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2
MEASURES OF GLOBAL POVERTY
MEASURES OF NATIONAL AND GLOBAL POVERTY AND THEIR USE IN
POLICY MAKING: WORLD BANK POVERTY MEASURES1
Martin Ravallion, The World Bank
Martin Ravallion described the World Bank’s approach to measuring global poverty,
explained the progress that had been achieved in various parts of the world to reduce poverty,
and then discussed some the challenges ahead. He explained the difficulties inherent in defining
a single global measure of poverty. He added that most of the World Bank’s poverty
measurement and analysis activities are, in fact, done at a country level to inform local
government policies and programming decisions by the World Bank.
He noted that it is difficult to talk meaningfully about global income poverty, since
poverty lines across countries vary in terms of their purchasing power, and there is a strong
economic gradient with richer countries adopting higher standards of living for defining poverty.
In the poorest countries, poverty lines tend to reflect “absolute poverty,” with minimal
requirements for food and non-food needs. In richer countries they reflect a measure of “relative
poverty,” with more generous allowances for consumption needs; these lines are often set at
some percentage of the country’s mean or median income.
Ravallion explained that the $1 a day global poverty measure was an attempt to measure
poverty in the world as a whole and to assure that two people with the same purchasing power
over commodities are treated the same way even if they live in different countries. He suggested
that focusing on the standards of the poorest countries gives a salience to the world’s poorest
people that would not exist if higher poverty lines were used.
Based on the World Bank’s level poverty assessments and the results of the 2005
international comparison project, new poverty rates were recalculated. Overall the percentage of
people falling below a poverty line of $1.25 a day was halved between 1981 and 2005 from 52 to
26 or a numerical decline from 1.9 billion to 1.4 billion (Figure I 2-1). However, there are stark
regional differences, with huge progress in China and substantial progress in India. Poverty rates
have also fallen in Latin America, the Caribbean, the Middle East, and North Africa; however,
the total numbers of those in poverty in these regions have not declined. And in Eastern Europe
1
The presentation is available at http://sites.nationalacademies.org/PGA/sustainability/foodsecurity/PGA_060826,
presentation by Martin Ravallion (February 16, 2011).
27
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28 A SUSTAINABILITY CHALLENGE: FOOD SECURITY FOR ALL
and Central Asia, poverty rates and numbers of poor people have increased, although there have
been signs of progress since the late 1990s.
Number of poor by region
2000
1800
Rest of the
1600 Developing World
Population living under $1.25 per day
1400
East Asia and Pacific
1200
(millions)
1000
Sub-Saharan Africa
800
600
400 South Asia
200
0
1981 1984 1987 1990 1993 1996 1999 2002 2005
FIGURE I 2-1 The regional picture: Uneven progress.
SOURCE: Presentation by Martin Ravallion, The World Bank, February 16, 2011.
The situation in Sub-Saharan Africa stands out with little change in poverty rates and
substantial increases in the number of people deemed poor using the $1.25 a day poverty line for
1981–2005. The number of poor has almost doubled between 1981 and 2005, increasing from
200 million to 380 million. Furthermore, Ravallion noted that there is a greater depth of poverty
in Sub-Saharan Africa, with the mean consumption of the poor estimated at only 70 cents a day,
making it the lowest in the world. However, he also noted that there have been encouraging signs
of greater progress against poverty in Africa since the mid-1990s.
Challenges Ahead
Household surveys. During the last 10 to 20 years, there has been a huge expansion in the
coverage of household surveys, expanding from just 22 countries in 1990 to 116 countries in
2011. Coverage is especially good in East Asia, South Asia, Eastern and Central Europe, and
Latin America, but lagging in the Middle East and North Africa and Sub-Saharan Africa.
Furthermore, in the Middle East and North Africa region there is no public access to the data,
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MEASURES OF GLOBAL POVERTY 29
unlike in other regions. Despite the increase in coverage, there are continued concerns about lags
in data availability and public access, comparability over time and across countries, and
underreporting and selective compliance.
Ravallion explained that market exchange rates generally are not useful in assessing real
incomes in developing countries, in that they tend to equate purchasing power with traded goods.
Therefore the International Comparison Project has developed more realistic estimates of
purchasing power parity exchange rates. The latest ICP data were released in 2005 with a new
one scheduled for release in 2011. Despite improvements in the ICP process since the 1970s,
serious issues remain in that they tend to be urban biased under representing rural areas, which is
a particular concern in China, where only 11 cities were surveyed.
Ravallion also discussed the arguments in favor of relative poverty lines. He noted that
many Organization for Economic Cooperation and Development countries have relative poverty
lines, that is, a fixed proportion of the country’s mean or median income. He suggested that one
way to allow for relative poverty is to have a poverty line that is constant at very low
incomes―representing absolute poverty—and then increasing at somewhat higher incomes.
Ravallion concluded by noting that in most instances there is no need to form a single
composite poverty index that includes data on nutrition, child mortality, schooling, and violence,
as these indicators are too disparate to combine into a single measure. The ultimate goal should
be to create a set of multiple indexes that looks at these non-consumption factors and can
usefully guide policy makers, rather than develop a single multidimensional index.
