caloric requirements), capabilities (e.g. The implication is that, by definition, zero income is a feasible value, while zero consumption is not a feasible value—people with zero consumption would starve. And one in eight risks going hungry or not getting the right food. Hence, it is both interesting and important to measure poverty with higher poverty lines. These charts highlight some remarkable achievements and the serious challenges that remain as we head into 2020. As we can seen, in the US the best-fit line is significantly different to the blue line: at very low levels of income, expenditure is significantly higher than income; and at high levels of income, expenditure is lower than income. This trend of decreasing poverty—both in absolute numbers and as a share of the world population—has been a constant during the last three decades. If you want to consider a poverty line higher than the International Poverty Line, you could chose a line of int.-$1,000 per year instead and see that in 2003, 48% of the world population was below this poverty line; ten years later, in 2013, 29% were below this line. A second approach asks households directly about their own valuation of the amount of money they would expect to pay if they had bought such items themselves, or, the amount of money they would expect to receive if they had sold these items. Figure 1a, made available here for the first time, shows the proportion of children in each country who are deprived – i.e. Learn more. Resource: The World Factbook The impact of poverty in Africa. The source article is available here on Martin Ravallion’s private page. For reference, in this chart we have included also OECD relative poverty lines. Researchers have compared how much changes in inequality matter for poverty reduction relative to economic growth. Available online here. One in five children in rich countries lives in relative poverty. On every day in the last 25 years there could have been a newspaper headline reading, “The number of people in extreme poverty fell by 128,000 since yesterday”. This chart shows an overview of global wealth and poverty. However, it is also important to point out that living conditions well above the International Poverty Line can still be characterized by poverty and hardship. Once this is established, prices for individual crops and animal products are used to convert the output into current prices and create weights for an ‘agricultural real output index’. Despite the clear evidence, many people are not aware of the fact that extreme poverty is declining across the world. World poverty rate for 2012 was 50.70%, a 1.5% decline from 2011. Bryan, G., Chowdhury, S., & Mobarak, A. M. (2014). Castaneda, Andres; Doan, Dung; Newhouse, David; Nguyen, Minh Cong; Uematsu, Hiroki; Azevedo, Joao Pedro. Do poverty traps exist? This approach—using the concept of social welfare—takes into account not just poverty, but also the change in living standards of individuals above the poverty line. The big success of the last generation was that global extreme poverty declined rapidly. The proportion of the world’s population living in extreme poverty has dropped significantly. A fundamental question that cuts through this topic is whether we have a good sense of the actual cost of ending poverty. It is measured in international-$ which means it is adjusted for price differences between countries, as we explain here. According to World Bank, the countries with the highest poverty rates in the world are: South Sudan - 82.30%; Equatorial Guinea - 76.80%; Madagascar - 70.70%; Guinea-Bissau - 69.30%; Eritrea - 69.00% The Quarterly Journal of Economics (2016) 131 (2): 579-631. doi: 10.1093/qje/qjw003 Online at https://academic.oup.com/qje/article-abstract/131/2/579/2607043?redirectedFrom=fulltext. The second approach is commonly used to establish a rental equivalent for housing and durable goods owned by the household. What Poverty Looks Like Poverty is a horrifying thing and here are some pictures to show you how sad it really is 4. The intuition for their approach is that, as long as the measurement error in nighttime lights is unrelated to the measurement errors in either National Accounts or survey means, one can use night lights as a gauge to see how much weight to give National Accounts income estimates relative to household-survey income estimates in measuring true income. As we can also see from this map, there are some countries with very few observations. To answer this question, Blattman and Dercon (2016)46 ran a policy experiment in Ethiopia. In Dollar Street you can find portraits of families and see how they cook, what they eat, how they sleep, what toilets they have available, what their children’s toys look like, and much more. Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). The poverty figures published by the World Bank are based on ‘microeconomic data’ — specifically, household surveys. Indeed, as we explain below, many of these concepts indirectly enter the methodology used by the World Bank to measure poverty; for example, by helping set the poverty lines against which monetized consumption is assessed. In American Economic Review, 92, 4, 727–744. Yet the correlation is far from perfect—some countries such as South Africa have a relatively low life expectancy in comparison to other countries with similar poverty rates. 