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
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
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
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
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
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
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.
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.
Articulation of the shared prosperity goal builds on an existing literature on inclusive growth as a goal for development.
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
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.
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
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
We identify regional ‘champions’ with spells of pro-poor growth incidence, Thailand (EAP), Sri Lanka (SA), Rwanda (SSA), Brazil (LAC), Jordan (MENA),