OXFORD MULTIDIMENSIONAL INDEX2
James E. Foster, The George Washington University
James Foster described the recently released Oxford Multidimensional Poverty Index
(MPI). He explained that this type of index was needed because conventional measures of
poverty capture only an income or consumption dimension of poverty, when in fact there are
many other aspects of poverty. He suggested that such a measure must be understandable and
easy to describe as well as conform to common-sense notions of poverty. It must also be
technically solid and data must be available. While such indexes have been talked about for some
time, one impetus for the new index came from Mexico, where a government law mandates that
poverty be measured multidimensionally.
The new index provides a dual cutoff approach to measuring poverty. Within each
dimension there is a deprivation cutoff, and then across the dimensions there is a poverty cutoff.
That is, if someone is deprived in enough dimensions or in enough breadth, they are considered
poor. Foster described the approach as being intuitive, transparent, and flexible. He emphasized
its use in country applications, where one can target and evaluate policies. He also said that it
was participatory, in that country stakeholders could determine cutoff and weights rather than
having a one-size-fits-all index. The three specific dimensions included in the MPI are education,
health, and standard of living, and there are 10 associated indicators (Box I 2-1).
2
The presentation is available at http://sites.nationalacademies.org/PGA/sustainability/foodsecurity/PGA_060826,
presentation by James Foster (February 16, 2011).
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30 A SUSTAINABILITY CHALLENGE: FOOD SECURITY FOR ALL
BOX I 2-1
Multidimensional Poverty Index Indicators
Education (Each indicator is weighted equally at 1/6)
• Years of Schooling: Deprived if no household member has completed 5 years of
schooling
• School Attendance: Deprived if any school -aged child is not attending school in years 1
to 8
Health (Each indicator is weighted equally at 1/6.)
• Child Mortality: Deprived if any child has died in the family Nutrition: Deprived if any
adult or child for whom there is nutritional information is malnourished
Standard of Living (Each indicator is weighted equally at 1/18.)
• Electricity: Deprived if the household has no electricity
• Drinking Water: Deprived if the household does not have access to clean drinking water
or clean water is more than 30 minutes walk from home
• Sanitation: Deprived if they do not have adequate sanitation or if their toilet is shared
• Flooring: Deprived if the household has a dirt, sand, or dung floor
• Cooking Fuel: Deprived if the household cooks with wood, charcoal, or dung
• Assets: Deprived if the household does not own more than one of the following: radio,
TV, telephone, bike, motorbike, or refrigerator, and does not own a car or tractor
SOURCE: http://www.ophi.org.uk/wp-content/uploads/MPI-One-Page-final.pdf.
PANEL DISCUSSION
Marco Ferroni opened the panel discussion, encouraging participants to focus on four key
issues:
• How important are global numbers for hunger, malnutrition, and poverty? For whom?
• Do measures of poverty, food security, and malnutrition move in the same direction? If not,
why not? Is this a problem with the measures or does it highlight more complex issues?
• Are numbers comparable between countries and over time?
• What information do decision makers really need and for what?
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MEASURES OF GLOBAL POVERTY 31
Stephan Klasen began the session by focusing on three points. First he noted that the $1 a
day measure of global poverty is not a direct measure of food or nutritional security. In fact, the
relation between income and nutrition is not clear. Second, the dollar a day measure was revised
upward in 2005 resulting in dramatic increases in poverty in both China and India despite
substantial economic expansion in both countries. He noted that this may have been the result of
changes in the way purchasing power parity numbers were calculated rather than any real change
in poverty rates. Third, he suggested that poverty measures and food security measures are
closely related at a country level, even if they are not at a global level. That is, national level
poverty lines are often nutritionally based. In addition, Klasen suggested that if there was enough
trust in the data generated through household surveys it would be possible to actually compile a
more accurate global poverty number―basically, the sum of the country level numbers. Even in
this case, though, such a measure does not reflect intrahousehold issues, that is, how food
supplies are allocated within a household. This is an important consideration, in that we can
often find malnourished children in a household with well nourished adults. Klasen also talked
about the usefulness of the MPI in shifting discussions about poverty beyond simply income and
consumption. He noted that it was easy to criticize the MPI―how the weights were chosen,
cutoff points, aggregations, and even what was included―but it has started a valuable debate.
Martin Ravallion added that he agreed that poverty is multidimensional, but argued
against a single index, suggesting that a composite index masks the real data that are needed to
take action and that one of the first things a decision maker is likely to do with the MPI is to
unpack the data.
Workshop participants discussed household surveys and the extent to which they could
be made more comparable across countries and the degree to which these surveys could be
expanded to include questions on food security and nutritional status. While some participants
suggested that the surveys should be expanded, Ravallion stressed the need to identify a basic
core set of data requirements that can be implemented well in all developing countries, with the
possibility of conducting other more specialized ad hoc surveys.
Other participants suggested that it might be possible to more directly link poverty and
nutrition measures in household surveys, but that it would require substantially increased training
for the enumerators and that in some countries―India and China were specifically mentioned—
it would be very difficult, as the survey instruments are already considered too long and response
rates are declining sharply, limiting the usefulness of the survey data. Lynnette Neufeld
suggested that it was important to understand what the indicators would be used for in order to
determine local priorities. Rather than try to stretch a survey or multiple surveys and expect that
they will be used in the same manner across all countries, she said that data requirements need to
be based on a clear understanding of the national policies and decisions that will be driven by the
data.
Other workshop participants expressed concern about the timeliness of the poverty data
and the inability to measure transitory poverty, both critical inputs for policy makers.3
3
An extensive bibliography of articles assessing an array of global poverty measures is included at the end of Part I
of the report.
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