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Policy Research Report 
A Measured Approach 
to Ending Poverty and Boosting Shared 
Prosperity 
Concepts, Data, and the Twin Goals 
Dean Jolliffe, Peter Lanjouw; 
Shaohua Chen, Aart Kraay, Christian Meyer, Mario Negre, Espen Prydz, Renos Vakis, 
and Kyla Wethli 
DEC Policy Research Talk 
October 2, 2014 | Peter Lanjouw, Development Research Group (DECRG)
5 key takeaways from the report 
• Reaching the poverty goal is ambitious: Business as usual and growth alone 
will not get us there by 2030 
• Shared prosperity has some appeal as an articulation of inclusive growth as 
a development goal, with historical antecedents in the literature 
• Growth in average incomes has historically played a large role in poverty 
reduction and is closely related conceptually and empirically to shared 
prosperity 
• There are various uncertainties, including climate change and extreme 
weather risks, that make the goals even more ambitious to attain 
• Measurement of twin goals critically depends on high-quality household 
surveys and complementary data. We need to improve access, availability, 
and quality of both. 
DEC Policy Research Talk 2
Presentation roadmap 
1. Key takeaways from this presentation 
2. Background & context: World Bank twin goals 
3. Report overview and key messages 
4. Looking forward 
DEC Policy Research Talk 3
Background: The World Bank Twin Goals 
Ending extreme poverty by 2030 
(< 3% of global pop. below 
$1.25 a day) 
Boosting shared prosperity 
(Growth of incomes of bottom 
40% of population in every country) 
PRR focuses on concepts, empirical evidence, 
strengths & weaknesses, and measurement related 
to the new twin goals 
• What exactly do these goals mean? 
• How realistic are they? 
• How will we assess progress towards achieving them? 
• What are challenges in measuring them? 
DEC Policy Research Talk 4
Presentation roadmap 
1. Key takeaways from this presentation 
2. Background & context: World Bank twin goals 
3. Report overview and key messages 
4. Looking forward 
DEC Policy Research Talk
Overview of PRR structure 
Part I: Defining and assessing the goals 
> Ending Poverty by 2030 
> Understanding Shared Prosperity 
Part II: The twin goals in a broader context 
> Alternative Notions of Poverty and Shared Prosperity 
> Challenges Posed by Uncertainty 
Part III: Data and measurement challenges 
> Tracking Poverty and Shared Prosperity over Time 
> Complementary Data 
DEC Policy Research Talk
Overview of PRR structure 
Part I: Defining and assessing the goals 
> Ending Poverty by 2030 
> Understanding Shared Prosperity 
Part II: The twin goals in a broader context 
> Alternative Notions of Poverty and Shared Prosperity 
> Challenges Posed by Uncertainty 
Part III: Data and measurement challenges 
> Tracking Poverty and Shared Prosperity over Time 
> Complementary Data 
DEC Policy Research Talk
Poverty Goal 
An overview of global poverty measurement 
DEC Policy Research Talk
Measuring Global Poverty: The Basic Approach 
• Builds on established practice of the past 25 years 
• starting with 1990 WDR on Poverty 
• 3 key ingredients 
Indicator of 
economic 
wellbeing 
Selection of 
poverty line 
• Constructing a global database 
Aggregation to 
single summary 
index 
• Assembling and ‘cleaning’ country-level household survey data 
• PovcalNet + Global Poverty Working Group 
DEC Policy Research Talk 9
Poverty Goal 
Where do we stand? 
DEC Policy Research Talk
Global Poverty in 2011: Headcount and Number of Poor 
By Developing Region 
East Asia & Pacific 
Europe & Central Asia 
415 
million 
Developing World 17.0% 
DEC Policy Research Talk | Source: 2011 Povcal estimates (9/25/2014) 11 
Middle East 
& North Africa 
Latin America 
& the Caribbean 
South Asia 
Sub-Saharan Africa 
399 
million 
161 
million 
28 
6 
2 
Headcount at $1.25 a day (2005 PPP), percent 
1,010.7 
million 
World 14.5% 
1,010.7 
million
Poverty Goal 
What does it take? 
DEC Policy Research Talk
3% by 2030 is far from assured: 
Business as usual will not get us there 
Global Poverty in 2030 at $1.25 per day (2005 PPP), assuming unchanged inequality 
DEC Policy Research Talk 
Scenario 
Headcount 
(percent) 
Number of poor 
(million) 
Average income growth of 4% p.a. in each country 3 252 
Each country sustains avg per capita growth during past 20 years 6.8 573 
Each country sustains avg per capita growth during past 10 years 4.8 405.4 
Each country sustains avg per capita growth during past 10 years 
(survey-based growth) 
6.7 564.8 
13
A more ‘aspirational’ scenario: Country-specific future 
growth matches the best episode of past 20 years 
Global Poverty in 2030 at $1.25 per day (2005 PPP), 
assuming unchanged inequality and country-specific growth rates 
associated with best 10-year spell observed during past 20 years 
DEC Policy Research Talk 14 
Region 
Headcount 
(percent) 
Number of 
poor (million) 
East Asia and Pacific 0.1 0.9 
Europe and Central Asia 0.0 0.1 
Latin America and the Caribbean 2.9 20.7 
Middle East and North Africa 0.4 1.8 
South Asia 0.6 12.0 
Sub-Saharan Africa 21.0 297.4 
Total Developing World 4.6 332.9 
World 4.0 332.9 
Even in this scenario, 
a number of countries 
remain with intolerably 
high poverty rates 
 There might be 
scope for a 
supplementary goal 
that calls for “no 
country left behind”
Aspirational scenario: A closer look a country-specific 
required growth rates 
• For 10 countries with largest absolute number of poor today, 
Required and actual growth rates (avg. annual) 
DEC Policy Research Talk 15 
3.5 
3.9 
6.7 
2.3 2.3 
1.5 
4.3 
1.4 
1.7 
3.7 
1.4 
3.52 
3.94 
7.73 
3.17 
4.97 
1.65 
6.43 
5.75 
3.42 
5.52 
7.92 
8 
7 
6 
5 
4 
3 
2 
1 
0 
India--Rural India--Urban China--Rural Nigeria Bangladesh Congo, Dem. 
Rep. 
Indonesia* Tanzania Ethiopia Pakistan Philippines 
Growth rate (percent) 
required growth rates to reach <3% by 2030 are not unimaginable 
• Challenges remain…
Does poverty decline slow as global target is neared? 
The arithmetic of a declining growth elasticity 
While past poverty reduction 
had been strikingly linear… 
…this trend might be more 
difficult to attain in the future 
PDF 
CDF 
t0 
t0 
poverty line 
t1 
t1 
DEC Policy Research Talk 16 
60 
50 
40 
30 
20 
10 
0 
1981 1987 1993 1999 2005 2010 
Poverty measures at $1.25 a day (percent) 
Global 
poverty 
headcount 
Global 
poverty 
gap 
Log income or consumption
What does past country experience suggest about 
the likely pace of poverty reduction in the future? 
