In these charts, each dot represents a household. The Journal of Economic Perspectives, 29(4), 227-244. How do poor households get ‘trapped’ in low-productivity locations? But after two decades of growth the share in extreme poverty more than halved in all these countries. Washington, DC. Bourguignon and Morrison’s starting point is to estimate the global distribution of incomes over time. In the Journal of Economic Growth. The dark blue line presents the ‘net present value’ of these effects—that is, the value of the benefits assuming these gains last forever, minus the program costs (discounting the benefits and costs by how far in the future they occur). Take Action. Now it has shifted to Sub-Saharan Africa. As the authors explain, this is possible because there are complementarities among different types of workers: ‘natives’ and ‘immigrants’ of similar education and age have different skills, often work in different jobs and perform different productive tasks. It is measured in international-$ which means it is adjusted for price differences between countries, as we explain here. They are an obvious instrument to consider, since transferring cash is perhaps the most straightforward way of raising incomes; and when coupled with well-designed conditionalities, transfers can help ‘nudge’ participants who are caught up in ‘psychological poverty traps’ (see our discussion of poverty traps above). Send petitions, emails, or tweets to world leaders. Economic growth – How do economies become more productive? The second approach is commonly used to establish a rental equivalent for housing and durable goods owned by the household. Persistent poverty rates have fallen in Britain, but thanks to Government welfare cuts the overall trend is still bleak However, it is important to bear in mind that the International Poverty Line is sometimes updated; in 2015, for example, the line was updated from 1.25 international dollars (at 2005 PPP prices), to 1.90 international dollars (at 2011 PPP prices). 15-7. The second step is to compute the headcount poverty rate at the reference year after normalizing the distributions observed in the two survey years by the reference year mean. As we can see, globally, the number of people living in extreme poverty fell by more than 1 billion during the period; from 1.9 billion in 1990 to 0.73 billion in 2015. The Bank’s best guess for 2018 is 8.6%. The measurement of extreme poverty in the European Union. In a time of unprecedented population growth, we managed to lift more and more people out of the extreme poverty of the past. Working Paper. Available here. In other entries in Our World In Data we discuss evidence that allows tracking progress in other aspects of welfare that are not captured by standard economic indicators. However, with rapid economic growth in Asia over the past two decades, poverty in Asia fell more rapidly than in Africa. Once this is established, prices for individual crops and animal products are used to convert the output into current prices and create weights for an ‘agricultural real output index’. Two-thirds of the world population live on less than 10 $-int per day. If you want to consider a poverty line higher than the International Poverty Line, you could chose a line of int.-$1,000 per year instead and see that in 2003, 48% of the world population was below this poverty line; ten years later, in 2013, 29% were below this line. How poverty changes is not only a consequence of economic growth, it also depends on the distribution of incomes and how this inequality changes during the growth process. Some countries also use absolute poverty measures on a national level. And every tenth person lives on less than 1.90 $-int per day. Policy Research Working Paper 7845. Unfortunately, the slow developments that entirely transform our world never make the news, and this is the very reason why we are working on this online publication. The Multidimensional Poverty Index (MPI) published by the Oxford Poverty & Human Development Initiative (OPHI), is one such effort to aggregate various aspects of well-being into a single metric. In richer countries, where ‘non-income’ resources such as savings, borrowing, and government welfare benefits are common, this issues of comparability can be substantial. Beegle, K., De Weerdt, J., Friedman, J., & Gibson, J. This can be confusing for researchers—including yours truly! “Survey Nonresponse and the Distribution of Income” Journal of Economic Inequality 4 (2006) no. “The $1.90/day (2011 PPP) line is not an adequate or in any way satisfactory level of consumption; it i… Counting and multidimensional poverty measurement. (2015). Explanation of how poverty for the world without China was calculated:In 1981 there were 4.5 billion people in the world. Progress against a poverty line of int.