Global and Country Poverty Rates, Welfare Rankings of the Regions and Purchasing Power Parities: How Robust Are the Results?

This four-part study examines the sensitivity of poverty estimates, regional composition of the ‘extremely poor’ population, and regional rankings to the Purchasing Power Parities (PPPs) used. The first part compares PPPs that use the price information collected by the ICP but follow a different methodology and, also, from a procedure that avoids the need for price information altogether. The second part examines sensitivity of poverty rates and poverty trends to PPPs. The results establish non-robustness of both. In the third part, the study finds that PPPs and inequality, both, have a positive effect on poverty. Finally, the paper proposes a methodology that uses the price and expenditure information and a welfare criterion due to Sen (1976) to rank regions, and examines the sensitivity of the rankings, and their temporal changes, to PPP. The results point to the need for high quality, item wise price and expenditure information across countries, improved PPP methodologies, explicit incorporation of inequality in the welfare measure, and more sensitivity analyses in cross country welfare comparisons with respect to PPP.