In countries where 
poverty has “ended” 
poverty decline did 
not always slow 
DEC Policy Research Talk 17
Rate of poverty reduction over last three decades in Thailand 
was not declining prior to 1995, tapered off afterwards 
$2 a day 
$1.75 a day 
$1.5 a day 
$1.25 a day 
1980 1985 1990 1995 2000 2005 2010 
DEC Policy Research Talk 18 
3% headcount 
• Constant rate of poverty reduction prior to 1995 
• Small uptick in 2000 due to East Asian Crisis 
• Tapering off tendency afterwards 
 Rate of poverty reduction can 
be influenced by countries themselves 
Poverty headcount under different poverty lines (percent)
Overview of PRR structure 
Part I: Defining and assessing the goals 
> Ending Poverty by 2030 
> Understanding Shared Prosperity 
Part II: The twin goals in a broader context 
> Alternative Notions of Poverty and Shared Prosperity 
> Challenges Posed by Uncertainty 
Part III: Data and measurement challenges 
> Tracking Poverty and Shared Prosperity over Time 
> Complementary Data 
DEC Policy Research Talk
Shared Prosperity 
A brief history 
DEC Policy Research Talk
Academic and policy debate on inclusive growth 
• Chenery et al. 1974 
• GNP growth too narrow; promoting aggregate growth not distributionally neutral; 
• Sen 1983, 1985, 1999 
• Access to or ownership of material goods not goal of development 
• Emergency of non-monetary indicators such as HDI 
• 1990 WDR on Poverty 
• Posits 2.5-point poverty reduction strategy: (1) promote labor-intensive growth, 
(2) basic social services to the poor, (2.5) social safety nets 
• Policy trade-off not mainly between growth and poverty reduction, but between 
types of growth 
• Pro-poor growth debate 
• Do we care about changes in incomes of poor relative to incomes of non-poor 
(relative view) or reductions in poverty (absolute view) 
• Basu 2001, 2006 
• Development goals beyond income are desirable 
• Urgent need for summary measure 
• Proposed bottom 20 percent 
DEC Policy Research Talk 21
Shared Prosperity 
Decoding the shared prosperity measure 
DEC Policy Research Talk
What is shared prosperity? 
“Boosting the per capita income or consumption 
growth of the poorest 40 percent in a given country” 
Two key aspects informed discussion around this indicator: 
Simplicity Focus 
DEC Policy Research Talk 23
Simplicity of shared prosperity indicator 
• Tracking the income growth of the bottom 40 percent 
is clearly linked to tracking overall income growth 
• Easy conceptual extension to conventional growth measure 
• “anonymous” 
• Country-specific, without explicit target at the global level 
• Eliminates need for complementary data for cross-country 
comparisons (in contrast to global poverty estimates + PPP) 
• Ease of communications 
DEC Policy Research Talk 24
Focus of shared prosperity indicator 
• Focus on bottom tail 
• Irrespective of what is happening in the country overall, 
development should be reaching the least well-off 
• Guidance for policy design 
• 40% cut-off is arbitrary 
• Practical compromise regarding trade-offs in the empirical 
implementation of the goal 
DEC Policy Research Talk 25
40% in earlier discussions of shared 
prosperity 
…the poorest 40 percent of the 
citizenry is of immense urgency 
since their condition is in fact far 
worse than national averages 
suggest. […] 
Policies specifically designed to 
reduce the deprivation among the 
poorest 40 percent in developing 
countries are prescriptions not 
only of principle but of prudence.” 
“ 
Robert S. McNamara 
McNamara‘s address to the 1972 Annual Meetings 
DEC Policy Research Talk 26
Shared Prosperity 
Tracking shared prosperity in practice 
DEC Policy Research Talk
Who is in the bottom 40 percent? 
income distribution 
United States 
income distribution 
Brazil 
consumption distribution 
India 
Mean bottom 
40% 
Mean bottom 
40% 
Mean bottom 40% 
Average US 
household in 
bottom 40% 
would be in the 
richest 10% in 
Brazil. 
Average 
Brazilian 
household in 
bottom 40% 
would be at 
about the 90th 
percentile in 
India. 
DEC Policy Research Talk | Source: Lakner and Milanovic (2013) 28
The bottom 40 percent compared to the poor 
as defined by national poverty lines 
DEC Policy Research Talk | Source: Ravallion, Chen, Sangraula (2009) 29
Things to consider when measuring shared 
prosperity 
What constitutes success? 
• Boosting shared prosperity is a simple growth measure for the bottom 40 percent 
between two given years 
• Unlike conventional growth measures, we do not yet have a clear sense of 
interpretation 
• One option is to compare with other parts of income distribution 
Which measure of wellbeing to use? 
• Matching poverty measurement: Consumption expenditure preferable 
• Strict comparability between welfare measure (income or consumption) required 
• Even when the same measure is used, definition and construction of aggregates 
varies widely 
Which time interval to consider? 
• Which start/end point? How long? 
• Will often be driven by data availability 
DEC Policy Research Talk 30
One (of many) options to measure performance: 
Compare shared prosperity to the national average 
Bangladesh 
Brazil 
110 130 150 170 190 
South Africa 
Uganda 
110 130 150 170 190 
110 130 150 170 190 
110 130 150 170 190 
DEC Policy Research Talk 31 
Bangladesh 
110 130 150 170 190 
90 
1980 1990 2000 2010 
Year 
90 
Annual growth (1981 = 100) 
Brazil 
1980 1990 Year 
South Africa 
110 130 150 170 190 
90 
1980 1990 2000 2010 
Year 
90 
Annual growth (1989 = 100) 
Uganda 
1980 1990 Year 
Mean income/consumption of the total population 
Mean income/consumption of the bottom 40 percent 
2000 2010 
Year 
90 
Annual growth (1981 = 100) 
1980 1990 2000 2010 
Year 
2000 2010 
Year 
90 
Annual growth (1989 = 100) 
1980 1990 2000 2010 
Year 
Mean income/consumption of the total population 
Mean income/consumption of the bottom 40 percent 
Population mean 
Population mean 
Bottom 40 mean 
Bottom 40 mean
One (of many) options to measure performance: 
Compare shared prosperity to the national average 
Bangladesh 
110 130 150 170 190 
90 
Bangladesh 
This provides a means to assess 
changes in inequality of outcomes 
– even though shared prosperity goal is 
not in and of itself an inequality goal. 
1980 1990 2000 2010 
Year 
Brazil 
110 130 150 170 190 
90 
Annual growth (1981 = 100) 
Brazil 
1980 1990 Year 
South Africa 
110 130 150 170 190 
90 
1980 South Africa 
1990 2000 2010 
Year 
Uganda 
110 130 150 170 190 
90 
110 130 150 170 190 
Annual growth (1989 = 100) 
Uganda 
1980 1990 Year 
110 130 150 170 190 
DEC Policy Research Talk 32 
Mean income/consumption of the total population 
Mean income/consumption of the bottom 40 percent 
2000 2010 
Year 
90 
Annual growth (1981 = 100) 
1980 1990 2000 2010 
Year 
2000 2010 
Year 
90 
Annual growth (1989 = 100) 
1980 1990 2000 2010 
Year 
Mean income/consumption of the total population 
Mean income/consumption of the bottom 40 percent 
Population mean 
Population mean 
Bottom 40 mean 
Bottom 40 mean
Empirical illustration: Data choice and interval can 
affect performance and interpretation (Peru) 
12 
10 
8 
6 
4 
2 
Moving averages provide more 
stable estimates 
2 period 
moving 
average 
DEC Policy Research Talk | Source: Peru ENAHO household survey 33 
12 
10 
8 
6 
4 
2 
0 
Average annual growth rate (percent) 
Consumption Income 
0 
Average annual growth rate (percent) 
Consumption 
3 period 
moving 
average 
Welfare measure and time interval 
significantly influence estimates 
Given sensitivity, caution is merited in cross-country comparisons
Shared Prosperity 
Twinning the goals – boosting shared prosperity to help end global poverty 
DEC Policy Research Talk
Combining 10-year growth rates with various 
improvements in shared prosperity 
• What would happen to poverty in Paraguay if incidence 
of growth matched that of Brazil? Or, India if matched to 
Sri Lanka? “Regional Champions” example. 
• What if g40>average growth by 1% point, by 2% point? 
