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Three ways to use the Prosperity Gap index

This is the twelfth blog in a series of blogs about how countries can make progress on the interlinked objectives of poverty, shared prosperity and the livable planet. For more information on the topic, read the 2024 Poverty, Prosperity, Planet Report


The World Bank’s new measure for shared prosperity, the Global Prosperity Gap, represents the average factor by which incomes worldwide would need to increase to meet a prosperity standard of $25/day, expressed in 2017 PPPs. The global prosperity standard is set at $25 per person per day—roughly equal to the per capita household income of a typical person living in a country that transitions to high-income status. The measure includes the income of every person in the world, aligning with the principles of a shared prosperity metric. However, it places a significantly higher weight on the income shortfalls of the poor than those of the rich. The Prosperity Gap decreases (improves) when incomes rise and increases (worsens) when incomes decline (for further details including global and regional trends, see this blog or this paper).

In what follows, we outline three ways to use the Prosperity Gap index in country or regional analysis. 

1. Ranking across countries (or sub-groups within countries)

Mean income is an important and widely used metric for assessing economic well-being. However, it does not reflect how income is distributed among individuals, an essential dimension of welfare. In contrast, the Prosperity Gap index captures both mean income and the degree of inequality in the distribution. Ranking economies by their Prosperity Gap thus offers a more nuanced understanding of their relative position in terms of economic well-being compared to mean income – and can often lead to different conclusions.

Figure 1 ranks countries based on their daily mean per capita income or consumption (left axis) and the Prosperity Gap (right axis). If countries had the same level of inequality, both rankings would align. However, the Prosperity Gap adjusts rankings by penalizing societies with higher inequality and rewarding those with lower inequality, leading to multiple line crisscrossing in the figure (for detail, see this blog).

To explore this in greater detail, two pairs of countries are highlighted: Ghana and Sierra Leone from Sub-Saharan Africa, and Colombia and Peru from Latin America. On average, Ghana and Colombia are wealthier than Sierra Leone and Peru, respectively. Nevertheless, the latter pair ranks higher on the Prosperity Gap measure due to their lower levels of inequality, which more than offset the higher average income of the former countries. In numbers, Colombia has an average daily per capita income of $17.31, compared to $12.40 in Peru. However, since inequality in Colombia is 1.8-times higher than the inequality in Peru, Colombia needs an average income of $22.60 (or 1.8-times higher than Peru’s mean income) for it to have the same Prosperity Gap as Peru.

Similar ranking assessments can be done for population sub-groups within a country (for subgroup decomposability of the Prosperity Gap index, see Annex 2B of the Poverty, Prosperity, and Planet Report ).

Figure 1: Ranking countries by mean income and Prosperity Gap from richest (top) to poorest (bottom)



2. Decomposing the changes in Prosperity Gap into the growth in mean income and the changes in inequality

Since the Prosperity Gap combines mean income and inequality, changes in the index can be broken down into contributions from shifts in mean income or consumption and those resulting from changes in inequality. Analyzing past trends through this lens provides valuable insights into the drivers of – or barriers to – progress in shared prosperity.

Consider Ethiopia and Sierra Leonne, two countries that currently have similar rankings in both mean income and the Prosperity Gap (Figure 1) but experienced vastly different trends over the previous decade (approximately 2005-2015, Figure 2a). In 2016, Ethiopia’s mean consumption was $3.74, compared to $3.89 in Sierra Leone in 2018. Similarly, their Prosperity Gaps were 9.84 and 9.26, respectively. However, about a decade earlier, incomes in Sierra Leone needed to increase 16-fold on average, compared to a 10-fold increase required in Ethiopia, to reach the global prosperity standard. This convergence across countries was the result of a steady decline in Sierra Leone’s Prosperity Gap contrasted with a stagnation in Ethiopia.

To understand the factors that drove this performance, Figure 2b shows the decomposition of changes in the Prosperity Gap from 2005 to 2015 for each country. Bars pointing downward represent welfare improvements (a reduction in the Prosperity Gap, a decline in inequality, or - the negative of - income growth), while bars pointing upward indicate welfare losses (an increase in the Prosperity Gap, rising inequality, or falling income).

From 2004 to 2018, Sierra Leone’s Prosperity Gap decreased by 3.86% annually, driven by a 3.08% annual increase in mean income, complemented by a 0.78% annual decline in inequality. (The sum of these two factors equals the total change in the Prosperity Gap). In contrast, Ethiopia experienced a near stagnation, with only a 0.49% annual decline in its Prosperity Gap.  While mean income increased in Ethiopia at an annual rate of 1.64%, these welfare gains were wiped out by the 1.14% annual increase in inequality.  Sierra Leone’s catchup was possible due to the relatively faster growth in mean income (1.44 percentage points higher annual growth in Ethiopia), combined with an even faster relative improvement in inequality (1.92 points lower annual inequality). 

Figure 2: The drivers of the change in the Prosperity Gap



3. Defining a country-relevant prosperity standard

The global prosperity standard of $25/day, while useful as a global target and to facilitate cross-country comparisons, may be considered overly aspirational for country-specific discussions, particularly for short-term planning. For instance, based on their most recent household survey, Ethiopia, Ghana, and Sierra Leone have Prosperity Gaps close to 10. This means that incomes, on average, need to increase tenfold to meet the $25/day prosperity standard.

To put this into perspective, Chinese household incomes grew close to 7% annually between 1990 and 2021. Even under such historically rapid growth rates, all things equal it would take these countries over four decades to achieve a tenfold increase in incomes.

Given these challenges, defining an alternate prosperity target in country- or region-specific dialogue could be beneficial. This approach is similar to how countries use national poverty lines for domestic discussions, while the international poverty line is used for global reporting. Fortunately, adopting an alternate prosperity standard is straightforward.

A key feature of the Prosperity Gap index is that the prosperity standard only affects the index’s level, without influencing trends, rankings, or changes over time. As a result, the conclusions drawn from the exercises above remain unchanged even if a different threshold is applied consistently across all countries.

Table 1 illustrates this with results using a $10/day prosperity threshold for the three African countries mentioned earlier. Ethiopia’s Prosperity Gap is 9.8 when using the $25/day threshold, but it drops to 3.9 with a $10/day threshold. This means that, on average, incomes in Ethiopia would need to increase 3.9-fold instead of 9.8-fold to meet the lower standard. Notably, the ratio of the Prosperity Gaps under the two thresholds (9.8/3.9 = 2.5) is equivalent to the ratio of the thresholds (25/10 = 2.5), showing that the threshold acts as a simple scaling factor. As a result, country rankings remain consistent regardless of the threshold used.

Furthermore, the country-specific threshold can be directly linked to the global threshold, offering a more comprehensive understanding of the country’s shared prosperity within the global context. Ethiopia’s Prosperity Gap based on the global standard (9.8) can be decomposed into the product of the country’s Prosperity Gap relative to the country-specific threshold (3.9) and the shortfall of the Ethiopian prosperity standard relative to the global standard (2.5). In other words, the Prosperity Gap derived from the global standard reflects both the income gaps among individuals in the country and the country’s prosperity shortfall from the world.

The authors gratefully acknowledge financial support from the UK Government through the Data and Evidence for Tackling Extreme Poverty (DEEP) Research Program.


Martha Viveros

Consultant, Development Data Group, World Bank

Nishant Yonzan

Economist, Development Data Group, World Bank

Maria Eugenia Genoni

Senior Economist, Global Lead on Data Systems and Statistics Operations, Poverty and Equity Global Practice, World Bank

Christoph Lakner

Program Manager, Development Data Group, World Bank

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