions software and other tools.   Importantly, the data needs of national statistical agencies should not take a back seat to the data demands of international organizations.

Last but not least, we need to keep our database, PovcalNet, up to date. A team at the World Bank has been working around the clock during the past few months to update the entire time series of poverty measures from 1981 to 2011, based on revised and newly available household surveys (now more than 1,000 in total). PovcalNet was updated this week, something I know will be a great relief to outside poverty experts who have been clamoring for newer statistics. PovcalNet is the source of, and allows users to replicate, the Bank's official global, regional and internationally comparable country level poverty estimates published in the PRR, the Global Monitoring Report (GMR) and the World Development Indicators, as well as the shared prosperity indices reported in the GMR. Assembly of these data is undertaken under the auspices of a Global Poverty Working Group who do a lot of painstaking, unglamorous work, including assembly of  country level household survey data and assessing them for international comparability.

I hope Let’s Talk Development readers will take a look at the video of yesterday’s PRR launch event, where James Foster, Nora Lustig, Kaushik Basu and Stephen O’Connell were the panelists. For the visually inclined, check out our infographic, which highlights some of the key findings.

Click here to see the full infographic.

Postscript: The two goals were the leitmotif of the IMF-WBG Annual Meetings, though this year’s proceedings were shadowed by Ebola and a shaky world economic outlook.


Peter Lanjouw

Professor of Development Economics at the University of Amsterdam

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