How Not to Count the Poor

The estimates of the extent, distribution and trend of global income poverty provided in the World Bank's World Development Reports for 1990 and 2000/01 are neither meaningful nor reliable. The Bank uses an arbitrary international poverty line unrelated to any clear conception of what poverty is. It employs a misleading and inaccurate measure of purchasing power "equivalence" that creates serious and irreparable difficulties for international and intertemporal comparisons of income poverty. It extrapolates incorrectly from limited data and thereby creates an appearance of precision that masks the high probable error of its estimates. The systematic distortion introduced by these three flaws likely leads to a large understatement of the extent of global income poverty and to a false appearance of its decline. A new methodology of global poverty assessment is feasible and necessary. 1 Dept. of Economics, Barnard College, Columbia University: [email protected] 2 Dept. of Philosophy, Columbia University: [email protected]. 3 The latest version of the paper, along with a précis in non-technical form, and our responses to attempted defenses of the World Bank’s approach to measuring global income poverty, will be made available on www.socialanalysis.org.