5. It is very difficult to compare income or consumption levels over long periods of time because the available goods and services tend to change significantly, to the extent where even completely new goods and services emerge. Take Action. As countries like India, Brazil, Indonesia, and China got richer, the share of their population living in extreme poverty has fallen. Accordingly, the share of people in extreme poverty has decreased continuously over the course of the last two centuries. The World Bank made one projection that assumes the continuation of the growth rate of each country and another projection that assumes the continuation of the growth rate specific to the world region. World Bank Policy Research Report. Economic growth – How do economies become more productive? In brief: It is important to have more research on the inefficiencies that arise from redistributive transfers. It tells us the fraction of the poverty line that people are missing, on average, in order to escape poverty. Chen, S., & Ravallion, M. (2001). Another approach—less common but also employed in practice—is to set absolute lines based on asking people what minimum consumption or income level they need just to make ends meet. This is indicative of the underlying growth in economic activity that South Asia achieved during this period. Journal of development Economics, 98(1), 3-18. It is an assertion that matters for how we understand and interpret development. Online here https://link.springer.com/article/10.1007/s10887-016-9126-7 and Christoph Lakner and Branko Milanovic (2015) – Global Income Distribution: From the Fall of the Berlin Wall to the Great Recession. Beegle, K., Christiaensen, L., Dabalen, A., & Gaddis, I. Here the data is plotted on a logarithmic y-axis to focus on the change of incomes between the majority of the world’s population, here is the same data plotted on a linear axis. Using a different measure of international poverty, the rate has dropped from 53 percent in 1981 to 17 percent in 2011 – representing the most rapid reduction in poverty in world history. The poverty gap index is often used in policy discussions because it has an intuitive unit (per cent mean shortfall) that allows for meaningful comparisons regarding the relative intensity of poverty. (2016). These results are consistent with other studies. 1979. A decline of 13 percentage points in a decade. “There is essentially no mass point in any country with zero consumption, but many countries that use income data have a significant mass of zero incomes in the data, all of which are treated as being poor. (2015). Over the period shown in the connected plot, Brazil’s average increased 3-fold and China’s average income increased even 6-fold. While the projections differ in methodology and underlying assumptions, it’s striking how much they align in their projection for what to expect in the coming decade if the world stays on current trajectories. The biggest gaps are in Sub-Saharan Africa and Central and South Asia. According to the estimates by Bourguignon and Morrison—shown in the visualization—only a little more than a quarter of the world population was not living in poverty by 1950. This is the rationale often used to argue for ‘big push’ macro policies such as the expansion of micro-finance in low-income countries. The lightly-shaded circles are for 2006, the darker circles for 2007, and the darkest circles are for 2008. To get the poverty level for larger families, add $4,480 for each additional person in … But since then, the number living on less than $10 stagnated whilst the number above this poverty line increased rapidly. The chart below answers the question of how the number of people below different poverty lines is changing. The World Bank estimates that the number of extremely poor people globally – those who live on 1.90 U.S. dollars a day or less – has fallen from 1.85 billion in 1990 to about 736 million in 2015. But current trends don’t have to become future trends: all countries that left extreme poverty behind had a moment at which they broke out of stagnation. (2012). Occupational choice in early industrializing societies: Experimental evidence on the income and health effects of industrial and entrepreneurial work (No. The World Bank is the most important institution measuring the extent of global poverty for the time since 1981. New estimates of extreme poverty for children. This is an important reminder that one poverty line is not enough and we need to rely on several poverty lines – higher and lower than the international poverty line – to understand what is happening. Available online here. All of our charts can be embedded in any site. The fact that the World Bank poverty estimates are only imperfect approximations does not mean that these are meaningless or useless numbers—it means that they should be used as one more source of information to assess living standards. Nov 16, 2020. (2012). This corresponds to people living in households with incomes below 60% of the national median equivalised disposable income. Based on World Bank data ranging from 1998 to 2018. As in their earlier research, Dollar, Kleineberg, and Kraay (2014)34 studied a large