Abstract
This paper contributes to the methodological literature on the estimation of international poverty lines for Latin America based on the official poverty lines chosen by the Latin American governments and commonly used in the public debate. The paper exploits a comprehensive data set of 86 up-to-date official extreme and total urban poverty lines across 18 countries in Latin America, as well as the recently updated values of the national purchasing power parity conversion factors from the 2011 International Comparison Program, and a set of harmonized household surveys. By using 3 and 6 US dollars per person a day at 2011 PPP as the extreme and total poverty lines for Latin America, this paper illustrates the sensitiveness of poverty rates to changes of the values of the poverty lines as a result of the recent update of the PPP values, the period of reference, and the relative cost of living across the countries in the region. The poverty lines with the 2011 PPP values lead to an increase in total poverty rates in Latin America when compared to the 2005 PPP values, while they leave the extreme poverty rate unaffected. In general, country-specific poverty rankings remain fairly stable to the values of the poverty lines selected.
Highlights
The international comparison of poverty measures is a central tool for development research
Poverty measurement differs from country to country in many respects, including: (i) the methodology to estimate the poverty line; (ii) the choice of the individual welfare measure; (iii) the construction of the welfare aggregate; (iv) the design of surveys; and (v) many other adjustments and considerations
The international poverty line is strongly affected by the official lines set in highly-populated countries, such as Brazil and Mexico that include more than 55 percent of the Latin American population, and is almost unaffected by the official lines set in other less-populated nations, such as Uruguay with a share of the regional population of less than 0.6 percent
Summary
The international comparison of poverty measures is a central tool for development research. These international lines fail to be “focal” and become irrelevant for all local discussions Given this problem, many researchers and institutions like the World Bank, the InterAmerican Development Bank (IADB), and ECLAC3 use for Latin America an extreme and total poverty line of $2.5 and $4 per person per day in 2005 PPPs, respectively. Depending on the specification chosen, the paper estimates the set of extreme and total poverty lines to be approximately $2.5 to $3.2, and $5.3 to $6.8 per person per day at 2011 PPP values, respectively We apply these lines to the distribution of household per capita income, which is standardized under the SEDLAC project, a joint initiative of the World Bank and the Center for Distributional Labor and Social Studies (CEDLAS) at Universidad Nacional de La Plata (UNLP) in Argentina, in all Latin American countries for which microdata are available.
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