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Poverty in Rising Africa

Do changes in the CPI provide a reliable yardstick to measure changes in the cost of living?

Andrew Dabalen's picture

This blog is the latest in a series of posts reflecting on the findings in the 2016 World Bank Poverty in a Rising Africa report, released in its entirety this month. We look forward to your questions and comments regarding this and other blogs in the series.

The consumer price index (CPI) is the most commonly used measure of inflation in the world, and Africa is no exception. But do CPIs reliably reflect the actual change in the cost of living? And if not, how does this affect our understanding of how poverty has evolved in the region?

The CPI is derived from a fixed and supposedly representative basket of goods and services provided in the domestic market to measure a cost-of-living index. To keep up with changing consumption patterns, the basket weights need to be updated regularly. But often they are not. Most get updated every decade or even less frequently, so they become less and less representative of the items that consumers actually purchase.

Once poor, forever poor?

Hai-Anh H. Dang's picture

Static poverty measures fail to distinguish between an individual who has been in poverty all her life, and another who happens to have had a small misfortune for the year the measurement was carried out. But these distinctions matter. The forces that conspire to condemn some individuals to remain stuck in poverty for years are generally somewhat different from those that randomly drag them down for a brief period. The latter group may need only some temporary relief – perhaps only some short-term employment insurance till they get the next job – while the former would need also longer-term interventions aimed at breaking the persistence of poverty. Indeed, the longer people spend in poverty, the lesser tends to be their chance of exiting it. As Africa rose, has its poverty remained mainly chronic, or has it become a more transient state of affairs?

A glimpse behind the curtain: CPIs in Africa

Isis Gaddis's picture

Consumer Price Indexes (CPIs) can be subject of heated debate. Plans by the US administration in 2013 to modify the way social security benefits are adjusted for inflation led to protests of federal workers. The new method, which involved a shift from one version of the CPI to another, was designed to make the adjustment more sensitive to consumer substitution behavior. For instance, consumers may shift from blueberries to strawberries if the price of blueberries increases disproportionately – failure to account for such behavior change leads to ‘substitution bias’ in the CPI. However, the move proved deeply unpopular, in part because it was perceived – in Paul Krugman’s words – as “purely and simply, a benefit cut”. Eventually, President Obama dropped the proposal.

Yep, about reading and writing again!

Luc Christiaensen's picture

Today, four in five African primary-school-age kids are enrolled in school, with more joining at a later age. This is a major change and achievement, and should bode well for Africa’s upcoming generations. Only 20 years ago, barely half the kids were in school. Progress has been faster even for girls, with the gender gap in net primary school enrollment now down to four percentage points (compared with eight percentage points in 1995).

Following the adoption of the Millennium Development Goals in 2000, attention to education increased dramatically. At least in terms of enrollment, this seems to have paid off, so much so that education has lost its earlier top spot on the international development agenda. Since 2000, the solutions train has been set in motion, the illiteracy challenge seems to be taken care of, and attention has shifted elsewhere.

Against this background, the latest Word Bank report “Poverty in a Rising Africa” finds that 42% of Africa’s adults, about two in five, or a whopping 215 million people, are still illiterate, down from 46%  in 1995. And make no mistake; this does not imply functional literacy for the remaining part of the population. The literacy tests applied are simply too rudimentary, and gross secondary school enrollment rates also only still stand at 46%.

When growth alone is not enough

Luc Christiaensen's picture

Africa’s robust annual economic expansion of 4.5% during 1995-2013 has come along with appreciable progress in human welfare. African newborns can now expect to live 6.2 years longer than in 2000, the prevalence of chronic malnutrition among children under five declined by six percentage points, and the number of deaths of violent events dropped from 20 (in the late 1990s) to four. Africans are also more empowered, manifested, among others, through greater participation of women in household decision making.

At the same time, for every five adults, two remain illiterate, life expectancy still only stands at 57— 10 years less than in South Asia – and the number of violent events has been on the rise again since 2010. The human development challenge remains substantial. Moreover, despite being a major force behind Africa’s growth renaissance, citizens in resource-rich countries did not experience a commensurate jump in their education or health status. On the contrary, results from the World Bank’s recent Africa Poverty Report “Poverty in a Rising Africa,” suggest that it is especially resource-rich countries which are bad at converting their economic fortunes into better human development.