35 
Scenario 
Headcount 
(percent) 
Each country sustains avg per capita growth during past 10 years 4.8 
10-year growth rate, 
combined with income distributions of regional ‘best’ performers 
4.1 
10-year growth rate, 
combined with g40 1 percent point greater than growth in mean 
3.7 
10-year growth rate, 
combined with g40 2 percent points greater than growth in mean 
3 by 2028 
DEC Policy Research Talk
Part I: Defining and assessing the goals 
> Ending Poverty by 2030 
> Understanding Shared Prosperity 
Part II: The twin goals in a broader context 
> Alternative Notions of Poverty and Shared Prosperity 
> Challenges Posed by Uncertainty 
Part III: Data and measurement challenges 
> Tracking Poverty and Shared Prosperity over Time 
> Complementary Data 
36 
Overview of PRR structure 
DEC Policy Research Talk
Setting the twin goals in a broader context 
• Twin goals represent one particular set of institutional preferences 
across individuals 
• Other development partners and countries may have other preferences 
• Poverty line 
• One of many ways to focus attention on the poorest 
• Governments use wide range of different, country-specific poverty lines 
• Headcount, severity, … 
• Shared prosperity measure 
• Governments may choose to prioritize other parts of income distribution 
or all individuals throughout the distribution 
• Same weight across individuals or varying weights depending on income 
• We use social welfare functions to capture and assess 
preferences over how income is distributed 
• Other indicators should be seen as complements to twin goals 
DEC Policy Research Talk 37
Articulating priorities across individuals: Two 
ingredients for the analysis of social welfare functions 
38 
income of percentile p, y(p) 
welfare-weighted income 
of percentile p, w( y(p) ) 
 Social welfare 
Percentile of income distribution, p 
푊 = 푤 푦 푝 푑푝 
Income y 
poorer richer 
(1) Income distribution 
(2) Welfare weights 
In this example, higher weights 
are assigned to the poor and 
lower weights to the rich 
i.e. society would be in favor of 
redistribution from rich to poor. 
DEC Policy Research Talk
Alternative Notions of 
Poverty and Shared Prosperity 
Welfare functions with poverty lines 
DEC Policy Research Talk
The headcount provides an incomplete 
picture of wellbeing below the poverty line 
Poverty headcount is ca. 60% in both countries 
However, average consumption below the poverty line 
in Senegal is substantially lower than in Pakistan. 
The Headcount weights everyone 
below the poverty line equally
Alternative Notions of 
Poverty and Shared Prosperity 
Social welfare functions that care about everyone 
DEC Policy Research Talk
Beyond the poverty line: Classes of functions that 
do not distinguish between poor and non-poor 
휶 = ퟎ 
(mean 
income) 
휶 = ퟏ 
0 0.2 0.4 0.6 0.8 1 
Weight on Percentile j in Social Welfare Function 
Percentiles of income or consumption distribution 
Bottom 40 percent 
푤 푦 푝 = 퐼푝<0.4 푦(푝) 
0 0.2 0.4 0.6 0.8 1 
Weight on Percentile j in Social Welfare Function 
Percentiles of income or consumption distribution 
Weights normalized to sum to one; drawn for hypothetical lognormal income distribution (mean $2000, Gini .30). 42 
휶 = ퟐ 
Sen 
real national income 
w y p = 1 − 푔 y p 
푤 푦 푝 = 푦(푝) 
1−훼 
Atkinson 
Higher 훼  higher inequality aversion
Growth and social welfare: Decomposing growth in social welfare into 
(a) change in average incomes, and (b) change in inequality 
43 
Atkinson (1) Sen index 
Bottom 40% Poverty headcount 
DEC Policy Research Talk
Overview of PRR structure 
Part I: Defining and assessing the goals 
> Ending Poverty by 2030 
> Understanding Shared Prosperity 
Part II: The twin goals in a broader context 
> Alternative Notions of Poverty and Shared Prosperity 
> Challenges Posed by Uncertainty 
Part III: Data and measurement challenges 
> Tracking Poverty and Shared Prosperity over Time 
> Complementary Data 
DEC Policy Research Talk
Forecasts of future growth and thus 
poverty reduction are highly uncertain 
Approach 2: 
Probabilistic scenarios based on random draws from 
past variation in growth rates between 2001 and 2011 
25 
20 
15 
10 
5 
0 
Global Poverty Headcount Ratio (%) 
3% target 
Years 
Approach 1: 
Projections based on actual 
past average growth rates 
25 
Global Poverty Headcount Ratio (%) 
20 
15 
10 
5 
0 
1981-1991 
1991-2001 
2001-2011 
median 
5th to 95th percentile 
1st to 99th percentile 
Global 
headcount: 
7.1% 
3.8% 
3% target 
DEC Policy Research Talk 45
Sources of uncertainty about progress towards the twin goals 
Economic and financial crises, food price shocks 
• Unrealistic to postulate stable growth for all countries 
• Crises can affect the sustainability of programs that assist the poor 
Climate change and extreme weather patterns 
• Effect on global poverty up to 2030 may be muted 
• Key impact may be on sustainability of progress beyond 2030 
State fragility, political, social, and armed conflict 
• Up to 1/3 of the world’s poor live in FCS 
• Complicated by link with climate change 
Global disease risk (pandemics) 
• Pandemics have generated episodes of profound disruption 
• Globalization can hasten the spread of pathogens 
DEC Policy Research Talk 46
Impacts of climate change and extreme weather 
on poverty reduction and shared prosperity 
• Up to 2030, in addition to higher average temperatures, climate change will likely 
contribute to increased intensity & frequency of extreme weather events 
• Likely limited direct impact of climate change on poverty and growth 
• But: Climate change will likely disproportionately affect the poor due to limited capacity to adapt, 
dependence on natural resources and ecosystem-based services 
Climate-change incidence curves for rural India, 2040 
Land value effect 
Land value + wage + 
cereal price effect 
Land value + wage effect 
Bottom 40% 
0 20 Percentile of consumption distribution 80 100 
Change in consumption (percent) 
-2 
-3 
-4 
-5 
-6 
-7 
Source: Jacoby, Rabassa, and Skoufias (2011). 47
Overview of PRR structure 
Part I: Defining and assessing the goals 
> Ending Poverty by 2030 
> Understanding Shared Prosperity 
Part II: The twin goals in a broader context 
> Alternative Notions of Poverty and Shared Prosperity 
> Challenges Posed by Uncertainty 
Part III: Data and measurement challenges 
> Tracking Poverty and Shared Prosperity over Time 
> Complementary Data 
DEC Policy Research Talk
Twin goals require frequent monitoring, 
based on high-quality household-survey data 
• WBG focus has been on more data, more frequently 
• Driven by commitment to annual reporting for more evidence-based policy 
• Reaching the goals will require effective national poverty-reduction 
strategies, which require high-quality poverty profiles 
• Low quality / high frequency data does not produce good policy 
• PRR calls for equal weight on quality 
• Spatially refined and comparable 
• Importance of additional data and new estimation methods 
• Matters for client countries and also helps WBG global monitoring 
DEC Policy Research Talk 49
Tracking Poverty and 
Shared Prosperity over Time 
Measurement issues in household surveys 
DEC Policy Research Talk
Spatial price differences within countries 
matter for sub-national poverty profiles 
In the US, official poverty 
estimates do not account 
for cost of living differences 
• In official estimates, poverty in 
51 
non-metropolitan areas is 
higher than in metropolitan 
areas. 
• Once adjusted for cost-of-living 
differences, poverty in 
non-metro areas is 15% lower 
than in metro areas (Jolliffe, 
2004) 
Non-metro poverty less metro poverty in the US 
Official poverty estimates 
Adjusted poverty estimates 
DEC Policy Research Talk
Small area estimation methods 
for improved tracking 
• Progress will be contingent on ability to identify 
“pockets” of poverty 
• Conventional data sources unable to yield reliable 
estimates of sub-national poverty and income 
• Small-area estimation methods are seeing increased 
application 
• Methods can be applied also to non-spatially defined 
population groups and non-income dimensions 
DEC Policy Research Talk 52
Pockets of poverty and the dynamics of poverty reduction at the 
country level: Increased spatial concentration of poverty in Vietnam 
1999 2009 
53 
1999 2009 
DEC Policy Research Talk
Changes in the measurement of consumption can result in large changes of 
mean consumption and distributional measures, particularly for bottom 40 
• Across and within countries, survey 
• For mean of the bottom 40 percent, 
deviations between survey modules 
are even bigger than for the total 
population 
54 
modules to measure household 
consumption expenditure vary 
widely 
• Beegle et al. (2012) provide 
experimental evidence on the 
magnitude 
• e.g. 7 day recall module with 
collapsed list records 35% less 
consumption than benchmark 
personal diary among bottom 40 
(vs. 28% less for total population) 
Source: Adapted from Beegle et al. (2012). 
