Development indicators  

Gianni Vaggi and Clara CapelliUniversity of Pavia November 2013

Poverty

Choosing and estimating poverty lines• Monetary (e.g. a certain level of

consumption)• Nonmonetary (e.g. a certain level of

literacy)• Relative/national poverty lines: in relation to the overall distribution of income or consumption in a country. Strictly related to inequality (Sen 1983).

• Absolute poverty lines: anchored to some absolute standard (seethe cost of basic needs approach). Sometimes "absolute poverty" isused as a synonym of "extreme poverty".

Measuring extreme poverty at world level:

The 1990 WDR• Standards of living (incomes and consumption), plus

measures of nutrition, life expectancy, child mortality and school enrollment rates.• Poverty lines: "A consumption-based poverty line can

be thought of comprising two elements: • the expenditure necessary to buy a minimum standard

of nutrition and other basic necessities;

• a further amount that varies from country to country, reflecting the cost of participating in the everyday life of society“.

A person can appear in public without shame (Adam Smith 1776).1985 Total population: 4,8 billion.

More than 1 billion people under the poverty line.

The Absolute Poverty Lines

• 1990 WDR: $ 1 per day in 1985 US$ (Ravaillon, Datt, Van DeWalle): first global poverty threshold;

• 2000: $ 1.08 per day in 1993 US$ prices(Chen and Ravaillon);

• 2008 "Dollar a Day Revisited" (Ravaillon, Chen, Sangraula): the lineis set at $1.25 (PPP 2005);

• $2 poverty line ($2.15 in 2000, $2.50 in 2008).

Measuring the international poverty line

1990 Country-poverty lines of six developing countries clustered around $370

(1985 PPP) a year : the 1-dollar-a-day story was born.

2000 1.08 dollar a day. 75 poverty lines examined, 15 lowest taken(Nepal Tajikistan and 13 SSA countries) ; a person is poor if she consumes less than an American spending 1.08 USD at 1993 prices.

•All data derive form national household consumption surveys, which are

based on a sample of the whole population.

•If you use GDP from national account extreme poverty is much lower(see

Sala i Martin)

Choosing and estimating poverty measures

Once the line has been set, poverty is to be measured in terms of its:

Incidence /headcount index: share of the population whose income or

consumption is below the poverty line.

Depth/poverty gap: how far off household are from the

poverty line, is the mean shortfall from the poverty line (counting the non-poor as zero shortfall) expressed as a percentage of the poverty line

Choosing and estimating poverty measures

incidence, depth and severity:

 

People living on less than 1.25 a day (millions):

• 1,909 in 1990;• 1,289 in 2008;

Poverty Headcount ratio at 1.25 a day:

• 43.1% in 1990;• 22.4% in 2008;

Source: PovcalNet

Source: WDI, 2012

Economia dello Sviluppo

Regional focus

• The greatest reduction in poverty occurred in East Asia andPacific:

• From 77% in 1981 to 14% in 2008;• In absolute terms, the poor population dropped by 800 million;• Such decline is mostly attributable to China (from 84% to 13%, 660

million people).• In South Asia, poverty rate fell from 61% to 36%;• Sub-Saharan Africa’s performance was poor: the poverty rate was

approximately 50% in 1981, it rose to nearly 60% in 1993 and thendropped to 47.5% in 2008. The number of people below the povertyline has nearly doubled in this time span and started declining onlyfrom 2005 onwards.

Economia dello Sviluppo

• Most of the people who have escaped extreme poverty are still"poor", i.e. they live below the $2a-day line;

• People living below this line dropped from 70% in 1981 to 43% in2008;

• In absolute terms, the number is constant at 2.5 billion people;• The largest decrease occurred in East Asia and Pacific, thanks to

China;• At global level, the number of people living on $1.25-$2 a day nearly

double, hitting 1.2 billion.

Economia dello Sviluppo

China/1GDP per capita, USD, Atlas method

Source: WB DatabaseEconomia dello Sviluppo

China/2$1.25-a-day Poverty Line, Headcount Ratio

Source: WB DatabaseEconomia dello Sviluppo

China/3

$2.50-a-day Poverty Line, Headcount Ratio

Source: WB DatabaseEconomia dello Sviluppo

India/1GDP per capita, USD, Atlas method

Source: WB Database

Economia dello Sviluppo

India/2$1.25-a-day Poverty Line, Headcount Ratio

Source: WB Database

Economia dello Sviluppo

India/3$2.50-a-day Poverty Line, Headcount Ratio

Source: WB Database Economia dello Sviluppo