-$ 10 per day is a very recent achievement. As the visualization shows these are: Central African Republic, Burundi, Liberia, the Democratic Republic of Congo, Niger, Sierra Leone, Madagascar, Togo, Guinea-Bissau, and the Gambia, See Martin Ravallion (2016) – Are the world’s poorest being left behind? The second big lesson from the history of extreme poverty is that it is the growth of an entire economy that lifts individuals out of poverty. Ferreira, Francisco HG, Shaohua Chen, Andrew Dabalen, Yuri Dikhanov, Nada Hamadeh, Dean Jolliffe, Ambar Narayan et al. And a couple of countries such as Niger and the Democratic Republic of Congo have even experienced negative growth over the reference period. Global estimates of child poverty are unfortunately not available. The chart shows the projection made by the development research team at the World Bank. Both can be seen in this visualization. HIV/AIDS), lack of water, conflicts over resources etc… Given that both approaches are subject to measurement error, it is natural to wonder which of the two methods is superior. The better data coverage is in terms of number and frequency of available surveys, the more accurate this lining-up process is and the more reliable the regional estimates will be.”, PovcalNet explains this as follows: “As part of this new round of global poverty measurement, a detailed reassessment of the 2011 PPPs has been conducted for Egypt, Iraq, Jordan, and the Republic of Yemen. Using a different measure of international poverty, the rate has dropped from 53 percent in 1981 to 17 percent in 2011 – representing the most rapid reduction in poverty in world history. In 1981 around 88% of the Chinese population lived in extreme poverty. In this entry we will focus mainly (though not exclusively) on poverty as measured by ‘monetized’ consumption and income, following the approach used by the World Bank. The seminal paper on this was written by Bourguignon and Morrison in 2002.15. Second, we can also see from this chart that despite remarkable progress, in some rich countries—notably the United States—a fraction of the population still lives in extreme poverty. 1979. Newhouse, D. L., Suarez-Becerra, P., & Evans, M. (2016). By looking at the total number of people in extreme poverty (area of the bars) we can also see another important fact: virtually half of the people living in extreme poverty are under 18 years of age. (2005)71 showing that as people become richer, they are less likely to respond to surveys. In most cases, surveys are representative at the national level and record responses provided by ‘primary respondents’ such as the head of the household. When data from only one survey year are available, the reference year mean is based on the survey mean by applying the growth rate in private consumption per capita from the national accounts. This is a point we discuss below in more detail. 1. What are these inefficiencies? There is absolutely no reason to be complacent about poverty today – it remains one of the world’s very worst problems. The reference year poverty estimate is then based on this mean and on the distribution observed in the one survey year. The table shown here, taken from Ferreira et al. The bottom panel replicates the one above, but for hours of work. Above we showed that poverty correlates with health. The biggest gaps are in Sub-Saharan Africa and Central and South Asia. David Dollar and Aart Kraay studied this link between growth, inequality and poverty reduction in a widely cited paper in 2002.33 The title of their paper is the summary of their finding: ‘Growth is good for the poor’. This projection answers the question of what would happen to extreme poverty trends if the economic growth of the past decade (2005–15) continued until 2030:5 The number of people in extreme poverty will stagnate at almost 500 million. The following chart summarizes the available data. However, it is also important to point out that living conditions well above the International Poverty Line can still be characterized by poverty and hardship. Keeping these comparability issues in mind, the World Bank does estimate poverty rates in high income countries, but chooses not to include them in the global figures. Phase 2:Stressed 3. EU-SILC stands for European Union Statistics on Income and Living Conditions. Allowances are made for the size and composition of households so that, for example, in a household with 2 adults and 2 children, the poverty line is roughly equivalent to $16.5 per person per day. The shade of the country corresponds to the magnitude of the indicator. Available online here. We would like to thank the authors for making the data available to us for this data visualization. 3 important charts for World AIDS Day Emi Suzuki, Haruna Kashiwase, Nov 30, 2020; Global food commodity prices in a post-COVID world John Baffes, Jinxin Wu, Nov 26, 2020; View all news View all blogs. (You can read more about this study and the authors’ interpretation of the results in this press release from vox.com). Studies also suggest that survey design matters for sampling purposes. In fact, the big success over the last generation was that the world made rapid progress against the very worst poverty. But today it is not just the poverty line of India that is taken into account rather, as we can see in the following table, it is based on the national poverty lines of 15 different low-income countries. For smaller families, subtract $4,480 per person. A second way of measuring poverty is to start from ‘macroeconomic data’, particularly the National Accounts, which report the aggregate total economic activity of a nation including the GDP. This broad perspective on global development is at the heart of our publication. The first countries in which people improved their living conditions were those that industrialized first. (2016). For example, Bangladesh and Bolivia have relatively similar poverty gaps (the mean shortfall is close to 3% of the poverty line), but they have very different poverty rates (the share of population in poverty in Bangladesh is 14.8%, while in Bolivia it is 7.1%). This poverty measurement is based on the monetary value of a person’s consumption. But measuring poverty through headcount ratios fails to capture the intensity of poverty – individuals with consumption levels marginally below the poverty line are counted as being poor just as individuals with consumption levels much further below the poverty line. More specifically, for each household, the chart compares income per day (horizontal axis) against expenditures per day (vertical axis). As discussed in our entry on income inequality, income inequality has developed quite differently in different countries. The same international organizations that set the poverty line made it a global goal to end extreme poverty. The size of the poverty gap is only a rough estimate, and the available empirical evidence does not provide a clear idea of how ‘rough’ is ‘rough’. Poverty eradication is a common goal for all of humankind. We license all charts under Creative Commons BY. (2016).61. This is indicative of the underlying growth in economic activity that South Asia achieved during this period. Jolliffe and Prydz (2016)56 address this issue of comparability by estimating the national poverty lines that are implied by poverty rates.57. For measurement purposes, children are considered to be poor if they live in a poor household (i.e. Social and Economic Policy at the UN . On every day in the last 25 years there could have been a newspaper headline reading, “The number of people in extreme poverty fell by 128,000 since yesterday”. They find significant differences between consumption reported by the benchmark personal diary and other diary and recall formats. The implication of this evidence should not be that there is no role for policy; but rather that traditional ‘big push’ macro policies are perhaps not the best approach to reducing poverty. In 1820, the vast majority of people lived in extreme poverty and only a tiny elite enjoyed higher standards of living. Another approach—less common but also employed in practice—is to set absolute lines based on asking people what minimum consumption or income level they need just to make ends meet. Income and consumption measures available from national household surveys are denominated in local currency units. Here, we focus on the various limitations of this methodology. This suggests that economic prosperity is not a vain, unimportant goal but rather a means for a better life. The darker the shade, the higher the value. It’s important to mention that these results do not reflect the fact that adults tend to generate more income than children. To ensure that ‘no one is left behind’ as the SDG agenda promises, this is where we need to focus our efforts. In 2015 the extreme poor numbered 736m people, or 10% of the world. 7844. The top 10% cut-off is 30-times higher than the cut-off for the poorest 10%. The issue is that national statistical agencies design and execute surveys to serve the specific needs and interests of each particular country; which means that different countries use different concepts, methods, and questionnaire designs. One in five children in rich countries lives in relative poverty. In the same year – 1981 – the population of China was 1 billion. This is the rationale often used to argue for ‘big push’ macro policies such as the expansion of micro-finance in low-income countries. Our visualisation is an update, based on the same source, of the similar visualisation in Kraay, A., & McKenzie, D. (2014). As before, the button at the bottom allows you to change the reference years, so that you can see how these two variables covary across time. Alkire, S., & Foster, J. The Multidimensional Poverty Index (MPI)—shown in the world map above and published by the Oxford Poverty & Human Development Initiative (OPHI)—is the most common international instrument used in this context. Do poverty traps exist? The ‘poverty gap index‘ takes the mean shortfall from the poverty line, and divides it by the value of the poverty line. The conclusion is that although poverty measurement instruments in high income countries are not designed to be compatible with instruments in low and middle income countries, the available evidence suggests that extreme poverty—as defined by the World Bank’s International Poverty Line—is likely to be very low in rich countries. We have seen that the chance of being born into extreme poverty has declined dramatically over the last 200 years. pictures of child poverty in the world’s rich nations. (2012). World poverty rate for 2012 was 50.70%, a 1.5% decline from 