International income poverty measurement: which way now?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Stephan Klasen*, Tatyana Krivobokova*, Friederike Greb**, Rahul Lahoti*, Syamsul Hidayat Pasaribu***, and Manuel Wiesenfarth**** August, 2015 Terms of use: Documents in AbstractIn this paper, we critically review conceptual and empirical issues surrounding the derivation of the international poverty line, expressed in PPP-adjusted dollars and linked to various rounds of the International Comparison of Prices (ICP). We find that there are some limitations in the current estimation of these lines, but show that statistically superior methods lead to lines that are relatively robust and confirm the $1.25 using 2005PPPs and suggest $1.67-1.71 using 2011PPPs; they also roughly confirm the current shape of the proposed 'weakly relative' poverty line. Using the new absolute line using 2011 PPPs would lead to substantially lower poverty in our estimation. The extent of the decline depends on whether and how one treats China, India, and Indonesia differently from other countries in the 2005 and 2011 PPPs. More seriously, we note that the dependence on the conceptual and empirical problems associated with the link to successive ICP rounds creates problems that have gotten worse over time so that we suggest that it would be best to consider alternatives to the current reliance on ICP rounds and the resulting PPPs. As a quick fix we propose to fix the international poverty line in national currencies using either the 2005 or 2011 level; in the medium term, we argue for global poverty measurement based on internationally coordinated national poverty measurement.

An Asian Poverty Line? Issues and Options

“…In particular, in the linear model used by Ravallion, Chen and Sangraula (2009), there actually is no statistical evidence of a kink in the curve so that the kink is imposed on the data rather than observed (which is visible from Figure 2b, see Greb et al 2012 andKlasen et al 2015). In the log-linear model, the residuals are not normally distributed so that the inference, especially regarding location and significance of the kink which separates the flat from the rising portion, is problematic.…”

“…In the log-linear model, the residuals are not normally distributed so that the inference, especially regarding location and significance of the kink which separates the flat from the rising portion, is problematic. As shown by Klasen et al (2015), the preferred statistical specification is actually a log-log model where there is statistical evidence for a kink as well as normally distributed residuals. Using the latter model, a global poverty line of about $1.21 is obtained, with a slightly larger reference group (of 19 countries).…”

“…It led to the switch of the international poverty line from $1.08 in 1993 dollars to $1.25 in 2005 dollars. Currently, similar issues are arising with the new 2011 PPPs which could lead to serious reassessments of poverty levels in the world and in different regions (Klasen et al 2015). More seriously, the 2008 revision led to a massive upward shift in global poverty for all years, e.g., from about 29% in 1990 to about 41% in the same year; thus, the base year of the first MDG was changed substantially with a large impact on what halving global poverty would mean.…”

“…Such a weakly relative poverty line has several features that make it advantageous to be used for an Asian poverty line (see Klasen 2013;Klasen et al 2015). First, it adjusts the poverty line 'automatically' with increasing prosperity in Asia, thereby addressing the problem of the increasing irrelevance of the very low $1.25-a-day poverty line.…”

“…We then discuss various options of developing such a poverty line, considering income and multidimensional versions of such a poverty line. We argue that there can be some merit in developing an Asian poverty line and that, in the case of income poverty, it would be best to ground such an Asian-specific poverty line in a consistent method of generating national poverty lines using national currencies rather than generating a PPP-adjusted poverty line in international dollars (see also Klasen 2013a andKlasen et al 2015). It is important that such a poverty line also considers relative poverty in its assessment to reflect the rising aspirations of Asian societies (see Ravallion and Chen 2011;Chen and Ravallion 2013).…”