On measuring poverty: 400 million new poor?

Reading a study by Sanjay G. Reddy and Camelia Minoiu ((2007) ‘Has World Poverty Really Fallen?’, Review of Income and Wealth, 53 (3): pp. 484-502) reminds one of how hard it is measure poverty. When it comes to measuring global poverty, there is an obvious risk of sampling bias, not least because the poor are so difficult to count. Reddy and Minoiu claim that because of the vast uncertainty involved in making certain assumptions and using different indicators, since 1990 “global poverty may or may not have increased”.

The lacking quality of global poverty statistics is also highlighted in an article by Shaohua Chen and Martin Ravallion ((2010) ‘The Developing World is Poorer than We Thought, But No Less Successful in the Fight Against Poverty ‘, The Quarterly Journal of Economics, 125 (4): pp. 1577-1625). Using a new data set based on new price surveys, they find that the absolute poverty in 2005 was much higher than originally estimated. Although Chen and Ravallion maintain the position that the developing world has been very successful in pushing poverty rates downwards, the absolute levels of poverty seem to be much higher. The old international poverty line constructed by using the 1993 International Comparison Program (ICP), indicated that there were approximately 1 billion poor people in 2005. Using a new poverty line based on the 2005 ICP instead, estimates global poverty in 2005 to 1.4 billion people. Hence, If Chen and Ravallion are correct, the world in 2005 just got another 400 million poor people.

Simon Hedlin