International Comparisons of Poverty in South Asia

David Newhouse,Monica Yanez-Pagans,TM Tonmoy Islam

doi:10.1162/adev_a_00161

Abstract

This paper explores the methodological differences underlying the construction of the national consumption aggregates that are used to estimate international poverty rates for South Asian countries. The analysis draws on a regional dataset of standardized consumption aggregates to assess the sensitivity of international poverty rates to the items included in the national consumption aggregates. A key feature of the standardized aggregate is that it includes the reported value of housing rent for urban Indian homeowners. Using the standardized consumption aggregates reduces the international poverty rate in South Asia by 1.3 percentage points, impacting the status of about 18.5 million people. Comparing standardized and nonstandardized monetary welfare indicators to other nonmonetary indicators suggests that the latter are more consistent with the standardized consumption aggregates. Overall, the results strongly suggest that harmonizing the construction of welfare measures, particularly the treatment of imputed rent, can meaningfully improve the accuracy of international poverty comparisons.

Highlights

The World Bank has set an ambitious target to eradicate global extreme poverty by 2030 and evaluating progress towards it requires a solid data infrastructure
The first goal will be achieved if the incidence of extreme poverty falls below 3 percent by 2030, while the second goal would be implemented by increasing the average welfare of those who earn at the 40th percentile or below in each country (Jolliffe et al, 2014)
The World Bank has set an ambitious target of eliminating international extreme poverty by 2030 and has taken steps to obtain proper estimates of international extreme poverty

Summary

Introduction

The World Bank has set an ambitious target to eradicate global extreme poverty by 2030 and evaluating progress towards it requires a solid data infrastructure. This paper provides new evidence from South Asia on how differences in the construction of the welfare measure in each country contributes to total error in international poverty measurement To study this in detail, we look at how countries in the region construct the consumption aggregate to assess poverty. The core of the paper compares poverty rates using the national consumption aggregates, which currently form the basis for poverty measurement, to standardized consumption aggregates that attempts to adjust for differences in three aspects described above This exercise provides an assessment of the extent to which the international poverty rates depend on methodological differences in the construction of welfare aggregates across countries.

Data and poverty rates

Assessing differences in sampling and survey design

Assessing differences to estimate national consumption aggregates

Findings

Conclusions