Global Absolute Poverty: Behind the Veil of Dollars

Abstract

Abstract:The widely applied "dollar-a-day" methodology identifies global absolute poverty as declining precipitously since the early 80's throughout the developing world. The methodological underpinnings of the "dollar-a-day" approach have been questioned in terms of adequately representing equivalent welfare conditions in different countries and years. These key issues of measuring global poverty are addressed here using the concept of the bare bones consumption basket (BBB). This methodology pinpoints equivalent levels of welfare, both internationally and intertemporally. The results validate the critique against the "dollar-a-day" methodology, showing large variations in costs of BBB between countries and years, even when one explicitly allows for additional expenses such as education and health. This volatility represents the differential among the typically used average CPI and a price index which is more relevant to those living in absolute poverty. On a point estimate level, success in terms of the first Millennium Development Goal (MDG) appears marginal. Once uncertainty in the estimates is accounted for, the BBB poverty lines provide the ground to dispute MDG 1 early celebrations. While BBB absolute poverty remains at very low levels during the entire 1983-2014 period, it also demonstrates strong persistence throughout. On the contrary, the higher welfare level BBB derivative shows overall much less flattering poverty levels.

The Unbearable Errorlessness of Global Poverty Estimates

“…There are good empirical grounds that cast doubt about the feasibility of the task, broadly speaking. Moatsos (2016) shows that the dollar a day method buys a different basket each year in each country, therefore it is impossible to be held constant in PPP dollar and real welfare terms overall. 4 It is very unlikely that future price trends (as captured by average CPI) will evolve is such differentials globally as to conspire and allow for an iPL to buy a welfare equivalent consumption basket all around the globe.…”

Poverty, Inequality, and Development in the Philippines: Official Statistics and Selected Life Stories

“…Official World Bank statistics on poverty and their traditional measurements are put into question (Moatsos, 2017) and calls are made for the "measurement of poverty in both monetary and non-monetary dimensions" so as to "reduce poverty in all its forms" (Saunders, 2018). Even an IMF-funded study (Ostry et al, 2016) admits that instead of delivering growth, neoliberalism has not succeeded in bringing economic development to the broadest number of people, as massive poverty and income inequality abound in many countries, more especially in the developing world (San Juan, 2017).…”

Global Absolute Poverty, Present and Past since 1820

“…Although we use normal distributions to draw values for those shares, the minimum and maximum observed in the sub-national data were respected, and draws outside those limits were recast. 41 For further details about its calculation see FAO (2008), and Moatsos (2017a) for its use in poverty measurement. 42 For countries without height data the regional average was used, and for countries with missing data the average growth from the region was used for data imputation.…”

“…31 One way of dealing with this is through linear programming. See Moatsos (2017a) and Allen (2017) for some examples. Linear programming is used in all poverty related empirical chapters of this thesis.…”

“…However, reliable estimates and conclusions can only be the result of a well founded methodology. The lack of convincing methodological underpinnings has been the principal concern in the long list of critics throughout the literature (Reddy and Pogge, 2010;Deaton, 2010a;Srinivasan, 2010;Aten and Heston, 2010;Subramanian, 2015;Moatsos, 2015). Those voiced concerns boil down to the issue of intertemporal and international consistency in measuring absolute poverty.…”