Unknown: The Extent, Distribution and Trend of Global Income Poverty

Abstract

Most readers, including many economists, take these figures as clear-cut facts. But the method used to calculate them has serious flaws, which render the resulting estimates untrustworthy. First, the IPL used by the Bank to identify the absolutely poor fails to meet elementary requirements of consistency. It does not have a common interpretation (in terms of purchasing power) across countries and years. As a result, the Bank’s poverty line leads to meaningless poverty estimates, as some of those identified as poor have clearly greater command over commodities than some of those identified as non-poor. These inconsistencies are an inherent consequence of the Bank’s method and cannot be eliminated without jettisoning the method altogether. Second, the Bank’s poverty line is not anchored in any assessment of the basic resource requirements of human beings. Third, the poverty estimates currently available are subject to massive uncertainties because of their sensitivity to the values of crucial parameters that are estimated on the basis of limited data or none at all. An alternative method of estimating global poverty is feasible and necessary.