How Have the World's Poorest Fared since the Early 1980s?

TLDR: This article presented a new assessment of progress in reducing poverty over 1981-2001 using more consistent data and methods, closely following the methods underlying the Attacking Poverty (World Bank 2000) numbers, which had been based on Chen and Ravallion (2000).

Abstract: This article offers a new assessment of progress in reducing poverty over 1981–2001 using more consistent data and methods, closely following the methods underlying the Attacking Poverty (World Bank 2000) numbers, which had been based on Chen and Ravallion (2000). In common with our past estimates, the authors draw on nationally representative surveys as much as possible. The article reviews the methods of measuring poverty from those surveys and notes any changes from past estimates, though the authors refer readers to other sources for further discussion of our methods and alternatives. The new estimates presented here supersede all our previous estimates in that the authors recalculate everything back in time on a consistent basis incorporating the new data. The authors summarize our results in a standard regional tabulation following previous work. However, the authors have also created a Web-based interactive tool, PovcalNet, that allows users to access the primary distributions and so estimate poverty measures for alternative country groupings or for a selected set of individual countries (http:/ /iresearch.worldbank.org/povcalnet). The article first describes the coverage of the survey data. It then discusses the poverty line and exchange rates, followed by the measures of poverty, and then presents the main results.

Figures

Table 3: Headcount indices of poverty

Table 2: Estimates for China by old and new methods

Figure 1: Number of surveys by year

Table 7: Mean income of the poor in $ per day

Figure 4: Numbers of relatively poor people

Table 6: Poverty gap indices

Full text

How have the world’s poorest fared since the early 1980s?
Shaohua Chen and Martin Ravallion
1
Development Research Group, World Bank
We present new estimates of the extent of the developing world’s progress against
poverty. By the frugal $1 per day standard, we find that there were 1.1 billion
poor in 2001 — almost 400 million fewer than 20 years earlier. Over the same
period, the number of poor declined by over 400 million in China, though half of
this decline was in the first few years of the 1980s. The number of poor outside
China rose slightly over the period. A marked bunching up of people between $1
and $2 per day has also emerged, with an increase over time in the number of
people living under $2 per day. Sub-Saharan Africa has become the region with
the highest incidence of extreme poverty and the greatest depth of poverty. If these
trends continue then the aggregate $1 per day poverty rate for 1990 will be
halved by 2015, though only East and South Asia will reach this goal.
World Bank Policy Research Working Paper 3341, June 2004
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange
of ideas about development issues. An objective of the series is to get the findings out quickly, even if the
presentations are less than fully polished. The papers carry the names of the authors and should be cited
accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors.
They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they
represent. Policy Research Working Papers are available online at http://econ.worldbank.org.
1
We are grateful to numerous colleagues at the World Bank who helped us obtain the necessary
data and answer our many questions and the staff of the numerous governmental statistics offices who
collected the primary survey data. The able assistance of Prem Sangraula is gratefully acknowledged.
Angus Deaton, Johan Mistiaen, Dominique van de Walle and the Observer’s Editorial Board made useful
comments on the first draft. Address for correspondence: schen@worldbank.org
,
mravallion@worldbank.org
.
Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized
WPS3341

2

3
Introduction
A cloud of doubt hangs over our knowledge about the extent of the world’s progress
against poverty. A widely cited estimate from World Bank (2002) is that there were 200 million
fewer poor in the world in 1998 than in 1980. This figure has been contested, and for good
reasons. Deaton (2002a) contrasts this seemingly optimistic assessment of the world’s progress
against poverty with that in the World Development Report, Attacking Poverty (World Bank,
2000), which appeared to show little or no progress. Deaton (2002a) argues that the claim in
World Bank (2002) was based on methodologically inconsistent estimates from two studies,
namely Bourguignon and Morisson (2002) (up to 1992) and Chen and Ravallion (2000) (beyond
that).
2
With reference to the relevant chart in World Bank (2002) (which he refers to as
Globalization) Deaton writes:
“The historical data in this chart were assembled by François Bourguignon and Christian
Morrisson… They derive their estimates by applying (sometimes sketchy and outdated)
distributional information to the consumption figures from national accounts data, a technique
that is almost certainly the only methodology that would allow the construction of data for a
century and a half. … After 1993, when the Bourguignon and Morrisson data end, Globalization
uses the poverty estimates that were assembled by Shaohua Chen and Martin Ravallion…. But
Chen and Ravallion's data from 1987 to 1993, which is when poverty increased, are dropped from
the chart. In consequence, and without any new information, we go from an assessment that the
number of poor people in the world was showing little or no decline from 1987 to 1998 in
Attacking Poverty to an assessment, in Globalization, of a continuous and accelerating decline
from 1980 to 1998.”
These concerns are too important to ignore. We agree with Deaton that the splicing of these
different data sources is highly questionable. The only solution is to construct a new, internally
consistent, series over the 1980s and 1990s.
2
Wade (2004) also questions the 200 million figure. However, misdiagnoses the problem, by
confusing changes in the methods used to count the world’s poor with the methodological issues related
to the way World Bank (2002) used different data sources. In fact, the Chen-Ravallion estimates used in
World Bank (2002) would be judged internally consistent by Wade’s criteria. The Deaton critique is more
persuasive since it is grounded on a well-researched understanding of the methods involved.

