LAC Equity Lab: Poverty - Poverty Drivers

Over the last decade, changes in LAC's poverty rate have been driven primarily by economic growth rather than changes in income distribution. This dashboard shows the main drivers of the changes in poverty in LAC and by country, under different lines, and for different indicators. A change in poverty can be driven by: (i) a change in average household income; and/or (ii) how that income is distributed. The drivers can be negative or positive, depending on whether they decrease or increase poverty, respectively. The magnitude of the number will be useful to compare which effect is more dominant than the other.

A reduction in poverty can be driven by: (i) an increase in incomes, e.g. when the country becomes richer overall; and/or (ii) a change in the normalized distribution of incomes, e.g. via social programs financed by taxes on higher incomes.

One can analyze how much of the total change in poverty is attributable to each driver by constructing a counterfactual in which the other driver does not change over time, and subsequently calculating the poverty rate in that scenario. For example, we could consider that incomes changed but their distribution remained invariant. Under that counterfactual, all the poverty changes are due to income changes. For more information click here.