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Global poverty goals and prices : how purchasing power parity matters

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  • Jolliffe,Dean Mitchell
  • Prydz,Espen Beer

Abstract

With the recent release of the 2011 purchasing power parity (PPP) data from the International Comparison Program (ICP), analysts and institutions are confronted with the question of whether and how to use them for global poverty estimation. The previous round of PPP data from 2005 led to a large increase in the estimated number of poor in the world. The 2011 price data suggest that developing countries? incomes in PPP-adjusted dollars are significantly higher than indicated by the 2005 PPP data. This has created the anticipation that the new PPP data will decrease significantly the count of poor people in the world. This paper presents evidence that if the global poverty line is updated with the 2011 PPP data based on the same set of national poverty lines that define the $1.25 line in 2005 PPPs, and if the 2011 PPP conversion factors are used without adjustments to selected countries, the 2011 poverty rate is within half a percentage point of the current global estimate based on 2005 PPPs. The analysis also indicates that the goal of ?ending? extreme poverty by 2030 continues to be an ambitious one.

Suggested Citation

  • Jolliffe,Dean Mitchell & Prydz,Espen Beer, 2015. "Global poverty goals and prices : how purchasing power parity matters," Policy Research Working Paper Series 7256, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7256
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    References listed on IDEAS

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    1. Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, February.
    2. Martin Ravallion, 2014. "An Exploration of the International Comparison Program's New Global Economic Landscape," NBER Working Papers 20338, National Bureau of Economic Research, Inc.
    3. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
    4. World Bank, 2015. "Purchasing Power Parities and Real Expenditures of World Economics : A Comprehensive Report of the 2011 International Comparison Program," World Bank Publications, The World Bank, number 20526, January.
    5. Christoph Lakner & Branko Milanovic, 2016. "Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession," World Bank Economic Review, World Bank Group, vol. 30(2), pages 203-232.
    6. 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.
    7. Shaohua Chen & Martin Ravallion, 2010. "The Developing World is Poorer than We Thought, But No Less Successful in the Fight Against Poverty," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1577-1625.
    8. Angus Deaton & Bettina Aten, 2017. "Trying to Understand the PPPs in ICP 2011: Why Are the Results So Different?," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(1), pages 243-264, January.
    9. repec:pri:rpdevs:presidential%20address%2017january%202010%20all is not listed on IDEAS
    10. Lakner,Christoph & Negre Rossignoli,Mario & Prydz,Espen Beer & Lakner,Christoph & Negre Rossignoli,Mario & Prydz,Espen Beer, 2014. "Twinning the goals : how can promoting shared prosperity help to reduce global poverty ?," Policy Research Working Paper Series 7106, The World Bank.
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    Citations

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    Cited by:

    1. 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.
    2. repec:eee:wdevel:v:103:y:2018:i:c:p:297-310 is not listed on IDEAS
    3. 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.
    4. Tony Addison, 2015. "Thirty years in Africa.s development: From structural adjustment to structural transformation?," WIDER Working Paper Series 119, World Institute for Development Economic Research (UNU-WIDER).
    5. 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.
    6. Nora Lustig & Jacques Silber, 2016. "Global Poverty Lines: An Introduction," Working Papers 1603, Tulane University, Department of Economics.
    7. Andrés Castañeda & Santiago Garriga & Leonardo Gasparini & Leonardo Lucchetti & Daniel Valderrama, 2018. "How Sensitive is Regional Poverty Measurement in Latin America to the Value of the Poverty Line?," CEDLAS, Working Papers 0233, CEDLAS, Universidad Nacional de La Plata.
    8. Dean Jolliffe & Espen Beer Prydz, 2016. "Estimating international poverty lines from comparable national thresholds," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 185-198, June.
    9. Martin Ravallion, 2016. "Are the world’s poorest being left behind?," Journal of Economic Growth, Springer, vol. 21(2), pages 139-164, June.
    10. Jirasavetakul,La-Bhus Fah & Lakner,Christoph, 2016. "The distribution of consumption expenditure in Sub-Saharan Africa : the inequality among all Africans," Policy Research Working Paper Series 7557, The World Bank.
    11. Andy Sumner, 2016. "The world's two new middles Growth, precarity, structural change, and the limitations of the special case," WIDER Working Paper Series 034, World Institute for Development Economic Research (UNU-WIDER).
    12. Sanjay G. Reddy & Rahul Lahoti, 2015. "$1.90 Per Day: What Does it Say?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 189, Courant Research Centre PEG.
    13. Nanak Kakwani & Hyun H. Son, 2015. "Global poverty estimates based on 2011 purchasing power parity: Where should the new poverty line be drawn?," Working Papers 371, ECINEQ, Society for the Study of Economic Inequality.
    14. Nora Lustig & Jacques Silber, 2016. "Introduction to the Special Issue on Global Poverty Lines," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(2), pages 129-140, June.
    15. Majumder,Amita & Ray,Ranjan & Santra,Sattwik, 2015. "Preferences, purchasing power parity, and inequality : analytical framework, propositions, and empirical evidence," Policy Research Working Paper Series 7395, The World Bank.

    More about this item

    Keywords

    Rural Poverty Reduction; ICT Applications; Regional Economic Development; Pro-Poor Growth;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F01 - International Economics - - General - - - Global Outlook

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