Counting the World's Poor: Problems and Possible Solutions

Abstract

As recent discussions have made clear, the apparent lack of poverty reduction in the face of historically high rates of economic growth—both in the world as a whole and in specific countries (most notably India)—provides fuel for the argument that economic growth does little to reduce poverty. How confident can we be that the data actually support these inferences? At the international level, the regular revision of purchasing power parity exchange rates plays havoc with the poverty estimates, changing them in ways that have little or nothing to do with the actual experience of the poor. At the domestic level, the problems in measuring poverty are important not only for the world count but also for tracking income poverty within individual countries. Yet, in many countries, there are large and growing discrepancies between the survey data—the source of poverty counts—and the national accounts—the source of the measure of economic growth. Thus economic growth, as measured, has at best a weak relationship with poverty, as measured. The World Bank prepares and publishes estimates of the number of poor people in the world. Although these numbers should be taken with a pinch of salt, they are arguably important. In an institution where the reduction of poverty is the paramount objective, some overall yardstick of progress (or the lack of it) is required. The numbers are frequently quoted by politicians and by leaders of international organizations, including the World Bank itself, who believe the numbers are effective for advocacy. Indeed, there is a long history of studies of poverty mobilizing support among the nonpoor for antipoverty policies. So it is important to know whether the world and national poverty counts are sound enough to support these uses. As recent discussions have made clear, the apparent lack of poverty reduction in the face of historically high rates of economic growth—both in the world as a whole and in specific countries (most notably India)—is providing fuel for the argument that economic growth does little to reduce poverty. How confident can we be that the data actually support these inferences? Are the changes in the poverty counts sufficiently well measured to support conclusions about growth and poverty reduction? Should