2011. Korinek, Anton, Johan Mistiaen and Martin Ravallion. Hellebrandt, Tomas and Mauro, Paolo (2015) – The Future of Worldwide Income Distribution (April 1, 2015). A closer look at the data suggests that the typical poor country grew at least as fast as the global average over this period.35. And you can find a more technical discussion of the MPI and its properties in Alkire and Foster (2011).32. Available online here. The difference between the reported numbers for 2005 and 2015 is 2,594,630,100-1,694,900,300=899,729,800. What the cutoff for extreme poverty is helpful for is to focus the attention to those who are the very poorest. The above-mentioned data from the Global Micro Database allows us to study poverty across age groups for various poverty lines—not just the International Poverty Line. The light blue bars show the impact of this intervention, measured by the yearly average increase in household consumption, three years after the productive asset transfer and one year after the end of the program intervention. “Inequality Among World Citizens: 1820-1992 .” American Economic Review, 92(4): 727-744. Beegle, K., De Weerdt, J., Friedman, J., & Gibson, J. (See below for more on extreme poverty in rich countries). To rely on the national poverty line of a low-income country is still the basic idea on which the International Poverty Line is based. “The state of social safety nets 2014.” Washington, DC : World Bank Group. From 1981 onwards, we have better empirical data on global extreme poverty. In these poorer countries more people understand how global poverty has changed. As can be seen, there is a clear gradient: poorer countries tend to use lower poverty lines. A simple look at the reality of homelessness in high-income countries suggests that we need to take this question seriously. According to official estimates, the poverty rate in the US was 13.5 percent in 2015. The shade of the country corresponds to the magnitude of the indicator. I went to their Income Distribution and Poverty page, changed the 'Measure' to "Age group 0-17: Poverty rate after taxes and transfers", and then exported the data as a text file. The source defines the universe of low and middle income countries as all countries except: Australia, Belgium, Cyprus, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Luxembourg, Japan, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and United States. In reality, subjective well-being does not suddenly improve above any given poverty line. As we can see, there is a positive correlation between these two measures of deprivation, but they are clearly not identical. WHAT YOU CAN LEARN WITH OPEN DATA. What are the main limitations of World Bank poverty estimates? Above, we pointed out that World Bank poverty estimates for some countries come from income data, while in other countries they come from consumption data. But the large majority of countries, all those above the blue line, have experienced growth. If you are interested in understanding poverty through these other lenses, you are welcome to explore our website—the content menu at the top of the page links to all of our entries on these topics. Beegle et al. Hunger is murder. Without the increase in productivity that brought economic growth, it would not have been possible to lift hundreds of millions of people out of extreme poverty. The International Poverty Line is the best known poverty line for measuring absolute poverty globally. Poverty rate (2013) Poverty rate (2015) Change; East Asia and Pacific: 3.6%: 2.3%-1.3%: Europe and Central Asia: 1.6%: 1.5%-0.1%: Latin America and Caribbean: 4.6%: 4.1%-0.5%: Middle East and North Africa: 2.6%: 5.0% +2.4%: South Asia: 16.2%: 12.4%-3.8%: Sub-Saharan Africa: 42.5%: 41.1%-1.4%: World Total 11.2% 10.0%-1.2% Assessing the evidence. Available online from https://openknowledge.worldbank.org/. Each of the lines in this plot shows, for each age group, the share of the population living below a given level of per capita daily income or consumption (after accounting for differences in prices across countries). What our history shows us is that it is possible to reduce extreme poverty it is on us to end extreme poverty as soon as possible. That is a very poverty line and focusses on what is happening to the very poorest people on the planet.4. Online at the World Bank website here. Kenya and Chad have similar monetary poverty rates (about 40% of the population live below the International Poverty Line), but they have extremely different multidimensional poverty rates (around 40% in Kenya, compared to 87% in Chad are living in ‘multidimensional poverty’). World Bank, Washington, DC. There were several major revisions between the first formulation of a global poverty line in 1978 and today. Nineteen countries worldwide have poverty rates over 50%. The World Bank is the main source for global information on extreme poverty today and it sets the ‘International Poverty Line’. Consumption per capita is the preferred welfare indicator for the World Bank’s analysis of extreme poverty. The visualization shows a breakdown of the population by per capita household consumption. Growth of the global middle class