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or income needed not to be poor. The perceived boundary between poor and not poor rises with the average income of a country and so does not provide a uniform measure for comparing poverty rates across countries. Nevertheless, national poverty estimates are clearly the appropriate measure for setting national policies for poverty reduction and for monitoring their results. International comparisons of poverty estimates entail both conceptual and practical problems. Countries have different definitions of poverty, and consistent comparisons across countries can be difficult. Local poverty lines tend to have higher purchasing power in rich countries, where more generous standards are used, than in poor countries. International poverty lines attempt to hold the real value of the poverty line constant across countries, as is done when making comparisons over time, regardless of average income of countries. Since the publication of World Development Report 1990, the World Bank has aimed to apply a common standard in measuring extreme poverty, anchored to what poverty means in the world’s poorest countries. The welfare of people living in different countries can be measured on a common scale by adjusting for differences in the purchasing power of currencies. The commonly used $1 a day standard, measured in 1985 international prices and adjusted to local currency using purchasing power parities, was chosen for World Development Report 1990 because it was typical of the poverty lines in low-income countries at the time. Later this $1-a-day line was revised to $1.08 a day measured in 1993 international prices. More recently, the international poverty lines were revised using the new data on PPPs compiled by the 2005 round of the International Comparison Program, along with data from an expanded set of household income and expenditure surveys. The new extreme poverty line is set at $1.25 a day in 2005 PPP terms, which represents the mean of the poverty lines found in the poorest 15 countries ranked by per capita consumption. The new poverty line maintains the same standard for extreme poverty—the poverty line typical of the poorest countries in the world—but updates it using the latest information on the cost of living in developing countries. Quality and availability of survey data Poverty estimates are derived using surveys fielded to collect, among other things, information on income or consumption from a sample of households. To be useful for poverty estimates, surveys must be nationally representative and include sufficient information to compute a comprehensive estimate of total household consumption or income (including consumption or income from own production), from which it is possible to construct a correctly weighted distribution of consumption or income per person. Over the past 20 years, the number of countries that field surveys and the frequency
of the surveys have expanded considerably. The quality of data has improved greatly as well. The World Bank’s poverty monitoring database now includes more than 600 surveys representing 115 developing countries. More than 1.2 million randomly sampled households were interviewed in these surveys, representing 96 percent of the population of developing countries. Measurement issues using survey data Besides the frequency and timeliness of survey data, other data issues arise in measuring household living standards. One relates to the choice of income or consumption as a welfare indicator. Income is generally more difficult to measure accurately, and consumption comes closer to the notion of standard of living. Also, income can vary over time even if the standard of living does not. However, consumption data are not always available: the latest estimates reported here use consumption for about two-thirds of countries. Another issue is that even similar surveys may not be strictly comparable because of differences in number of consumer goods they identify, differences in the length of the period over which respondents must recall their expenditures, or differences in the quality and training of enumerators. Selective nonresponses are also a concern in some surveys. Comparisons of countries at different levels of development also pose a potential problem because of differences in the relative importance of the consumption of nonmarket goods. The local market value of all consumption in kind (including own production, which is particularly important in underdeveloped rural economies) should be included in total consumption expenditure, but may not be. Surveys now routinely include imputed values for consumption in-kind from own-farm production. Imputed profit from the production of nonmarket goods should be included in income, but sometimes it is omitted (such omissions were a bigger problem in surveys before the 1980s). Most survey data now include valuations for consumption or income from own production, but valuation methods vary. Definitions Survey year is the year in which the underlying data were collected. Population below national poverty line, national is the percentage of the population living below the national poverty line. National estimates are based on populationweighted subgroup estimates from household surveys. Population below $1.25 a day and population below $2.00 a day are the percentages of the population living on less than $1.25 a day and $2.00 a day at 2005 international prices. As a result of revisions in PPP exchange rates, poverty rates for individual countries cannot be compared with poverty rates reported in earlier editions.