3 HowNotto Count the Poor

Abstract

This chapter argues that the World Bank's approach to estimating the extent, distribution, and trend of global income poverty is neither meaningful nor reliable. The Bank uses an arbitrary international poverty line that is not adequately anchored in any specification of the real requirements of human beings. Moreover, it employs a concept of purchasing power ‘equivalence’ that is neither well defined nor appropriate for poverty assessment. These difficulties are inherent in the Bank's ‘money-metric’ approach and cannot be credibly overcome without dispensing with this approach altogether. In addition, the Bank extrapolates incorrectly from limited data and thereby creates an appearance of precision that masks the high probable error of its estimates. It is difficult to judge the nature and extent of the errors in global poverty estimates that these three flaws produce. However, there is reason to believe that the Bank's approach may have led it to understate the extent of global income poverty and to infer without adequate justification that global income poverty has steeply declined in the recent period. A new methodology of global poverty assessment, focused directly on what is needed to achieve elementary human requirements, is feasible and necessary. A practical approach to implementing an alternative is described.

International income poverty measurement: which way now?

“…The empirical starting point for the analysis is Figure 1 which shows the relationship between per capita consumption from the national accounts to the poverty line in the sample of 74 countries 13 For reasons explained, for example, in Reddy and Pogge (2010), it is not possible to generate inter-temporally consistent PPP-adjusted estimates of incomes or poverty. Each ICP produces PPP exchange rates valid for the benchmark year.…”

“…More generally, these massive changes point to a serious conceptual as well as an empirical issue. On the conceptual side, it just reiterates that PPPs cannot directly be compared across rounds as they are only suitable from cross-sectional but not inter-temporal comparisons (see Klasen, 2013 andPogge, 2010). Thus it is possible that a significant share of the differences observed in Table 2 is due to this incomparability as global prices and structures of demand have shifted in ways that generates these changes.…”

“…This was already a problem when the benchmark year was changed from 1985 to 1993 (see Reddy and Pogge, 2010) and the poverty line switched from $1.02 in 1985 prices to $1.08 in 1993 prices. But the problem got much more severe with the switch to the 2005 benchmark year and the $1.25 poverty line.…”

“…Reddy and Pogge, 2010;Klasen, 2013a, b). In fact, we argue in this paper that the problems associated with this particular approach of measuring global poverty have increased over time.…”

Inconsistências e consequências da variável raça para a mensuração de desigualdades

“…desemprego e gastos de saúde inesperados) (Neri et al, 1999). Vários estudos têm investigado a pobreza e a desigualdade da perspectiva do consumo (Rocha, 1988(Rocha, , 2000Reddy, Pogge, 2002;Ferreira, Lanjouw, Neri, 2001), incluindo estudos voltados para a desigualdade racial (Oliver, Shapiro, 2006), sob a justificativa de que as desigualdades observadas nestas duas dimensões, escolaridade e consumo, diferem substancialmente apesar de estarem correlacionadas.…”