number of countries over the past 40 years. Poverty headcount ratio at national poverty lines (% of population) Details. For all countries shown in grey in this map, there is not a single survey available to the World Bank in the last three decades. In the map we show available estimates of the extreme poverty headcount ratio, country by country. How do researchers reconstruct historical poverty estimates? For example, the poverty level for a household of four in 2020 is an annual income of $26,200. Estimating international poverty lines from comparable national thresholds. Do poverty traps exist? Given all this information, consumption, as per the definition above, could be estimated directly from (i), or as the difference between (ii) and (iii). Kraay, A., & McKenzie, D. (2014). In The Quarterly Journal of Economics, 125, 4, 1577–1625. As we can see, there is a clear negative relationship: people tend to live longer in countries where poverty is less common. To go deeper, also browse Global Poverty in Charts by clicking here How the GHI is calculated The World Bank announced this week that extreme poverty is at its lowest rate in 28 years. But the cause of his death was an infection—a condition that can now be treated with antibiotics sold for less than a couple of cents. nutrition-based traps, or country-level savings traps), there is little empirical evidence supporting their practical relevance. Consumption per capita is the preferred welfare indicator for the World Bank’s analysis of extreme poverty. They find that these low-skill industrial jobs paid more than the alternatives available to a substantial fraction of workers; but at the same time, they had adverse health effects and did not offer a long-term solution—most applicants quit the formal sector quickly, finding industrial jobs unpleasant and risky. Relative poverty can be measured using the poverty headcount ratio and the poverty gap index. The latter are the countries which experienced income growth over these 54 years. 2016 and Castaneda et al. This chart is Figure 7 in the Briefing Note UNICEF (2016), Ending Extreme Poverty: a Focus on Children; available here. These numbers are used to compare living standards across countries, by academics in studies of economic growth, particularly through the Penn World Table, by the World Bank to construct measures of global poverty, by the European Union to redistribute resources, and by the international development community to draw attention to discrepancies between rich and poor countries.”. This line chart shows the evolution of the poverty rate in Canada over time. The chart shows the perceptions that survey-respondents in the UK have regarding global achievements in poverty reductions. The world’s Gross Domestic Product in 2017 was bigger than 80 Trillion US-$. Find Out, Online tool for visualization and analysis. 2002. Persistent economic growth really is a very powerful force, and the findings of Dollar, Kleineberg, and Kraay and the chart make this very clear. But as we highlight in the first section of this entry it is unfortunately not what we can expect for the coming decade. Working Paper. They are however included to give an idea of the degree of variation in standards used by countries to measure poverty. Online here. Note 2: Aggregation results apply only to your custom-defined groups and do not reflect official World Bank aggregates based on regional and income classification of economies. The poorest in the world are often hungry, have much less access to education, regularly have no light at night, and suffer from much poorer health. We license all charts under Creative Commons BY. In other words: they found that the poorest fifteen countries in their sample used a roughly similar absolute poverty line, independent of differences in their per capita consumption levels. This post asks whether such remarks are true. “How Poor Are America’s Poorest? Extreme poverty in the broader context of well-being, Extreme poverty in a historical perspective, Comparison of extreme poverty estimates, Povcal vs Bradshaw & Mayhew (2011), Data deprivation: Number of poverty surveys per decade available via the World Bank, Disposable household income: The income cutoff to the poorest decile vs Mean income, GDP per capita in international and market dollars. When data from only one survey year are available, the reference year mean is based on the survey mean by applying the growth rate in private consumption per capita from the national accounts. (You can read more about this study and the authors’ interpretation of the results in this press release from vox.com). Income measures, on the other hand, are only used for countries in which reliable consumption measures are not available. As can be seen, there is a clear gradient: poorer countries tend to use lower poverty lines. This means that poverty rates for children are higher at any poverty line. Online here https://link.springer.com/article/10.1007/s10887-016-9126-7, Deaton, A., & Zaidi, S. (2002). Nathan Rothschild was surely the richest man in the world when he died in 1836. Washington, DC. 2002. Measuring poverty through headcount ratios does not capture the intensity of poverty—individuals with consumption levels marginally below the poverty line are counted as