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On the Relevance of Relative Poverty for Developing Countries

Author

Listed:
  • Christopher Garroway

    (OECD)

  • Juan Ramón de Laiglesia

    (OECD)

Abstract

Poverty is typically measured in different ways in developing and advanced countries. The majority of developing countries measure poverty in absolute terms, using a poverty line determined by the monetary cost of a predetermined basket of goods. In contrast, most analyses of poverty in advanced countries, including the majority of OECD countries and Eurostat, measure poverty in relative terms, setting the poverty line as a share of the average or median standard of living in a country. This difference in how social outcomes are measured makes it difficult to share experiences in social policy design and implementation. This paper argues that policy analysis should rely on both relative poverty – measured as a share of the median standard of living – and absolute measures. As countries reduce extreme absolute poverty, concerns of social inclusion, better represented by relative poverty lines, become increasingly relevant. Anchoring the poverty line to median welfare makes the poverty line dependent on distributional parameters beyond the mean, thus allowing for poverty lines that differ across countries with the same level of income per capita. The paper derives and presents relative poverty headcount ratios from publicly available grouped data for 114 countries. An examination of the trends in absolute and relative poverty in Brazil, China and the United States uncovers commonalities that are not apparent if the analysis focuses on national poverty lines or different concepts across countries. Les pays développés et les pays en développement mesurent en général la pauvreté de façon différente. La plupart des pays en développement utilise des mesures absolues de la pauvreté, à l’aide d’un seuil de pauvreté défini par la valeur monétaire d’un panier de biens prédéterminé. Par contre, la plupart des analyses de la pauvreté dans des pays développés, y compris dans la plupart des pays de l’OCDE et des institutions telles que Eurostat utilisent des mesures relatives de la pauvreté, avec un seuil de pauvreté définie par une proportion fixe du niveau de vie moyen ou médian dans un pays. Ces différences de mesure rendent plus difficile le partage d’expériences en formulation et mise en oeuvre de politiques sociales. Ce document soutient que l’analyse des politiques publiques devrait reposer sur en même temps sur des mesures absolues et relatives, ces dernières se rapportant à une proportion du niveau de vie médian. Les questions d’inclusion sociale, qui sont mieux prises en compte par des lignes de pauvreté relatives, voient leur importance croitre au fur et à mesure que les pays réduisent la pauvreté absolue. Du fait de l’ancrage du seuil de pauvreté à la médiane de la mesure de bien-être, le seuil de pauvreté dépend de paramètres de la distribution au-delà du niveau de vie moyen, ce qui permet aux seuils de pauvreté d’être différents pour des pays avec le même revenu par habitant. Le document présente des taux de pauvreté relative calculés à partir de données disponibles au public pour 114 pays. Une analyse des tendances des mesures absolue et relative de la pauvreté pour le Brésil, la Chine et les États-Unis relève des points communs qui demeurent cachés si l’analyse se concentre uniquement sur les seuils de pauvreté nationaux ou sur des concepts de mesure propres à chaque pays.

Suggested Citation

  • Christopher Garroway & Juan Ramón de Laiglesia, 2012. "On the Relevance of Relative Poverty for Developing Countries," OECD Development Centre Working Papers 314, OECD Publishing.
  • Handle: RePEc:oec:devaaa:314-en
    DOI: 10.1787/5k92n2x6pts3-en
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    Citations

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    Cited by:

    1. Ravallion, Martin & Chen, Shaohua, 2019. "Global poverty measurement when relative income matters," Journal of Public Economics, Elsevier, vol. 177(C), pages 1-1.
    2. Martin Ravallion, 2020. "On Measuring Global Poverty," Annual Review of Economics, Annual Reviews, vol. 12(1), pages 167-188, August.
    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. Martin Ravallion & Shaohua Chen, 2013. "A Proposal for Truly Global Poverty Measures," Global Policy, London School of Economics and Political Science, vol. 4(3), pages 258-265, September.
    5. Mohammed Ziaul Haider & Champa Bati Dutta & Ohidul Islam Siddiqui, 2015. "Role of Bangladesh Small and Cottage Industries Corporation in Poverty Reduction," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 16(1), pages 103-121, March.
    6. Salvador Pérez-Moreno, 2016. "Revisiting Growth-Poverty Relationship: A Medium-Term Causality Approach," South African Journal of Economics, Economic Society of South Africa, vol. 84(4), pages 624-635, December.
    7. Wei Zou & Xiaopei Cheng & Zengzeng Fan & Chuhao Lin, 2023. "Measuring and Decomposing Relative Poverty in China," Land, MDPI, vol. 12(2), pages 1-24, January.
    8. Ravallion,Martin & Chen,Shaohua, 2017. "Welfare-consistent global poverty measures," Policy Research Working Paper Series 8170, The World Bank.
    9. Yu Lu & Ziheng Shangguan, 2023. "Reassessing Resettlement-Associated Poverty Induced by Water Conservancy Projects in China: Case Study of the “Yangtze to Huai River Inter-Basin” Water Diversion Project," Sustainability, MDPI, vol. 15(12), pages 1-17, June.
    10. Chen, Shaohua & Ravallion, Martin, 2021. "Reconciling the conflicting narratives on poverty in China," Journal of Development Economics, Elsevier, vol. 153(C).
    11. Bruno Jetin, 2019. "ASEAN Economic Community: the shift from absolute to relative poverty, and the rise of the middle class," Post-Print halshs-02388525, HAL.
    12. Decerf,Benoit Marie A, 2022. "Absolute and Relative Poverty Measurement : A Survey," Policy Research Working Paper Series 10008, The World Bank.
    13. Laura Cuesta & Mia Hakovirta & Merita Jokela, 2018. "The Antipoverty Effectiveness of Child Support: Empirical Evidence for Latin American Countries," LIS Working papers 748, LIS Cross-National Data Center in Luxembourg.
    14. Carmelo García-Pérez & Yolanda González-González & Mercedes Prieto-Alaiz, 2017. "Identifying the Multidimensional Poor in Developed Countries Using Relative Thresholds: An Application to Spanish Data," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(1), pages 291-303, March.
    15. Sara Lindersson & Elena Raffetti & Maria Rusca & Luigia Brandimarte & Johanna Mård & Giuliano Di Baldassarre, 2023. "The wider the gap between rich and poor the higher the flood mortality," Nature Sustainability, Nature, vol. 6(8), pages 995-1005, August.

    More about this item

    Keywords

    mesure de la pauvreté; pauvreté et développement; pauvreté relative; poverty in developing countries; poverty measurement; relative poverty;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • Y10 - Miscellaneous Categories - - Data: Tables and Charts - - - Data: Tables and Charts

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