Call to improve global ‘poverty line’ measure

The poverty line measure used by the World Bank has many unsatisfactory features, according to a discussion paper from an Oxford economist.

The paper compares historical poverty baskets with modern food security and poverty lines, arguing that the latter could be improved by emulating the historical methods.

Key points

  • The World Bank Poverty Line has been highly controversial due to its method of construction, the author says. It is not clear what standard of comfort it represents, since it was not set equal to the cost of a specified basket. Defining the poverty line as ‘a dollar a day’ has also led to intractable disputes over price indices, since comparing poverty levels across countries requires translating the dollar a day into local currencies.
  • Although the World Bank refuses to propose a basket of goods to define the international poverty line, the various national poverty lines that form the basis of the dollar a day line were themselves based on their own baskets. By examining these baskets, we can see what the dollar a day line means, and how it relates to historical poverty lines.
  • Analysis of the logic and practice of food security lines suggests that we can improve the historical measures by raising the calorie content of the food basket to 2,100 calories, and by interpreting the basket to apply to each person rather than to an adult male equivalent. These changes would bring the baskets into alignment with modern food security lines, as well as the nutritional assumptions underlying many poverty lines.
  • Furthermore, this calorie standard is consistent with the energy requirements of people living in earlier times. Analysis of the World Bank poverty line indicates that a subsistence basket based on 2,100 calories per person is consistent with the ‘dollar a day’ line under many assumptions.

The paper concludes by calling on the World Bank to settle on an explicit measure of poverty that can be applied across space and over time, and highlights the potentially 'large' benefits of doing so.

Source: Robert Allen, Poverty Lines in History, Theory, and Current International Practice, Working Paper 685, Department of Economics, University of Oxford
LinksPaper

Category:

Publication date: 
Dec 2 2013