Chart plots results of a regression of log consumption on 
dummies indicating module assignment. Personal diary 
omitted. We absorb EA fixed effects but do not include 
any other controls. *** significant at 1%, ** at 5% level. 
change from benchmark personal diary 
-0.136*** 
-0.173*** 
-0.207*** 
-0.283*** 
-0.071* 
-0.039 
-0.161*** 
Diary: 
HH, infreq. 
Diary: 
HH, freq. 
Recall: 
Usual, 12 month 
Recall: 
Collapse, 7 day 
Recall: 
Subset, 7 day 
Recall: 
Long, 7 day 
Recall: 
Long, 14 day 
DEC Policy Research Talk
Changes in the measurement of consumption can result in large changes of 
mean consumption and distributional measures, particularly for bottom 40 
• Across and within countries, survey 
• For mean of the bottom 40 percent, 
deviations between survey modules 
are even bigger than for the total 
population 
55 
National 
-0.344*** 
-0.276*** 
-0.085** 
-0.170*** 
-0.355*** 
-0.161*** 
-0.071** 
modules to measure household 
consumption expenditure vary 
widely 
• Beegle et al. (2012) provide 
experimental evidence on the 
magnitude 
• e.g. 7 day recall module with 
collapsed list records 35% less 
consumption than benchmark 
personal diary among bottom 40 
(vs. 28% less for total population) 
Source: Adapted from Beegle et al. (2012). 
Chart plots results of a regression of log consumption on 
dummies indicating module assignment. Personal diary 
omitted. We absorb EA fixed effects but do not include 
any other controls. *** significant at 1%, ** at 5% level. 
change from benchmark personal diary 
-0.136*** 
-0.173*** 
-0.207*** 
-0.283*** 
-0.071* 
-0.039 
-0.161*** 
Diary: 
HH, infreq. 
Diary: 
HH, freq. 
Recall: 
Usual, 12 month 
Recall: 
Collapse, 7 day 
Recall: 
Subset, 7 day 
Recall: 
Long, 7 day 
Recall: 
Long, 14 day 
Bottom 40 
DEC Policy Research Talk
Overview of PRR structure 
Part I: Defining and assessing the goals 
> Ending Poverty by 2030 
> Understanding Shared Prosperity 
Part II: The twin goals in a broader context 
> Alternative Notions of Poverty and Shared Prosperity 
> Challenges Posed by Uncertainty 
Part III: Data and measurement challenges 
> Tracking Poverty and Shared Prosperity over Time 
> Complementary Data 
DEC Policy Research Talk
Complementary data needed to estimate 
poverty and shared prosperity 
Household surveys are a necessary input to measuring global poverty and 
shared prosperity, but they are not sufficient. 
 Several complementary data sources are also needed 
57 
Purchasing power 
parity (PPP) indices 
Population 
(census) data 
Inflation and national 
accounts growth 
• to estimate total number of 
the poor (as product of 
poverty rate and population) 
• population frame for survey 
samples 
• Make poverty line 
comparable across countries 
• Inflation data to keep 
measures of wellbeing in real 
terms 
• NA data to “line up” surveys 
into reference years 
DEC Policy Research Talk
Changing population projections and 
effects on poverty estimates 
Bangladesh, 2005 to 2015 • UN World Population Prospects 
58 
UN WPP 2012 Rev. / 
WDI 2014 and later 
UN WPP 2008 Rev. / 
WDI 2011 and earlier 
UN WPP 2010 Rev. / 
WDI 2012 and 2013 
Poverty rate in 2010 
43% 
71m poor 
65m poor 
64m poor 
(WPP) estimates serve as inputs 
to WDI and as baseline for 
official poverty estimates. 
• Example of Bangladesh: 
• Census in 2011 
• UN WPP pre-census 
estimates significantly 
higher than post-census 
estimates 
• With each revision, number 
of poor in Povcal changes, 
even at given poverty rate 
• Bangladesh not exceptional 
• United States NRC (2000): 
4.8% average absolute error 
in UN/WB 5-year projections 
DEC Policy Research Talk
New PPPs can have substantial implications for patterns of 
global poverty and lead to re-ranking of countries and regions 
1993 poverty headcount based on three PPP Indices 
1.35 bn total 1.3 bn total 1.8 bn total 
26% 25% 
51% 
24% 
15% 
10% 
43% 42% 
47% 
39% 
50% 
57% 
60% 
50% 
40% 
30% 
20% 
10% 
0% 
1985 ICP 1993 ICP 2005 ICP 
East Asia and the Pacific Latin America and the Caribbean 
South Asia Sub-Saharan Africa 
| Source: Deaton (2010) 59 
Regional poverty headcount 
$1.01 a day $1.08 a day $1.25 a day 
• 2005 ICP PPP: “the 
developing world is 
poorer than we thought” 
• Release of 2011 ICP brings 
same challenges and 
requires careful review 
• Our view: “…additional 
research will be necessary 
before international poverty 
rates can be estimated 
using the ICP PPPs” 
(International Comparison 
Program, 2014).