being poor just as individuals with consumption levels much further below the poverty line. In a time of unprecedented population growth, we managed to lift more and more people out of the extreme poverty of the past. The chart shows the decline of extreme poverty in these countries. This would not be possible if we would only rely on much higher poverty thresholds. Get Informed . Where do they live? The World Bank has an ambitious target of reducing poverty to less than 3% of the global population by 2030. And the bad news is that we cannot expect this progress to continue: As I have recently written, because the world’s very poorest economies are stagnating half a billion are expected to be in extreme poverty in 2030. The shown results come from Randomized Controlled Trials (RCTs). Around the world, most government programs hope to reduce poverty through short-term interventions that have lasting effects. Results may be inappropriate (e.g., summing series expressed as a percentage) and caution should be observed when using this function. The Journal of Economic Inequality, 14(2), 185-198. Absolute poverty measures are often used to compare poverty between countries and then they are not just held constant over time, but also across countries. If we are interested in material deprivation, any monetary income should be considered in relation to the amount of goods and services that it can buy locally. The number of people who live on more than 10 dollars per day increased by 900 million in the last 10 years. But today it is not just the poverty line of India that is taken into account rather, as we can see in the following table, it is based on the national poverty lines of 15 different low-income countries. In 2015, more than 736 million people lived below the international poverty line. Online here. Two-thirds of the world population live on less than 10 $-int per day. One way to think about this is to consider how low prosperity is before an economy achieves sustained economic growth that lifts the majority of the population out of poverty. To read the chart below, choose a level of annual income on the y-axis and then use the blue 2013-line and the red 2003-line to find the corresponding share of the world population living with less than that income on the x-axis. Bourguignon and Morrison (2002) rely on three types of data in order to estimate the distributions of income: economic output (real GDP per capita), population, and inequality. These estimates come from Ravallion (2015).18 They use a poverty line of 1.25 int.-$ in 2005 prices, and they rely on incomes measured from national accounts. This debate can get incredibly heated (and fairly so, because the stakes are incredibly high), so it was helpful last year that Hickel and Charles Kenny — whose book Getting Bettermakes a compelling case that the world is, well, getting better — put together a list of 12 statements on which they can both agree. This is the same result that Bradshaw and Mayhew (2011)73 find in a study of extreme poverty in Europe using data on per capita household incomes from the EU-SILC survey to measure absolute poverty rates in Europe, using a poverty line of $2.15 PPP-dollars per person per day.74 In this visualization you can see their results; and in this scatter plot you can see how the PovcalNet estimates below compare to those by Bradshaw and Mayhew. While informative, this methodology certainly leaves out many important aspects of welfare. Review of Income and wealth, 47(3), 283-300. Some of these may be obvious, but in other situations, i… As we can see, in 1820 there were just under 1.1 billion people in the world, of which the large majority lived in extreme poverty. A rising global middle class and stagnation of the world’s poorest will also mean that a new divide at the lowest end of the global income distribution is opening up. Journal of public economics, 95(7), 476-487. There were several major revisions between the first formulation of a global poverty line in 1978 and today. Where does this number come from? CGD; Online here. Economists in recent years have started taking this question seriously and asked how much weight should we give to National Account estimates vis-à-vis household-survey estimates? The HHS Department issues poverty guidelines for each household size. Annualized average growth rate in per capita real survey mean consumption or income, bottom 40% of population (%), Annualized average growth rate in per capita real survey mean consumption or income, total population (%), Population living in slums (% of urban population), Poverty gap at $1.90 a day (2011 PPP) (%), Poverty headcount ratio at $1.90 a day (2011 PPP) (% of population), Poverty headcount ratio at national poverty lines (% of population), Survey mean consumption or income per capita, bottom 40% of population (2011 PPP $ per day), Survey mean consumption or income per capita, total population (2011 PPP $ per day), International Comparison Program & Purchasing Power Parity, International Household Survey Network (IHSN), Trust Fund for Statistical Capacity Building. In reality, subjective well-being does not suddenly improve above any given poverty line. As we can see, the differences are substantial for both the headcount ratio and the poverty gap index.