Publication: Poverty-Specific Purchasing Power Parities in Africa
Loading...
Date
2017-07
ISSN
Published
2017-07
Editor(s)
Abstract
The paper revisits the issue of poverty-specific purchasing power parities (PPPs), using the most recent (2011) International Comparison Program (ICP) results. The World Bank's global poverty count uses a common international poverty line -- currently $1.90 at 2011 international prices—based on the ICP PPPs for consumption. The use of these PPPs is often criticized for two reasons. First, the ICP PPPs are based on patterns of aggregate household consumption, not the consumption of the poor. Second, the basket of goods and services used for collecting prices for the ICP is not poverty specific. On the first issue, using data from 28 African countries, the paper concludes that the poverty-specific PPPs estimated with household expenditure survey weights are very similar to the ICP PPPs. On the second issue, poverty-specific PPPs were estimated after removing items deemed to be irrelevant for the poor. The overall effect of removing these items from consumption PPPs is shown to be negligible.
Link to Data Set
Citation
“Dikhanov, Yuri; Hamadeh, Nada; Vigil-Oliver, William; Degefu, Tefera B.; Song, Inyoung. 2017. Poverty-Specific Purchasing Power Parities in Africa. Policy Research Working Paper;No. 8150. © World Bank. http://hdl.handle.net/10986/27956 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Global Socio-economic Resilience to Natural Disasters(Washington, DC: World Bank, 2025-05-22)Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.Publication From Patriarchy to Policy(Washington, DC: World Bank, 2025-05-29)Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Is Living in African Cities Expensive?(Taylor and Francis, 2019)Although several studies have examined why overall price levels are higher in richer countries, little is known about whether there is a similar relationship at the urban and city level across countries. This paper compares the price levels of cities in Sub-Saharan Africa with those of other regions by analyzing price information collected for the purpose of calculating official purchasing power parities. The approach of the paper is to readjust the calculated price levels from national to urban levels, using known price-level ratios between those areas. The results indicate that African cities are relatively more expensive, despite having lower income levels. The price levels of goods and services consumed by households are 25 to 28 percent higher in Sub-Saharan Africa than in other low- and middle-income countries, relative to their income levels. Such high costs of living could constrain livelihood of low-income urban residents, as well as the development of Africa’s urban economies.Publication Is Living in African Cities Expensive?(World Bank, Washington, DC, 2016-04)Although several studies have examined why overall price levels are higher in richer countries, little is known about whether there is a similar relationship at the urban and city level across countries. This paper compares the price levels of cities in Sub-Saharan Africa with those of other regions by analyzing price information collected for the 2011 round of the International Comparison Program. Readjusting the calculated price levels from national to urban levels, the analysis indicates that African cities are relatively more expensive, despite having lower income levels. The price levels of goods and services consumed by households are up to 31percent higher in Sub-Saharan Africa than in other low- and middle-income countries, relative to their income levels. Food and non-alcoholic beverages are especially expensive, with price levels around 35 percent higher than in other countries. The paper also analyzes price information collected by the Economist Intelligence Unit's Worldwide Cost of Living Survey, and obtains a similar result, indicating higher prices of goods and services in African cities.Publication Preferences, Purchasing Power Parity, and Inequality(World Bank, Washington, DC, 2015-08)This paper makes analytical, methodological and empirical contributions to the literature on purchasing power parity. Purchasing power parities are required in a host of cross-country welfare comparisons, such as poverty rates and gross domestic product. The subject has recently generated much interest in the wake of the release of the final results of the 2011 International Comparison Program. This paper introduces a preference-based analytical framework that departs from the conventional Balassa-Samuelson framework in deriving empirically verifiable propositions on the link between purchasing power parity and exchange rates, and between purchasing power parity and inequality. The paper also provides an alternative methodology for calculating purchasing power parities that are benchmarked against the 2011 International Comparison Program purchasing power parities. As this study shows, the alternative methodology is capable of easy implementation on readily available data sets. The benchmarking exercise suggests that the 2011 International Comparison Program generally understates purchasing power parity and overstates gross domestic product, and that the purchasing power parities vary across expenditure percentiles. The study reports regional variation in the direction of the difference between the two purchasing power parities. The empirical evidence is supportive of the positive association between inequality and purchasing power parity derived in the paper.Publication Purchasing Power Parities and Real Expenditures of World Economics : A Comprehensive Report of the 2011 International Comparison Program(Washington, DC, 2015)The International Comparison Program (ICP) is a large and highly complex worldwide statistical program conducted under the charter of the United Nations Statistical Commission (UNSC). The ICP is designed to provide globally comparable economic aggregates in national accounts that can be used by individual researchers, analysts, and policy makers at the national and international levels and by international organizations such as the European Union, International Monetary Fund, Organization for Economic Co-operation and Development (OECD), United Nations, and World Bank. Over its lifetime, the ICP has become the principal source of data on the purchasing power parities (PPPs) of currencies, measures of real per capita income, and measures of real gross domestic product (GDP) and its main components from the expenditure side, including private consumption, government expenditures, and gross fixed capital formation. Indeed, since its inception in 1970, successive rounds of the ICP have produced valuable data for international economic analyses of economic growth and the catch-up and convergence of incomes among nations; productivity levels and trends; analyses of systematic patterns in national price levels and trends; construction of the Human Development Index by the United Nations; measures of regional and global inequality in incomes and consumption; and estimates of the incidence of absolute poverty using World Bank developed yardsticks such as the US$1 a day and $2 a day poverty lines.Publication Purchasing Power Parities for Policy Making(World Bank, Washington, DC, 2021-06-10)The International Comparison Program (ICP) is a worldwide statistical initiative led by the World Bank under the auspices of the United Nations Statistical Commission. It produces comparable price and volume measures of gross domestic product (GDP) and its expenditure aggregates across economies. Through a partnership with international, regional, sub-regional and national agencies, the ICP collects price data and GDP expenditures to estimate purchasing power parities (PPPs) for the world’s economies. This guide provides an overview of how data and indicators based on these ICP outputs are used in a host of analyses, including monitoring progress towards the Sustainable Development Goals, to inform policy making across the socioeconomic spectrum at the national, regional, and international levels. Seventy charts and maps illustrating these uses are organised under eleven policy-focused chapters: the size of the economy and price levels; poverty and inequality; trade and competitiveness; labor costs, wages, and social safety nets; food and nutrition; health; education; energy and climate; infrastructure; human development; and administrative uses. The indicators are produced by the World Bank and other organizations including Eurostat, the Food and Agriculture Organization, the International Energy Agency, the International Labour Organization, the International Monetary Fund, the International Telecommunication Union, the Organisation for Economic Co-operation and Development, the United Nations Development Program, the United Nations Educational, Scientific and Cultural Organization, the World Economic Forum, and the World Health Organization. The guide also highlights notable uses of underlying ICP data on food prices and on public sector wages, as well as the wealth of data from the ICP database itself, such as price levels, real expenditures, and expenditure shares for aggregates below GDP for each economy. In addition, the guide includes a comprehensive chapter on the uses and limitations of PPPs and analyses for which they are appropriate, as well as a technical note outlining the concepts and definitions of terms used. A web-based version (https://www.worldbank.org/en/programs/icp/brief/PPPs-for-Policy ) is also available, and more information can be found on icp.worldbank.org.
Users also downloaded
Showing related downloaded files
Publication Doing Business 2014 : Understanding Regulations for Small and Medium-Size Enterprises(Washington, DC: World Bank Group, 2013-10-28)Eleventh in a series of annual reports comparing business regulation in 185 economies, Doing Business 2014 measures regulations affecting 11 areas of everyday business activity: Starting a business, Dealing with construction permits, Getting electricity, Registering property, Getting credit, Protecting investors, Paying taxes, Trading across borders, Enforcing contracts, Closing a business, Employing workers. The report updates all indicators as of June 1, 2013, ranks economies on their overall “ease of doing business”, and analyzes reforms to business regulation – identifying which economies are strengthening their business environment the most. The Doing Business reports illustrate how reforms in business regulations are being used to analyze economic outcomes for domestic entrepreneurs and for the wider economy. Doing Business is a flagship product by the World Bank and IFC that garners worldwide attention on regulatory barriers to entrepreneurship. More than 60 economies use the Doing Business indicators to shape reform agendas and monitor improvements on the ground. In addition, the Doing Business data has generated over 870 articles in peer-reviewed academic journals since its inception.Publication World Development Report 2011(World Bank, 2011)The 2011 World development report looks across disciplines and experiences drawn from around the world to offer some ideas and practical recommendations on how to move beyond conflict and fragility and secure development. The key messages are important for all countries-low, middle, and high income-as well as for regional and global institutions: first, institutional legitimacy is the key to stability. When state institutions do not adequately protect citizens, guard against corruption, or provide access to justice; when markets do not provide job opportunities; or when communities have lost social cohesion-the likelihood of violent conflict increases. Second, investing in citizen security, justice, and jobs is essential to reducing violence. But there are major structural gaps in our collective capabilities to support these areas. Third, confronting this challenge effectively means that institutions need to change. International agencies and partners from other countries must adapt procedures so they can respond with agility and speed, a longer-term perspective, and greater staying power. Fourth, need to adopt a layered approach. Some problems can be addressed at the country level, but others need to be addressed at a regional level, such as developing markets that integrate insecure areas and pooling resources for building capacity Fifth, in adopting these approaches, need to be aware that the global landscape is changing. Regional institutions and middle income countries are playing a larger role. This means should pay more attention to south-south and south-north exchanges, and to the recent transition experiences of middle income countries.Publication Remarks to the Annual Meetings 2020 Development Committee(World Bank, Washington, DC, 2020-10-16)David Malpass, President of the World Bank Group, announced that the Board approved a fast track approach to emergency health support programs that now covers 111 countries. Most projects are well advanced, with average disbursement upward of 40 percent. The goal is to take broad, fast action early. The operational framework presented back in June has positioned the Bank to help countries address immediate health threats and social and economic impacts and maintain our focus on long-term development. The Bank is making good progress toward the 15-month target of 160 billion dollars in surge financing. Much of it is for the poorest countries and will take the form of grants or low-rate, long-maturity loans. IFC, through the Global Health Platform, will be providing financing to vaccine manufacturers to foster expanded production of COVID-19 vaccines in both part 1 and 2 countries, providing production is reserved for emerging markets. The Development Committee holds a unique place in the international architecture. It is the only global forum in which the Governments of developed countries and the Governments of developing countries, creditor countries and borrower countries, come together to discuss development and the ‘net transfer of resources to developing countries.’ The current International Financial Architecture system is skewed in favor of the rich and creditor countries. It is important that all voices are heard, so Malpass urged the Ministers of developing countries to use their voice and speak their minds today. Malpass urged consideration of how we can build a new approach to debt restructuring that allows for a fair relationship and balance between creditors and debtors. This will be critical in restoring growth in developing countries; and helping reverse the inequality.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.