Projection errors in poverty estimates due to 
divergence between national accounts and surveys: 
Let’s pretend we didn’t have India’s 2009/2010 survey… 
Income distribution (density estimate) Poverty headcount, percent (at $1.25 a day, 2005 PPP) 
actual 
04/05 scaled 
to 09/10 using 
survey means 
04/05 scaled 
to 09/10 using 
national accounts 
| Sources: Povcal, India NSS, WDI, Ravallion (2008) 60 
04/05 
actual 
04/05 scaled to 09/10 
using survey means 
04/05 scaled 
to 09/10 using 
national accounts 
09/10 
actual 
222 m 
people 
41.6 
Daily consumption per capita (2005 PPP) 
Critical to better understand divergence between NA and surveys
Presentation roadmap 
1. Key takeaways from this presentation 
2. Background & context: World Bank twin goals 
3. Report overview and key messages 
4. Looking forward 
DEC Policy Research Talk
Concluding observations and looking forward 
62 
• There is a merit to twinning the goals 
• While shared prosperity indicator is not in and of itself an inequality 
measure, it does open avenues to broadening the discussion to 
include inequality of outcomes 
• Introduction of shared prosperity reasserts need to focus on 
types of growth 
• Quality of data needs as much attention as frequency 
• Data systems architectures at the country level are needed not only 
to support credible measurement of twin goals, but also for effective 
national development policy 
DEC Policy Research Talk
Thank you 
Policy Research Report 
A Measured Approach 
to Ending Poverty and Boosting Shared Prosperity 
Concepts, Data, and the Twin Goals

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Policy Research Report 2014

  • 1. Policy Research Report A Measured Approach to Ending Poverty and Boosting Shared Prosperity Concepts, Data, and the Twin Goals Dean Jolliffe, Peter Lanjouw; Shaohua Chen, Aart Kraay, Christian Meyer, Mario Negre, Espen Prydz, Renos Vakis, and Kyla Wethli DEC Policy Research Talk October 2, 2014 | Peter Lanjouw, Development Research Group (DECRG)
  • 2. 5 key takeaways from the report • Reaching the poverty goal is ambitious: Business as usual and growth alone will not get us there by 2030 • Shared prosperity has some appeal as an articulation of inclusive growth as a development goal, with historical antecedents in the literature • Growth in average incomes has historically played a large role in poverty reduction and is closely related conceptually and empirically to shared prosperity • There are various uncertainties, including climate change and extreme weather risks, that make the goals even more ambitious to attain • Measurement of twin goals critically depends on high-quality household surveys and complementary data. We need to improve access, availability, and quality of both. DEC Policy Research Talk 2
  • 3. Presentation roadmap 1. Key takeaways from this presentation 2. Background & context: World Bank twin goals 3. Report overview and key messages 4. Looking forward DEC Policy Research Talk 3
  • 4. Background: The World Bank Twin Goals Ending extreme poverty by 2030 (< 3% of global pop. below $1.25 a day) Boosting shared prosperity (Growth of incomes of bottom 40% of population in every country) PRR focuses on concepts, empirical evidence, strengths & weaknesses, and measurement related to the new twin goals • What exactly do these goals mean? • How realistic are they? • How will we assess progress towards achieving them? • What are challenges in measuring them? DEC Policy Research Talk 4
  • 5. Presentation roadmap 1. Key takeaways from this presentation 2. Background & context: World Bank twin goals 3. Report overview and key messages 4. Looking forward DEC Policy Research Talk
  • 6. Overview of PRR structure Part I: Defining and assessing the goals > Ending Poverty by 2030 > Understanding Shared Prosperity Part II: The twin goals in a broader context > Alternative Notions of Poverty and Shared Prosperity > Challenges Posed by Uncertainty Part III: Data and measurement challenges > Tracking Poverty and Shared Prosperity over Time > Complementary Data DEC Policy Research Talk
  • 7. Overview of PRR structure Part I: Defining and assessing the goals > Ending Poverty by 2030 > Understanding Shared Prosperity Part II: The twin goals in a broader context > Alternative Notions of Poverty and Shared Prosperity > Challenges Posed by Uncertainty Part III: Data and measurement challenges > Tracking Poverty and Shared Prosperity over Time > Complementary Data DEC Policy Research Talk
  • 8. Poverty Goal An overview of global poverty measurement DEC Policy Research Talk
  • 9. Measuring Global Poverty: The Basic Approach • Builds on established practice of the past 25 years • starting with 1990 WDR on Poverty • 3 key ingredients Indicator of economic wellbeing Selection of poverty line • Constructing a global database Aggregation to single summary index • Assembling and ‘cleaning’ country-level household survey data • PovcalNet + Global Poverty Working Group DEC Policy Research Talk 9
  • 10. Poverty Goal Where do we stand? DEC Policy Research Talk
  • 11. Global Poverty in 2011: Headcount and Number of Poor By Developing Region East Asia & Pacific Europe & Central Asia 415 million Developing World 17.0% DEC Policy Research Talk | Source: 2011 Povcal estimates (9/25/2014) 11 Middle East & North Africa Latin America & the Caribbean South Asia Sub-Saharan Africa 399 million 161 million 28 6 2 Headcount at $1.25 a day (2005 PPP), percent 1,010.7 million World 14.5% 1,010.7 million
  • 12. Poverty Goal What does it take? DEC Policy Research Talk
  • 13. 3% by 2030 is far from assured: Business as usual will not get us there Global Poverty in 2030 at $1.25 per day (2005 PPP), assuming unchanged inequality DEC Policy Research Talk Scenario Headcount (percent) Number of poor (million) Average income growth of 4% p.a. in each country 3 252 Each country sustains avg per capita growth during past 20 years 6.8 573 Each country sustains avg per capita growth during past 10 years 4.8 405.4 Each country sustains avg per capita growth during past 10 years (survey-based growth) 6.7 564.8 13
  • 14. A more ‘aspirational’ scenario: Country-specific future growth matches the best episode of past 20 years Global Poverty in 2030 at $1.25 per day (2005 PPP), assuming unchanged inequality and country-specific growth rates associated with best 10-year spell observed during past 20 years DEC Policy Research Talk 14 Region Headcount (percent) Number of poor (million) East Asia and Pacific 0.1 0.9 Europe and Central Asia 0.0 0.1 Latin America and the Caribbean 2.9 20.7 Middle East and North Africa 0.4 1.8 South Asia 0.6 12.0 Sub-Saharan Africa 21.0 297.4 Total Developing World 4.6 332.9 World 4.0 332.9 Even in this scenario, a number of countries remain with intolerably high poverty rates  There might be scope for a supplementary goal that calls for “no country left behind”
  • 15. Aspirational scenario: A closer look a country-specific required growth rates • For 10 countries with largest absolute number of poor today, Required and actual growth rates (avg. annual) DEC Policy Research Talk 15 3.5 3.9 6.7 2.3 2.3 1.5 4.3 1.4 1.7 3.7 1.4 3.52 3.94 7.73 3.17 4.97 1.65 6.43 5.75 3.42 5.52 7.92 8 7 6 5 4 3 2 1 0 India--Rural India--Urban China--Rural Nigeria Bangladesh Congo, Dem. Rep. Indonesia* Tanzania Ethiopia Pakistan Philippines Growth rate (percent) required growth rates to reach <3% by 2030 are not unimaginable • Challenges remain…
  • 16. Does poverty decline slow as global target is neared? The arithmetic of a declining growth elasticity While past poverty reduction had been strikingly linear… …this trend might be more difficult to attain in the future PDF CDF t0 t0 poverty line t1 t1 DEC Policy Research Talk 16 60 50 40 30 20 10 0 1981 1987 1993 1999 2005 2010 Poverty measures at $1.25 a day (percent) Global poverty headcount Global poverty gap Log income or consumption
  • 17. What does past country experience suggest about the likely pace of poverty reduction in the future? In countries where poverty has “ended” poverty decline did not always slow DEC Policy Research Talk 17
  • 18. Rate of poverty reduction over last three decades in Thailand was not declining prior to 1995, tapered off afterwards $2 a day $1.75 a day $1.5 a day $1.25 a day 1980 1985 1990 1995 2000 2005 2010 DEC Policy Research Talk 18 3% headcount • Constant rate of poverty reduction prior to 1995 • Small uptick in 2000 due to East Asian Crisis • Tapering off tendency afterwards  Rate of poverty reduction can be influenced by countries themselves Poverty headcount under different poverty lines (percent)
  • 19. Overview of PRR structure Part I: Defining and assessing the goals > Ending Poverty by 2030 > Understanding Shared Prosperity Part II: The twin goals in a broader context > Alternative Notions of Poverty and Shared Prosperity > Challenges Posed by Uncertainty Part III: Data and measurement challenges > Tracking Poverty and Shared Prosperity over Time > Complementary Data DEC Policy Research Talk
  • 20. Shared Prosperity A brief history DEC Policy Research Talk
  • 21. Academic and policy debate on inclusive growth • Chenery et al. 1974 • GNP growth too narrow; promoting aggregate growth not distributionally neutral; • Sen 1983, 1985, 1999 • Access to or ownership of material goods not goal of development • Emergency of non-monetary indicators such as HDI • 1990 WDR on Poverty • Posits 2.5-point poverty reduction strategy: (1) promote labor-intensive growth, (2) basic social services to the poor, (2.5) social safety nets • Policy trade-off not mainly between growth and poverty reduction, but between types of growth • Pro-poor growth debate • Do we care about changes in incomes of poor relative to incomes of non-poor (relative view) or reductions in poverty (absolute view) • Basu 2001, 2006 • Development goals beyond income are desirable • Urgent need for summary measure • Proposed bottom 20 percent DEC Policy Research Talk 21
