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

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  • Amita Majumder
  • Ranjan Ray
  • Sattwik Santra

Abstract

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.

Suggested Citation

  • Amita Majumder & Ranjan Ray & Sattwik Santra, 2016. "Global and Country Poverty Rates, Welfare Rankings of the Regions and Purchasing Power Parities: How Robust Are the Results?," Monash Economics Working Papers 11-16, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2016-11
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    References listed on IDEAS

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    1. Ranjan Ray, 2017. "The Role of Prices in Welfare Comparisons: Methodological Developments and a Selective Survey of the Empirical Literature," The Economic Record, The Economic Society of Australia, vol. 93(301), pages 314-332, June.

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    More about this item

    Keywords

    Poverty Rates; Purchasing Power Parity; Penn Effect; Price Indices;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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