PPPs for policy making: a visual guide to using data from the ICP - Chapter 2: Poverty and inequality

This page is optimized for viewing in a desktop browser. Mobile device users may prefer to view a pdf of the publication with links to interactive visualizations and access to underlying data.

Poverty

Monitoring poverty levels and the trends in poverty rates over time is important to the development agendas of many countries. Robust and consistent measures of poverty, whether they be global yardsticks allowing cross-country comparisons or national measures that reflect their own assessments of poverty, can help policy makers assess the success of poverty reduction strategies, gauge program effectiveness, and guide their development strategy.

Countries have identified poverty reduction as one of the most pressing goals under the United Nations’ 2030 Agenda for Sustainable Development with Sustainable Development Goal (SDG) target 1.1 looking to eradicate extreme poverty for all people everywhere by 2030. International poverty lines identify the daily income or consumption level under which people struggle to provide for their basic subsistence needs. These levels are expressed in PPP dollars to enable a common measurement across all countries. The lowest of these, the extreme poverty line, is currently set at $1.90 a day in 2011 PPP terms using PPPs estimated at the level of Households and Nonprofit Institutions Serving Households (NPISHs) Final Consumption Expenditure and was originally based on national poverty lines found in some of the poorest countries. The $3.20 poverty line is derived from typical national poverty lines in countries classified as lower-middle-income, while the $5.50 poverty line represents typical national poverty lines in upper-middle-income countries. The poverty headcount ratio is defined as the percentage of the population living on less than these 2011 PPP-based levels of daily income or consumption (figure 2.1).

In order to assess the depth of poverty alongside its incidence, policy makers can examine the poverty gap (figure 2.2) defined as the mean shortfall in income or consumption from the extreme poverty line, counting the nonpoor as having zero shortfall, expressed as a percentage of the poverty line.

National poverty lines reflect social and economic assessments made in each country of how much a person needs per day in order to meet their basic needs. Additionally, the World Bank has defined societal poverty lines that are tailored to the specific level of economic development of each country. This is calculated as $1 + 50 percent of the daily national median consumption or income in 2011 PPP terms for each country, with a lower bound set at the extreme poverty line of $1.90 (figure 2.3).

SDG target 1.1 also examines the working poverty rate which identifies those that live in poverty despite working. This metric, from the International Labour Organization (ILO), indicates the adequacy of employment-related incomes, the quality of employment, and the state of the labor market’s health, and provides a baseline from which to measure the success of targeted policies (figure 2.4).

MAIN PAGE

Acknowledgments

Abbreviations

Introduction

Uses and limitations of Purchasing Power Parities

Chapter 1: The size of the economy and price levels

• Size of the economy
• Per capita measures
• Price levels
• Subnational analyses

Chapter 2: Poverty and inequality

• Poverty
• Inequality and shared prosperity

Chapter 3: Trade and competitiveness

• Competitiveness
• Market convergence
• Productivity

Chapter 4: Labor costs, wages, and social safety nets

• Labor costs
• Wages
• Social safety nets

Chapter 5: Food and nutrition

• Food security and nutrition
• Food consumption

Chapter 6: Health

• Health expenditures
• Health outcomes

Chapter 7: Education

• Education expenditures
• Education outcomes

Chapter 8: Energy and climate

• Energy efficiency
• Emissions and climate change

Chapter 9: Infrastructure

• Investment
• Transport
• Information and communication technology
• Research and development

Chapter 10: Human Development

• Human Development Index
• Gender Development Index
• Better Life Index

Chapter 11: Administrative uses

• Administrative uses

Technical note

• Presentation of data
• Concepts and definitions
• ICP classification of expenditures and indicators
• Further resources

Annex

References