  • 22. Shared Prosperity Decoding the shared prosperity measure DEC Policy Research Talk
  • 23. What is shared prosperity? “Boosting the per capita income or consumption growth of the poorest 40 percent in a given country” Two key aspects informed discussion around this indicator: Simplicity Focus DEC Policy Research Talk 23
  • 24. Simplicity of shared prosperity indicator • Tracking the income growth of the bottom 40 percent is clearly linked to tracking overall income growth • Easy conceptual extension to conventional growth measure • “anonymous” • Country-specific, without explicit target at the global level • Eliminates need for complementary data for cross-country comparisons (in contrast to global poverty estimates + PPP) • Ease of communications DEC Policy Research Talk 24
  • 25. Focus of shared prosperity indicator • Focus on bottom tail • Irrespective of what is happening in the country overall, development should be reaching the least well-off • Guidance for policy design • 40% cut-off is arbitrary • Practical compromise regarding trade-offs in the empirical implementation of the goal DEC Policy Research Talk 25
  • 26. 40% in earlier discussions of shared prosperity …the poorest 40 percent of the citizenry is of immense urgency since their condition is in fact far worse than national averages suggest. […] Policies specifically designed to reduce the deprivation among the poorest 40 percent in developing countries are prescriptions not only of principle but of prudence.” “ Robert S. McNamara McNamara‘s address to the 1972 Annual Meetings DEC Policy Research Talk 26
  • 27. Shared Prosperity Tracking shared prosperity in practice DEC Policy Research Talk
  • 28. Who is in the bottom 40 percent? income distribution United States income distribution Brazil consumption distribution India Mean bottom 40% Mean bottom 40% Mean bottom 40% Average US household in bottom 40% would be in the richest 10% in Brazil. Average Brazilian household in bottom 40% would be at about the 90th percentile in India. DEC Policy Research Talk | Source: Lakner and Milanovic (2013) 28
  • 29. The bottom 40 percent compared to the poor as defined by national poverty lines DEC Policy Research Talk | Source: Ravallion, Chen, Sangraula (2009) 29
  • 30. Things to consider when measuring shared prosperity What constitutes success? • Boosting shared prosperity is a simple growth measure for the bottom 40 percent between two given years • Unlike conventional growth measures, we do not yet have a clear sense of interpretation • One option is to compare with other parts of income distribution Which measure of wellbeing to use? • Matching poverty measurement: Consumption expenditure preferable • Strict comparability between welfare measure (income or consumption) required • Even when the same measure is used, definition and construction of aggregates varies widely Which time interval to consider? • Which start/end point? How long? • Will often be driven by data availability DEC Policy Research Talk 30
  • 31. One (of many) options to measure performance: Compare shared prosperity to the national average Bangladesh Brazil 110 130 150 170 190 South Africa Uganda 110 130 150 170 190 110 130 150 170 190 110 130 150 170 190 DEC Policy Research Talk 31 Bangladesh 110 130 150 170 190 90 1980 1990 2000 2010 Year 90 Annual growth (1981 = 100) Brazil 1980 1990 Year South Africa 110 130 150 170 190 90 1980 1990 2000 2010 Year 90 Annual growth (1989 = 100) Uganda 1980 1990 Year Mean income/consumption of the total population Mean income/consumption of the bottom 40 percent 2000 2010 Year 90 Annual growth (1981 = 100) 1980 1990 2000 2010 Year 2000 2010 Year 90 Annual growth (1989 = 100) 1980 1990 2000 2010 Year Mean income/consumption of the total population Mean income/consumption of the bottom 40 percent Population mean Population mean Bottom 40 mean Bottom 40 mean
  • 32. One (of many) options to measure performance: Compare shared prosperity to the national average Bangladesh 110 130 150 170 190 90 Bangladesh This provides a means to assess changes in inequality of outcomes – even though shared prosperity goal is not in and of itself an inequality goal. 1980 1990 2000 2010 Year Brazil 110 130 150 170 190 90 Annual growth (1981 = 100) Brazil 1980 1990 Year South Africa 110 130 150 170 190 90 1980 South Africa 1990 2000 2010 Year Uganda 110 130 150 170 190 90 110 130 150 170 190 Annual growth (1989 = 100) Uganda 1980 1990 Year 110 130 150 170 190 DEC Policy Research Talk 32 Mean income/consumption of the total population Mean income/consumption of the bottom 40 percent 2000 2010 Year 90 Annual growth (1981 = 100) 1980 1990 2000 2010 Year 2000 2010 Year 90 Annual growth (1989 = 100) 1980 1990 2000 2010 Year Mean income/consumption of the total population Mean income/consumption of the bottom 40 percent Population mean Population mean Bottom 40 mean Bottom 40 mean
  • 33. Empirical illustration: Data choice and interval can affect performance and interpretation (Peru) 12 10 8 6 4 2 Moving averages provide more stable estimates 2 period moving average DEC Policy Research Talk | Source: Peru ENAHO household survey 33 12 10 8 6 4 2 0 Average annual growth rate (percent) Consumption Income 0 Average annual growth rate (percent) Consumption 3 period moving average Welfare measure and time interval significantly influence estimates Given sensitivity, caution is merited in cross-country comparisons
  • 34. Shared Prosperity Twinning the goals – boosting shared prosperity to help end global poverty DEC Policy Research Talk
  • 35. Combining 10-year growth rates with various improvements in shared prosperity • What would happen to poverty in Paraguay if incidence of growth matched that of Brazil? Or, India if matched to Sri Lanka? “Regional Champions” example. • What if g40>average growth by 1% point, by 2% point? 35 Scenario Headcount (percent) Each country sustains avg per capita growth during past 10 years 4.8 10-year growth rate, combined with income distributions of regional ‘best’ performers 4.1 10-year growth rate, combined with g40 1 percent point greater than growth in mean 3.7 10-year growth rate, combined with g40 2 percent points greater than growth in mean 3 by 2028 DEC Policy Research Talk
  • 36. Part I: Defining and assessing the goals > Ending Poverty by 2030 > Understanding Shared Prosperity Part II: The twin goals in a broader context > Alternative Notions of Poverty and Shared Prosperity > Challenges Posed by Uncertainty Part III: Data and measurement challenges > Tracking Poverty and Shared Prosperity over Time > Complementary Data 36 Overview of PRR structure DEC Policy Research Talk
  • 37. Setting the twin goals in a broader context • Twin goals represent one particular set of institutional preferences across individuals • Other development partners and countries may have other preferences • Poverty line • One of many ways to focus attention on the poorest • Governments use wide range of different, country-specific poverty lines • Headcount, severity, … • Shared prosperity measure • Governments may choose to prioritize other parts of income distribution or all individuals throughout the distribution • Same weight across individuals or varying weights depending on income • We use social welfare functions to capture and assess preferences over how income is distributed • Other indicators should be seen as complements to twin goals DEC Policy Research Talk 37
  • 38. Articulating priorities across individuals: Two ingredients for the analysis of social welfare functions 38 income of percentile p, y(p) welfare-weighted income of percentile p, w( y(p) )  Social welfare Percentile of income distribution, p 푊 = 푤 푦 푝 푑푝 Income y poorer richer (1) Income distribution (2) Welfare weights In this example, higher weights are assigned to the poor and lower weights to the rich i.e. society would be in favor of redistribution from rich to poor. DEC Policy Research Talk
  • 39. Alternative Notions of Poverty and Shared Prosperity Welfare functions with poverty lines DEC Policy Research Talk
  • 40. The headcount provides an incomplete picture of wellbeing below the poverty line Poverty headcount is ca. 60% in both countries However, average consumption below the poverty line in Senegal is substantially lower than in Pakistan. The Headcount weights everyone below the poverty line equally
  • 41. Alternative Notions of Poverty and Shared Prosperity Social welfare functions that care about everyone DEC Policy Research Talk
  • 42. Beyond the poverty line: Classes of functions that do not distinguish between poor and non-poor 휶 = ퟎ (mean income) 휶 = ퟏ 0 0.2 0.4 0.6 0.8 1 Weight on Percentile j in Social Welfare Function Percentiles of income or consumption distribution Bottom 40 percent 푤 푦 푝 = 퐼푝<0.4 푦(푝) 0 0.2 0.4 0.6 0.8 1 Weight on Percentile j in Social Welfare Function Percentiles of income or consumption distribution Weights normalized to sum to one; drawn for hypothetical lognormal income distribution (mean $2000, Gini .30). 42 휶 = ퟐ Sen real national income w y p = 1 − 푔 y p 푤 푦 푝 = 푦(푝) 1−훼 Atkinson Higher 훼  higher inequality aversion
  • 43. Growth and social welfare: Decomposing growth in social welfare into (a) change in average incomes, and (b) change in inequality 43 Atkinson (1) Sen index Bottom 40% Poverty headcount DEC Policy Research Talk
