Unknown: The Extent, Distribution, and Trend of Global Income Poverty

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 vitiates 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 an incorrect inference that it has declined. A new methodology of global poverty assessment is feasible and necessary. For some 16 years now, the World Bank (‘the Bank’) has regularly reported the number of people living below an international poverty line, colloquially known as ‘$1/day’. Reports for the most recent year, 2001, put this number at 1,089 million. The Bank’s estimates of 1 We would like to thank for their most helpful comments Sudhir Anand, Christian Barry, David Grewal, Howard Nye, Michael Reich, Ling Tong, and Robert Wade. We are also most grateful for the comments of participants at a workshop of the Initiative for Policy Dialogue (held in New York on March 31 and April 1, 2003) including Shaohua Chen, Angus Deaton and Martin Ravallion. None of these individuals are responsible for any remaining inadequacies. 2 Chen and Ravallion 2004, 153