Education for all in a “rising Africa”

Eleni Abraham Yitbarek's picture

Africa’s remarkable economic growth has been accompanied by the concern that the benefits of the economic growth are not shared broadly. Growth may only go so far; when inequality and lack of social mobility persist, children are effectively born disadvantaged.

There have been gains in schooling in the region. Data from the UNESCO shows that the primary adjusted net enrollment ratio increased from 59% in 1999 to 79% in 2012. Education is becoming more inclusive, but that doesn’t mean African children have an equal chance.

One way to view whether educational opportunities are becoming more equal across children is to look at “education mobility” between generations. Does the next generation of children have more educational mobility than their parents? In Poverty in a Rising Africa report, we investigate trends in the intergenerational transmission of education over 50 years. This work draws on two indicators of mobility traditionally used to access such mobility: the intergenerational gradient and the correlation coefficient between parents and children years of schooling. The intergenerational gradient is simply the regression coefficient of parents’ education as a predictor of children education. It measures intergenerational persistence--a lower the value indicates more intergenerational mobility. The correlation between parents and children years of schooling shows how much of the dispersion in children's education is explained by parental education -- a lower value also indicates more intergenerational mobility. 

Is inequality in Africa rising?

Christoph Lakner's picture

Inequality is typically measured at the country-level. “Poverty in a Rising Africa,” the latest World Bank Group Africa poverty report, does not find a systematic increase in inequality - the number of countries showing an increase of within-country inequality is the same as the number of countries showing a decrease. As the report notes, these findings come with the important caveat that the survey instruments used to measure household consumption expenditure are not good at capturing the very rich.

This also leave the question whether the conclusions would change when we ignore national boundaries and look at inequality among all African citizens instead. Doing so puts the disparities that exist within African countries into context with the disparities that exist within the region as a whole, akin to the interpersonal global income distribution. Such a perspective on inequality comes naturally to an international organization as the World Bank.

Inequality of opportunity in Sub-Saharan Africa

Paolo Brunori's picture

It is widely known that, compared to other continents, poverty rates are particularly high in Africa.  Somewhat less appreciated is that inequality within countries also tends to be high. “Poverty in a Rising Africa,” the latest World Bank Africa poverty report, shows for example that seven out of the world’s 10 most unequal countries are African, with the country Gini indexes ranging from 0.31 (Niger) to 0.63 (South Africa) (with zero implying perfect equality and one, perfect inequality).
However, not only the level of inequality matters, but also the reasons behind it. Unequal outcomes may result from both differences in opportunities as well as differences in effort. There is also growing evidence and consensus that it is especially the former, which is pernicious for development. Rewards by effort may incentivize people. Yet, when welfare mainly differs because of differences at birth (such as gender, ethnicity, or parental background) or, more generally, because of factors beyond the individual control, it tends to be especially detrimental for economic growth and social harmony.

Data gaps: The poor typical household surveys miss

Isis Gaddis's picture

Standard measures of poverty and inequality are calculated at the household level—assuming resources are pooled and shared equally among its members. The World Bank Group’s new global poverty estimates, for example, are based on consumption per person—the average consumed by individuals within the household.
If consumption per person falls below the new global poverty line of $1.90 per day, everyone in the household is considered “poor.” If consumption is above the poverty line, no one in the household is considered “poor.” This measure is also used to monitor progress toward the first target of the newly agreed Sustainable Development Goals, to end extreme poverty by 2030.

Domestic Violence and Poverty in Africa: When the Husband’s Beating Stick is Like Butter

Luc Christiaensen's picture

According to the latest statistics, 51%  of African women report that being beaten by their husbands is justified if they either go out without permission, neglect the children, argue back, refuse to have sex, or burn the food. This is startling.

To be sure, the numbers reflect attitudes, not incidence. About one third of African women report to have experienced domestic violence (physical or sexual). But the attitudes are arguably even more pernicious. They shape behavior, reflect social norms toward conflict resolution, also outside the home, and could bear importantly on development and poverty reduction. They are also correlated with the incidence of violence. In assessing people’s poverty status and well-being, a much more systematic discussion of the acceptance and incidence of domestic violence is called for.

So, what has been happening to women’s attitudes and incidence towards domestic violence following Africa’s hopeful economic turn-around? Two decades of systematic data collection through the Demographic and Health Surveys make it possible to examine this. The latest Poverty in a Rising Africa report summarizes the findings.