  • 44. Overview of PRR structure Part I: Defining and assessing the goals > Ending Poverty by 2030 > Understanding Shared Prosperity Part II: The twin goals in a broader context > Alternative Notions of Poverty and Shared Prosperity > Challenges Posed by Uncertainty Part III: Data and measurement challenges > Tracking Poverty and Shared Prosperity over Time > Complementary Data DEC Policy Research Talk
  • 45. Forecasts of future growth and thus poverty reduction are highly uncertain Approach 2: Probabilistic scenarios based on random draws from past variation in growth rates between 2001 and 2011 25 20 15 10 5 0 Global Poverty Headcount Ratio (%) 3% target Years Approach 1: Projections based on actual past average growth rates 25 Global Poverty Headcount Ratio (%) 20 15 10 5 0 1981-1991 1991-2001 2001-2011 median 5th to 95th percentile 1st to 99th percentile Global headcount: 7.1% 3.8% 3% target DEC Policy Research Talk 45
  • 46. Sources of uncertainty about progress towards the twin goals Economic and financial crises, food price shocks • Unrealistic to postulate stable growth for all countries • Crises can affect the sustainability of programs that assist the poor Climate change and extreme weather patterns • Effect on global poverty up to 2030 may be muted • Key impact may be on sustainability of progress beyond 2030 State fragility, political, social, and armed conflict • Up to 1/3 of the world’s poor live in FCS • Complicated by link with climate change Global disease risk (pandemics) • Pandemics have generated episodes of profound disruption • Globalization can hasten the spread of pathogens DEC Policy Research Talk 46
  • 47. Impacts of climate change and extreme weather on poverty reduction and shared prosperity • Up to 2030, in addition to higher average temperatures, climate change will likely contribute to increased intensity & frequency of extreme weather events • Likely limited direct impact of climate change on poverty and growth • But: Climate change will likely disproportionately affect the poor due to limited capacity to adapt, dependence on natural resources and ecosystem-based services Climate-change incidence curves for rural India, 2040 Land value effect Land value + wage + cereal price effect Land value + wage effect Bottom 40% 0 20 Percentile of consumption distribution 80 100 Change in consumption (percent) -2 -3 -4 -5 -6 -7 Source: Jacoby, Rabassa, and Skoufias (2011). 47
  • 48. Overview of PRR structure Part I: Defining and assessing the goals > Ending Poverty by 2030 > Understanding Shared Prosperity Part II: The twin goals in a broader context > Alternative Notions of Poverty and Shared Prosperity > Challenges Posed by Uncertainty Part III: Data and measurement challenges > Tracking Poverty and Shared Prosperity over Time > Complementary Data DEC Policy Research Talk
  • 49. Twin goals require frequent monitoring, based on high-quality household-survey data • WBG focus has been on more data, more frequently • Driven by commitment to annual reporting for more evidence-based policy • Reaching the goals will require effective national poverty-reduction strategies, which require high-quality poverty profiles • Low quality / high frequency data does not produce good policy • PRR calls for equal weight on quality • Spatially refined and comparable • Importance of additional data and new estimation methods • Matters for client countries and also helps WBG global monitoring DEC Policy Research Talk 49
  • 50. Tracking Poverty and Shared Prosperity over Time Measurement issues in household surveys DEC Policy Research Talk
  • 51. Spatial price differences within countries matter for sub-national poverty profiles In the US, official poverty estimates do not account for cost of living differences • In official estimates, poverty in 51 non-metropolitan areas is higher than in metropolitan areas. • Once adjusted for cost-of-living differences, poverty in non-metro areas is 15% lower than in metro areas (Jolliffe, 2004) Non-metro poverty less metro poverty in the US Official poverty estimates Adjusted poverty estimates DEC Policy Research Talk
  • 52. Small area estimation methods for improved tracking • Progress will be contingent on ability to identify “pockets” of poverty • Conventional data sources unable to yield reliable estimates of sub-national poverty and income • Small-area estimation methods are seeing increased application • Methods can be applied also to non-spatially defined population groups and non-income dimensions DEC Policy Research Talk 52
  • 53. Pockets of poverty and the dynamics of poverty reduction at the country level: Increased spatial concentration of poverty in Vietnam 1999 2009 53 1999 2009 DEC Policy Research Talk
  • 54. Changes in the measurement of consumption can result in large changes of mean consumption and distributional measures, particularly for bottom 40 • Across and within countries, survey • For mean of the bottom 40 percent, deviations between survey modules are even bigger than for the total population 54 modules to measure household consumption expenditure vary widely • Beegle et al. (2012) provide experimental evidence on the magnitude • e.g. 7 day recall module with collapsed list records 35% less consumption than benchmark personal diary among bottom 40 (vs. 28% less for total population) Source: Adapted from Beegle et al. (2012). Chart plots results of a regression of log consumption on dummies indicating module assignment. Personal diary omitted. We absorb EA fixed effects but do not include any other controls. *** significant at 1%, ** at 5% level. change from benchmark personal diary -0.136*** -0.173*** -0.207*** -0.283*** -0.071* -0.039 -0.161*** Diary: HH, infreq. Diary: HH, freq. Recall: Usual, 12 month Recall: Collapse, 7 day Recall: Subset, 7 day Recall: Long, 7 day Recall: Long, 14 day DEC Policy Research Talk
  • 55. Changes in the measurement of consumption can result in large changes of mean consumption and distributional measures, particularly for bottom 40 • Across and within countries, survey • For mean of the bottom 40 percent, deviations between survey modules are even bigger than for the total population 55 National -0.344*** -0.276*** -0.085** -0.170*** -0.355*** -0.161*** -0.071** modules to measure household consumption expenditure vary widely • Beegle et al. (2012) provide experimental evidence on the magnitude • e.g. 7 day recall module with collapsed list records 35% less consumption than benchmark personal diary among bottom 40 (vs. 28% less for total population) Source: Adapted from Beegle et al. (2012). Chart plots results of a regression of log consumption on dummies indicating module assignment. Personal diary omitted. We absorb EA fixed effects but do not include any other controls. *** significant at 1%, ** at 5% level. change from benchmark personal diary -0.136*** -0.173*** -0.207*** -0.283*** -0.071* -0.039 -0.161*** Diary: HH, infreq. Diary: HH, freq. Recall: Usual, 12 month Recall: Collapse, 7 day Recall: Subset, 7 day Recall: Long, 7 day Recall: Long, 14 day Bottom 40 DEC Policy Research Talk
  • 56. Overview of PRR structure Part I: Defining and assessing the goals > Ending Poverty by 2030 > Understanding Shared Prosperity Part II: The twin goals in a broader context > Alternative Notions of Poverty and Shared Prosperity > Challenges Posed by Uncertainty Part III: Data and measurement challenges > Tracking Poverty and Shared Prosperity over Time > Complementary Data DEC Policy Research Talk
  • 57. Complementary data needed to estimate poverty and shared prosperity Household surveys are a necessary input to measuring global poverty and shared prosperity, but they are not sufficient.  Several complementary data sources are also needed 57 Purchasing power parity (PPP) indices Population (census) data Inflation and national accounts growth • to estimate total number of the poor (as product of poverty rate and population) • population frame for survey samples • Make poverty line comparable across countries • Inflation data to keep measures of wellbeing in real terms • NA data to “line up” surveys into reference years DEC Policy Research Talk
  • 58. Changing population projections and effects on poverty estimates Bangladesh, 2005 to 2015 • UN World Population Prospects 58 UN WPP 2012 Rev. / WDI 2014 and later UN WPP 2008 Rev. / WDI 2011 and earlier UN WPP 2010 Rev. / WDI 2012 and 2013 Poverty rate in 2010 43% 71m poor 65m poor 64m poor (WPP) estimates serve as inputs to WDI and as baseline for official poverty estimates. • Example of Bangladesh: • Census in 2011 • UN WPP pre-census estimates significantly higher than post-census estimates • With each revision, number of poor in Povcal changes, even at given poverty rate • Bangladesh not exceptional • United States NRC (2000): 4.8% average absolute error in UN/WB 5-year projections DEC Policy Research Talk
  • 59. New PPPs can have substantial implications for patterns of global poverty and lead to re-ranking of countries and regions 1993 poverty headcount based on three PPP Indices 1.35 bn total 1.3 bn total 1.8 bn total 26% 25% 51% 24% 15% 10% 43% 42% 47% 39% 50% 57% 60% 50% 40% 30% 20% 10% 0% 1985 ICP 1993 ICP 2005 ICP East Asia and the Pacific Latin America and the Caribbean South Asia Sub-Saharan Africa | Source: Deaton (2010) 59 Regional poverty headcount $1.01 a day $1.08 a day $1.25 a day • 2005 ICP PPP: “the developing world is poorer than we thought” • Release of 2011 ICP brings same challenges and requires careful review • Our view: “…additional research will be necessary before international poverty rates can be estimated using the ICP PPPs” (International Comparison Program, 2014).
