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

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Inequality and shared prosperity

The goal of shared prosperity recognizes that while growth is necessary for improving economic welfare in a society, progress is measured by how those gains are shared with its poorest members. It reflects the degree of social inclusion and well-being within a population, and improvements in shared prosperity correlate with reductions in poverty and inequality.

PPP-based measures of income or consumption for different populations, using PPPs estimated at the level of Households and Nonprofit Institutions Serving Households (NPISHs) Final Consumption Expenditure, enable cross-country comparisons. These inform initiatives aimed at achieving a more equitable distribution of wealth through targeting social security programs, jobs growth, and tax regimes. Figure 2.5 shows the PPP-based daily income or consumption mean average for the poorest 40 percent against the total population, with the countries further from the dotted line having a larger gap between the mean incomes or consumptions of the two populations. These data, collected at different points in time, can be used to monitor progress towards SDG target 10.1 and the second of the World Bank’s twin goals, both of which seek to foster income growth of the bottom 40 percent of the population.

The World Bank also publishes PPP-based estimates of the mean consumption or income of the top 60 percent and top 10 percent of the population in addition to the two cohorts mentioned above. Together these provide an indication of the distribution of wealth within a country (figure 2.6).

Another measure of inequality within and among countries is captured by the share of people living below 50 percent of the PPP-based daily median consumption or income level of a country’s population (figure 2.7). This metric is useful for assessing the level and trends of social inclusion, relative poverty, and inequality within a country and allows policy makers to monitor progress towards SDG target 10.2, which looks to empower and promote the social, economic, and political inclusion of all.