and falling extreme poverty. What is an adequate consumption bundle? As we can see, there is a clear negative relationship: people tend to live longer in countries where poverty is less common. So there were 1.9 billion extremely poor people and 2.6 billion people not in extreme poverty. The ‘equivalised disposable income’ refers to income after applying equivalence factors to adjust for household composition, and after taking into account social transfers and taxes. After seeing the data for 2003 to 2013, the data shown here should not be surprising: Globally the share of people below any poverty line – $1.90, $3.20, $5.50, $10 – is declining. The lightly-shaded circles are for 2006, the darker circles for 2007, and the darkest circles are for 2008. This reinforces the importance of thinking about deprivation beyond income and consumption. World Bank Group. The following chart shows the cumulative distribution of welfare for different age groups. Productivity levels were low and food was scarce—material living standards were generally very low. Half a billion projected to live in extreme poverty in 2030. Where does this number come from? Bourguignon, François and Christian Morrisson. The source of the data is Newhouse, D. L., Suarez-Becerra, P., & Evans, M. (2016). It tells us the fraction of the poverty line that people are missing, on average, in order to escape poverty. Description: The map displayed here shows how Population below poverty line varies by country. The number of people living on less than $1.90 per day has declined. The countries I marked with a star are those that were a low-income or lower-middle-income countries a generation ago (in 1990). (2015)45 analyze the data from seven randomized controlled trials of government-run cash transfer programs in six developing countries in different world regions and find no systematic evidence that cash transfer programs discourage work. Guidelines for constructing consumption aggregates for welfare analysis (Vol. In their own words, they ‘line up’ country estimates to a reference year in order to produce regional and global totals. It found that the coverage and quality of the 2011 PPP price data for most of these countries were hindered by the exceptional period of instability they faced at the time of the 2011 exercise of the International Comparison Program. Different countries use different surveying instruments, and while there is much scope for harmonization (see Beegle et al 201252), there are some basic common features that allow for cross-country comparisons. The Poverty and Equity Data Portal is the World Bank Group’s comprehensive source for the latest data on poverty, inequality, and shared prosperity. Below are the most up-to-date, quantifiable poverty statistics from the world’s top data gathering and humanitarian organizations. You can read more about this process in PovcalNet. On the other hand, if growth is inclusive and lifts all boats, the economy is able to reduce absolute poverty over time. Even economists who think a lot about income and poverty find it difficult to understand what it means to live on a given income level. The set of national poverty lines estimated by Jolliffe and Prydz suggests, in contrast to earlier findings by Chen and Ravallion, that there is substantial variation in poverty lines even among the poorest countries. For this reason, it is not sufficient to simply convert the consumption levels of people in different countries by the market exchange rate; it is additionally necessary to adjust for cross-country differences in purchasing power. According to the estimates by Bourguignon and Morrison—shown in the visualization—only a little more than a quarter of the world population was not living in poverty by 1950. A number of countries in Africa which are among the very poorest in the world today did not achieve economic growth over the last generation and many of them actually got poorer. Below we provide an overview of each of these ingredients. The poverty line of 1.90 int.-$ per day was just introduced in 2015, so the 2002 paper uses the measure of ‘one dollar per day’. They were able to convince five factories to hire people at random from a group of consenting participants, and then tracked the effects on their incomes and health. Global economic inequality – Our entry on the global distribution of incomes. If you continue to navigate this website beyond this page, cookies will be placed on your browser. GDP per capita data from the World Bank. “There is essentially no mass point in any country with zero consumption, but many countries that use income data have a significant mass of zero incomes in the data, all of which are treated as being poor. This is an increase of 899,729,800/10=89,972,980 per year. Most people in the world live in poverty. This reaffirms the importance of measuring poverty beyond just income and consumption, and of maintaining a nuanced understanding of how global living conditions change. The following graph shows this relationship between average incomes (GDP per capita) and the share of the population living in extreme poverty.
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