  • 60. Projection errors in poverty estimates due to divergence between national accounts and surveys: Let’s pretend we didn’t have India’s 2009/2010 survey… Income distribution (density estimate) Poverty headcount, percent (at $1.25 a day, 2005 PPP) actual 04/05 scaled to 09/10 using survey means 04/05 scaled to 09/10 using national accounts | Sources: Povcal, India NSS, WDI, Ravallion (2008) 60 04/05 actual 04/05 scaled to 09/10 using survey means 04/05 scaled to 09/10 using national accounts 09/10 actual 222 m people 41.6 Daily consumption per capita (2005 PPP) Critical to better understand divergence between NA and surveys
  • 61. Presentation roadmap 1. Key takeaways from this presentation 2. Background & context: World Bank twin goals 3. Report overview and key messages 4. Looking forward DEC Policy Research Talk
  • 62. Concluding observations and looking forward 62 • There is a merit to twinning the goals • While shared prosperity indicator is not in and of itself an inequality measure, it does open avenues to broadening the discussion to include inequality of outcomes • Introduction of shared prosperity reasserts need to focus on types of growth • Quality of data needs as much attention as frequency • Data systems architectures at the country level are needed not only to support credible measurement of twin goals, but also for effective national development policy DEC Policy Research Talk
  • 63. Thank you Policy Research Report A Measured Approach to Ending Poverty and Boosting Shared Prosperity Concepts, Data, and the Twin Goals

Editor's Notes

  1. The PRR will try to inform at two levels: First, given the articulation of the two institutional goals, we will look at them in detail and attempt to provide guidance as to their derivation and interpretation. Second, we will take advantage of the renewed attention to the concerns embodied in the two goals, to step back and provide a broader perspective on the kind of indicators and issues that one might wish to examine. This broader objective will be somewhat partial and incomplete. We will focus on those areas that are particularly pertinent to our, and the World Bank’s objectives, and where we feel research has something useful to say.
  2. The PRR will try to inform at two levels: First, given the articulation of the two institutional goals, we will look at them in detail and attempt to provide guidance as to their derivation and interpretation. Second, we will take advantage of the renewed attention to the concerns embodied in the two goals, to step back and provide a broader perspective on the kind of indicators and issues that one might wish to examine. This broader objective will be somewhat partial and incomplete. We will focus on those areas that are particularly pertinent to our, and the World Bank’s objectives, and where we feel research has something useful to say.
  3. Articulation of the shared prosperity goal builds on an existing literature on inclusive growth as a goal for development.
  4. The goal of boosting shared prosperity requires increasing the average income of the bottom 40% percent of the population over time. Unlike the poverty goal, it is a country-specific goal which is unbounded (rather than having a specific target). Simplicity: Shared Prosperity Goal? Unbounded, Clear conceptual linkage to average income growth Focus: 40% cut-off is arbitrary. But focus on bottom 40% echoes Rawlsian concern that irrespective of what is happening overall, development should be reaching the least well-off. Theory: Compliance with some conventional axioms. Anonymity, weak Pareto principle
  5. The people who constitute the bottom 40 percent are likely to vary substantially across countries. In low- and lower-middle-income countries there will likely be significant overlap between those living in poverty and the bottom 40 percent of the population: tracking shared prosperity can thus reinforce poverty reduction efforts in these countries. By contrast, the bottom 40 percent of the population in upper-middle-income countries are likely to be non-poor: in these countries tracking shared prosperity can bring attention to those not covered by poverty policies but who might otherwise be relatively left behind.
  6. Another possibility is to compare the performance of the bottom 40 percent with that of other parts of the income distribution (for example the top 60 percent of the population) or overall national average performance. Alongside trends in average income of the bottom 40 percent, figure 3.4 also shows annualized growth rates for the population as a whole. In addition to providing a means to compare performance of shared prosperity across countries, this comparison also allows an assessment of the evolution of income inequality (this point is discussed further below). For example, the bottom 40 percent in South Africa did better than average during the mid-1990s (suggesting not only that incomes at the bottom 40 grew but also that there was some catching up). By contrast, by the 2000s, income growth for the bottom 40 increased compared to the mid-1990s, but was significantly slower than average income growth, implying increased inequality. So even though shared prosperity was boosted over this period in South Africa (average incomes of the bottom 40 percent increased), the bottom 40 percent underperformed relative to the rest of the population. In Uganda, on the other hand, the trends suggest not only that shared prosperity has been increasing over time, but the bottom 40 percent also did at least as well as the rest of the population (the growth rate was the same as or exceeded the overall average). Note, examining inequality in this way takes us to an assessment of inequality of outcomes WB has historically focused on inequality of opportunity
  7. Another possibility is to compare the performance of the bottom 40 percent with that of other parts of the income distribution (for example the top 60 percent of the population) or overall national average performance. Alongside trends in average income of the bottom 40 percent, figure 3.4 also shows annualized growth rates for the population as a whole. In addition to providing a means to compare performance of shared prosperity across countries, this comparison also allows an assessment of the evolution of income inequality (this point is discussed further below). For example, the bottom 40 percent in South Africa did better than average during the mid-1990s (suggesting not only that incomes at the bottom 40 grew but also that there was some catching up). By contrast, by the 2000s, income growth for the bottom 40 increased compared to the mid-1990s, but was significantly slower than average income growth, implying increased inequality. So even though shared prosperity was boosted over this period in South Africa (average incomes of the bottom 40 percent increased), the bottom 40 percent underperformed relative to the rest of the population. In Uganda, on the other hand, the trends suggest not only that shared prosperity has been increasing over time, but the bottom 40 percent also did at least as well as the rest of the population (the growth rate was the same as or exceeded the overall average). Note, examining inequality in this way takes us to an assessment of inequality of outcomes WB has historically focused on inequality of opportunity
  8. We identify regional ‘champions’ with spells of pro-poor growth incidence, Thailand (EAP), Sri Lanka (SA), Rwanda (SSA), Brazil (LAC), Jordan (MENA),