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Global poverty estimates based on 2011 purchasing power parity: where should the new poverty line be drawn?

Author

Listed:
  • Nanak Kakwani

    (University of New South Wales)

  • Hyun H. Son

    (Asian Development Bank)

Abstract

This paper aims to present a new global poverty line based on the 2011 Purchasing Power Parity (PPP). To calculate a new global poverty threshold based on 2011 PPP, this paper moves away from the World Bank’s method of anchoring a single global poverty line on the national poverty lines of the 15 poorest countries. It instead proposes an alternative method of using equivalent poverty lines. Each country is shown to have a different equivalent poverty line. This paper finds that there is no single international poverty line in 2011 PPP that is equivalent to $1.25 in 2005 PPP. Single poverty lines vary for each region because countries have experienced different inflation rates and have different PPP conversion rates between 2005 and 2011. To calculate a single poverty line in 2011 PPP, this paper measures the weighted average of equivalent poverty lines of 101 countries around the globe with weights proportional to their populations. Based on the new method, the corresponding poverty line is estimated at $1.93 in 2011 PPP. The World Bank has officially adopted the poverty line of $1.90 in 2011 PPP. This paper demonstrates that our proposed poverty line performs better than the World Bank’s in terms of preserving the real purchasing power of the previous line of $1.25 in 2005 PPP. Given the new poverty threshold of $1.93, the number of poor worldwide is reduced by 6.42 million, with the reduction largely occurring in South Asia and Sub-Saharan Africa.

Suggested Citation

  • Nanak Kakwani & Hyun H. Son, 2016. "Global poverty estimates based on 2011 purchasing power parity: where should the new poverty line be drawn?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 173-184, June.
    • Handle: RePEc:kap:jecinq:v:14:y:2016:i:2:d:10.1007_s10888-016-9322-x
    DOI: 10.1007/s10888-016-9322-x
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    1. repec:pri:rpdevs:deaton_price_indexes_inequality_and_the_measurement_of_world_poverty_aer. is not listed on IDEAS
    2. Jolliffe, Dean & Prydz, Espen Beer, 2015. "Global Poverty Goals and Prices: How Purchasing Power Parity Matters," IZA Discussion Papers 9064, Institute of Labor Economics (IZA).
    3. Crombrugghe, D.P.I. de & Szirmai, A. & Bluhm, R., 2014. "Poor trends: The pace of poverty reduction after the Millennium Development Agenda," MERIT Working Papers 2014-006, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Francisco H. G. Ferreira & Shaohua Chen & Andrew Dabalen & Yuri Dikhanov & Nada Hamadeh & Dean Jolliffe & Ambar Narayan & Espen Beer Prydz & Ana Revenga & Prem Sangraula & Umar Serajuddin & Nobuo Yosh, 2016. "A global count of the extreme poor in 2012: data issues, methodology and initial results," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 141-172, June.
    5. Angus Deaton, 2010. "Price Indexes, Inequality, and the Measurement of World Poverty," American Economic Review, American Economic Association, vol. 100(1), pages 5-34, March.
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    Cited by:

    1. Moatsos, Michail, 2020. "Global Absolute Poverty: The Evolution of its Measurement," EconStor Preprints 216642, ZBW - Leibniz Information Centre for Economics.
    2. Jolliffe,Dean Mitchell & Mahler,Daniel Gerszon & Lakner,Christoph & Atamanov,Aziz & Tetteh Baah,Samuel Kofi, 2022. "Assessing the Impact of the 2017 PPPs on the International Poverty Line and Global Poverty," Policy Research Working Paper Series 9941, The World Bank.
    3. Martin Ravallion, 2016. "Toward better global poverty measures," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 227-248, June.
    4. Robert C. Allen, 2017. "Absolute Poverty: When Necessity Displaces Desire," American Economic Review, American Economic Association, vol. 107(12), pages 3690-3721, December.
    5. Ramprasad Sengupta & Sovik Mukherjee, 2018. "Crime, Deprivation and Social Sustainability—Evidence across States in India," Indian Journal of Human Development, , vol. 12(3), pages 354-377, December.
    6. Robert C. Allen, 2017. "Absolute Poverty: When Necessity Displaces Desire REVISED," Working Papers 20170005, New York University Abu Dhabi, Department of Social Science, revised Jun 2017.

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