Publication: Identifying the poor – Accounting for household economies of scale in global poverty estimates
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Date
2024-03-30
ISSN
0305-750X
Published
2024-03-30
Author(s)
Tetteh-Baah, Samuel Kofi
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Abstract
Estimates of the number of people living in extreme poverty, as reported by the World Bank, figure prominently in international development dialogue and policy. An assumption underpinning these poverty counts is that there are no economies of scale in household size – a family of six needs three times as much as a family of two. This paper examines the sensitivity of global estimates of extreme poverty to changing this assumption. The analysis rests on nationally representative household surveys from 162 countries covering 97.5 percent of the population estimated to be in extreme poverty in 2019. We compare current-method estimates with a constant-elasticity scale adjustment that divides total household consumption or income not by household size but by the square-root of household size. While the regional profile of extreme poverty is robust to this change, the determination of who is poor changes substantially – the poverty status of 264 million people changes. We then discuss evidence suggesting that the assumption of economies of scale more closely aligns with non-consumption measures of poverty. Specifically, we draw from existing literature of subjective assessments of poverty and wellbeing, along with new empirical evidence from examining the partial correlation (conditional on household size) between the two measures of poverty and a set of presumed poverty covariates (i.e., years of schooling, literacy, asset index, working in agriculture, access to electricity, piped drinking water, improved sanitation).
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Publication Identifying the Poor(World Bank, Washington, DC, 2022-10)Estimates of the number of people living in extreme poverty, as reported by the World Bank, figure prominently in international development dialogue and policy. An assumption underpinning these poverty counts is that there are no economies of scale in household size—a family of six needs three times as much as a family of two. This paper examines the sensitivity of global estimates of extreme poverty to changing this assumption. The analysis rests on nationally representative household surveys from 162 countries covering 98 percent of the population estimated to be in extreme poverty in 2017. The paper compares current-method estimates with a constant-elasticity scale adjustment that divides total household consumption or income not by household size but by the square root of household size. While the regional profile of extreme poverty is robust to this change, the determination of who is poor changes substantially—the poverty status of 270 million people changes. The paper then shows that the measure that accounts for economies of scale is significantly more correlated with a set of presumed poverty covariates (years of schooling, literacy, asset index, working in agriculture, access to electricity, piped drinking water, and improved sanitation).Publication Assessing the Impact of the 2017 PPPs on the International Poverty Line and Global Poverty(Washington, DC: World Bank, 2022-02-21)Purchasing power parity exchange rates (PPPs) are used to estimate the international poverty line (IPL) in a common currency and account for relative price differences across countries when measuring global poverty. This paper assesses the impact of the 2017 PPPs on the nominal value of the IPL and global poverty. The analysis indicates that updating the $1.90 IPL in 2011 PPP dollars to 2017 PPP dollars results in an IPL of approximately $2.15—a finding that is robust to various methods and assumptions. Based on an updated IPL of $2.15, the global extreme poverty rate in 2017 falls from the previously estimated 9.3 to 9.1 percent, reducing the count of people who are poor by 15 million. This is a modest change compared with previous updates of PPP data. The paper also assesses the methodological stability between the 2011 and 2017 PPPs, scrutinizes large changes at the country level, and analyzes higher poverty lines with the 2017 PPPs.Publication April 2022 Update to the Poverty and Inequality Platform (PIP)(World Bank, Washington, DC, 2022-04)The April 2022 update to the newly launched Poverty and Inequality Platform (PIP) involves several changes to the data underlying the global poverty estimates. Some welfare aggregates have been changed for improved harmonization, and the CPI, national accounts, and population input data have been updated. This document explains these changes in detail and the reasoning behind them. Moreover, a large number of new country-years have been added, bringing the total number of surveys to more than 2,000. These include new harmonized surveys for countries in West Africa, new imputed poverty estimates for Nigeria, and recent 2020 household survey data for several countries. Global poverty estimates are now reported up to 2018 and earlier years have been revised.Publication September 2023 Update to the Poverty and Inequality Platform (PIP)(World Bank, Washington, DC, 2023-10-11)The September 2023 update to the Poverty and Inequality Platform (PIP) involves several changes to the data underlying the global poverty estimates. In particular, some welfare aggregates have been revised, and the CPI, national accounts, and population input data have been updated. This document explains these changes in detail and the reasoning behind them. Moreover, 63 new country-years have been added, bringing the total number of surveys to more than 2,200. Global poverty estimates are reported up to 2019 and earlier years have been revised. Regional poverty estimates in 2020 and 2021 are reported only for regions with sufficient survey data coverage during the COVID-19 pandemic.Publication March 2024 Update to the Poverty and Inequality Platform (PIP)(Washington, DC: World Bank, 2024-04-01)The March 2024 update to the Poverty and Inequality Platform (PIP) involves several changes to the data underlying the global poverty estimates. In particular, some welfare aggregates have been revised, and the CPI, national accounts, and population input data have been updated. This document explains these changes in detail and the reasoning behind them. Moreover, 101 new country-years have been added, bringing the total number of surveys to more than 2,300. Depending on the availability of recent survey data, global and regional poverty estimates are reported up to 2022. This is the first time PIP is reporting global poverty estimates post-2019, covering the period of the COVID-19 pandemic.
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