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Global Absolute Poverty Fell by Almost Half on Tuesday (sort of)
http://www.cgdev.org/blog/global-absolute-poverty-fell-almost-half-tuesday
On Tuesday night, the International Comparison Project released the latest purchasing power parity numbers for the world’s economies. The vast majority of the planet slept right on as if nothing had happened.* And they were right. But the new numbers still suggest the size and distribution of world income looks considerably different than we previously thought. The World Bank will produce new official estimates in the coming days, but our preliminary estimates suggest the share of people in the developing world living below the absolute poverty line of $1.25 per day in 2010 “fell” by nearly half, from about 19.7 percent to 11.2 percent, thanks to the revisions.
Global poverty numbers involve two sets of data: national income and consumption surveys (collated in the World Bank’s PovcalNet) and international data about prices around the world. The ICP is in charge of this second set of data. It compares what people buy and at what local currency price they buy those things to come up with a ‘purchasing power parity’ exchange rate, a ratio that is designed to equalize the power of a rupee to buy what Indians buy with the power of a dollar to buy what an American buys. Tuesday, the ICP released their estimates for what those purchasing power exchange rates looked like in 2011.
In short, the new PPP numbers suggest a lot of poor countries are richer than we thought. For example, The Economist now estimates that China’s economy will be bigger than the US economy by year’s end. (This much to the delight of Eclipse author and colleague Arvind Subramanian, whose forecasts now look better than anyone else’s.) But it isn’t just China. India’s 2011 current GDP PPP per capita from the World Bank World Development Indicators is $3,677. The new ICP number: $4,735. Bangladesh’s 2011 GDP PPP per capita according to the WDI is $1,733; the ICP suggests that number should be $2,800. Nigeria goes from $2,485 to $3,146.
...
The estimated number of $1.25 poor in India in 2010 falls from 396 million to 148 million, thanks to the revisions. The number of poor people in Nigeria goes from 88 to 60 million. And pretty much every country is sloping downward — using the same national survey data the new ICP numbers suggest much lower rates of absolute poverty.
Global poverty numbers involve two sets of data: national income and consumption surveys (collated in the World Bank’s PovcalNet) and international data about prices around the world. The ICP is in charge of this second set of data. It compares what people buy and at what local currency price they buy those things to come up with a ‘purchasing power parity’ exchange rate, a ratio that is designed to equalize the power of a rupee to buy what Indians buy with the power of a dollar to buy what an American buys. Tuesday, the ICP released their estimates for what those purchasing power exchange rates looked like in 2011.
In short, the new PPP numbers suggest a lot of poor countries are richer than we thought. For example, The Economist now estimates that China’s economy will be bigger than the US economy by year’s end. (This much to the delight of Eclipse author and colleague Arvind Subramanian, whose forecasts now look better than anyone else’s.) But it isn’t just China. India’s 2011 current GDP PPP per capita from the World Bank World Development Indicators is $3,677. The new ICP number: $4,735. Bangladesh’s 2011 GDP PPP per capita according to the WDI is $1,733; the ICP suggests that number should be $2,800. Nigeria goes from $2,485 to $3,146.
...
The estimated number of $1.25 poor in India in 2010 falls from 396 million to 148 million, thanks to the revisions. The number of poor people in Nigeria goes from 88 to 60 million. And pretty much every country is sloping downward — using the same national survey data the new ICP numbers suggest much lower rates of absolute poverty.