Internationally Comparable Poverty Lines

By N. Kakwani Director International Poverty Centre Brasilia Brazil Email: nanak.kakwani@undp-povertycentre.org

Definition of Poverty Line ď ˇ Poverty line specifies the level of income or consumption that is just sufficient to maintain the basic minimum standard of living. ď ˇ A person is poor if his or her income or consumption is less than the poverty line.

When are global poverty counts internationally comparable? Suppose u* is the utility level, which measures the international minimum standard of living, anyone whose enjoyment utility is less than u* is identifies as poor. If u* is fixed for all countries, then the poverty counts so obtained are internationally comparable.

Three Poverty Lines 1. National Poverty Line: reflecting minimum standard of living at the national level. 3. Regional poverty line such as Latin America: reflecting average minimum standard of living in the region. 5. Global poverty line: reflecting average minimum standard of living in the world.

The World Bank Poverty Counts The World Bank in 1990 WDR determined that \$1 a day in 1985 PPP is a typical poverty line among low income countries in the mid-1980s. Compiled national poverty lines for 33 counties Australia, Belgium, Canada, Germany, Japan and USA. Only 10 low income countries. Semi-logarithm between poverty line and mean per capita consumption. Eye-balling the scatter plot of this equation.

World Bank Poverty Counts1 Changing the base of PPP dollars to 1993. New threshold should be \$1.50 because there was an Inflation of 50% in the US between 19985 and 1993. The new poverty threshold is \$1.08 in 1993 PPP dollars Which is the medium of 10 countries with the lowest poverty lines. The World has lowered the original \$1 a day poverty line.

Table1: New international poverty Lines Country

Survey

National poverty line

year

in LC

FAO Calorie Calorie based poverty line in 93 PPP\$

in 93 PPP\$ Norms

Food

Non-food

Total

Burundi

1998

5314

1.21

2070

0.85

0.20

1.05

Burkina Faso

1998

4470

0.99

2080

0.85

0.50

1.35

Cote d'Ivoire

1998

13567

1.77

2170

0.89

0.74

1.63

Cameroon

1996

11535

1.81

2170

0.89

0.74

1.63

Ethiopia

2000

72

1.50

2000

0.82

0.39

1.21

Ghana

1998

56690

2.34

2170

0.89

0.52

1.41

Guinea

1994

24282

2.26

2130

0.87

0.68

1.56

Gambia

1998

217

2.52

2160

0.89

0.34

1.22

Kenya

1997

1106

1.95

2140

0.88

0.30

1.18

2001

63843

1.11

2110

0.87

0.21

1.07

Mozambique

1996

154968

1.73

2200

0.90

0.35

1.26

Malawi

1997

319

1.86

2080

0.85

0.30

1.16

Nigeria

1996

941

0.76

2120

0.87

0.27

1.14

Uganda

1999

18594

1.70

2050

0.84

0.63

1.47

Zambia

1998

35684

1.14

2110

0.87

0.27

1.14

2000

812

1.42

2080

0.85

0.38

1.23

India

2000

359

1.00

2140

0.88

0.41

1.29

Lao PDR

1998

18424

1.09

2000

0.82

0.28

1.10

Nepal

1996

397

1.11

2120

0.87

0.34

1.21

0.87

0.35

1.22

Median

1.50

New Global Poverty Counts Based on Caloric Norms A household utility function is defined as

q f u = [ r

qn , ] n

q f : Food basket q n : Non-food basket r : Householdâ&#x20AC;&#x2122;s per capita calorie requirement n : Basic non-food needs u* : Minimum standard of living, which every household should enjoy.

International Food Poverty Line Food poverty line of a household=r*ccost where ccost is the calorie cost in PPP dollars. Lemma 1: If the people in two countries have the same calorie cost in food PPP dollars, then they will enjoy the same level of utility. Thus, the calorie cost in PPP dollars determine the standard of living people enjoy.

Calorie cost: Russia Table 3: Calorie cost by quintiles: 2002 Quantiles

Rubles per 1000 calories

Quantile1

8.2

Quantile2

10.1

Quantile3

11.5

Quantile4

13.1

Quantile5

17.0

Calorie and protein cost in Thailand Table 5: Calorie and protein cost 2002: Whole Kingdom Calorie /1000 Protein/100g Quintile1 12.11 39.19 Quintile2 13.87 41.52 Quintile3 15.51 43.75 Quintile4 17.5 46.21 quintile5 20.16 48.43 All persons 16.61 45.04

Methodology for non-food line Determination of non-food poverty line Total expenditure function

D

Food poverty line

Food function

E C

F A O

u

â&#x2C6;&#x2014; z

B

u

Utility

z

expenditure

Global Poverty Estimates Table2: Percentage and number of poor by regions: 2001 World Bank Region

IPC1

IPC2

Percentage of poor

World Bank

IPC1

IPC2

Number of poor (million)

14.89

29.47

20.01

271.12

536.59

364.34

East Europe and Central Asia

3.46

8.7

5.05

16.34

41.08

23.85

Latin America and the Caribbean

9.96

16.15

12.1

52.21

84.66

63.43

Middle East and North Africa

2.35

9.04

4.12

6.95

26.74

12.19

South Asia

31.89

56.58

41.27

439.23

779.29

568.42

Sub-Saharan Africa

46.38

61.82

52.33

312.57

416.62

352.66

Total

21.27

36.50

26.82

1098.41

1884.98

1384.89

East Asia and Pacific

World Bank: World Bank estimates based on 1993 PPP \$1.08 per day IPC1: International Poverty Centre estimates based typical poverty line among low income countries in the late 1990s IPC2: International Poverty Centre estimates based nutritional requirements.

Concluding remarks

 The \$1 a line is based on a very shaky methodology. It is not a typical poverty line of low income countries.  It is not related to satisfaction of basic needs.  The new global counts are much higher.  The new millennium goal of halving poverty between 1990 and 2015 will not be met by using new global counts based on the observed global trends.

internationally comparable poverty lines
internationally comparable poverty lines

this presentation was commissioned by the poverty reduction and social protection network of the regional policy dialogue for the vii hemisp...