4
This paper offers a new assessment of progress in reducing poverty over 1981-2001 using
consistent data and methods — closely following the methods underlying the Attacking Poverty
numbers, which had been based on Chen and Ravallion (2000). In common with our past
estimates, we draw on nationally representative surveys as much as feasible. The paper reviews
our methods of measuring poverty from those surveys and notes any changes from past
estimates, though we refer readers to other sources for further discussion of our methods and
alternatives.
3
The new estimates presented here supersede all our previous estimates, in that we
have re-calculated everything back in time on a consistent basis incorporating the new data.
4
This paper summarizes our results in a standard regional tabulation following past work.
However, we have also created a web-based interactive tool, PovcalNet that allows users to
access the primary distributions and so estimate poverty measures for alternative country
groupings or for a selected set of individual countries (http://iresearch.worldbank.org/povcalnet).
A notable feature of these new estimates is that we go back to the early 1980s, allowing
an assessment of the validity of the aforementioned claim in World Bank (2002). We have
previously resisted going back this far, given our concerns about the coverage and quality of the
survey data available for the early 1980s. Our efforts to expand coverage have helped allay our
fears about reliability for the early 1980s. However, it is clear that our estimates for the first year
in our series, 1981, are not as reliable as the rest of the series.
We find that the 200 million figure is probably an under-estimate. Indeed, our best
estimates suggest that it is almost twice that number. That is good news. However, a closer
3
For a critical overview of our estimation methods see Deaton (2002b), which covers the main
issues raised in the literature. Ravallion (2002a) replies to Deaton’s comments; also see Ravallion
(2003a) for further discussion.
4
The latest individual country estimates, can be found at the web site:
http://www.worldbank.org/research/povmonitor/
. The latest year’s estimates at country level are also
published in the World Bank’s World Development Indicators (see, for example, World Bank, 2004).

5
inspection of the data leaves little room for complacency about the world’s progress against
poverty. Indeed, the picture that emerges is one of highly uneven progress, with serious setbacks
in some regions and time periods. And we find that the number living under $2 per day rose.
It should not be forgotten that there are limitations to our measures. There are continuing
concerns about aspects of the underlying data, including the Purchasing Power Parity exchange
rates, the accuracy and comparability of the surveys used, and intrinsic limitations of the welfare
measures based on those surveys. A potentially important example of the latter is the fact that
our definition of poverty does not directly reflect inequality within the household.
The next section describes the coverage of the survey data. We then discuss the poverty
line and exchange rates, followed by the measures of poverty. Our main results are then
discussed before concluding.
Coverage of the household surveys
This is our first attempt to estimate global poverty measures back to the early 1980s. Our
last paper provided estimates starting in 1987 (Chen and Ravallion, 2000, 2001). In retrospect,
starting the series in 1987 was an unfortunate choice, since the late 1980s and early 1990s was a
difficult time for the world’s poor, given sharply lower growth in both China and India. By
going back further in time, we hope to get a clearer idea of the long-term trend.
We draw on 454 surveys covering 97 countries representing 93% of the population of all
low and middle income countries (Part 2 member countries of the World Bank). Taking the
most recent survey for each country, about 1.1 million households were interviewed. The surveys
were mostly done by governmental statistics offices as part of their routine operations.
Our poverty measures are estimated from the primary (unit record or tabulated) survey
data. We have not used any secondary sources for measuring poverty at each survey round

Frequently asked questions

Q1. What contributions have the authors mentioned in the paper "How have the world’s poorest fared since the early 1980s?" ?

The authors present new estimates of the extent of the developing world ’ s progress against poverty. 

Q2. What are the future works mentioned in the paper "How have the world’s poorest fared since the early 1980s?" ?

Not only has Africa emerged in the 1990s as the region with the highest incidence of poverty, the depth of poverty is also markedly higher than that found in other regions — suggesting that without lower inequality economic growth in Africa will have a harder time reducing poverty in the future than elsewhere. If it is maintained over 2001-15 then the trend rate of decline in the incidence of poverty by the $ 1 per day standard over 1984-2001 will be sufficient to halve the 1990 aggregate headcount index by 2015, consistent with the Millennium Development Goals. 

Q3. What is the striking feature of the results in Table 6?

The most striking feature of the results in Table 6 is the depth of poverty in Africa, with a$1 per day poverty gap index of 20%, as compared to 6% for the developing world as a whole. 

Q4. What is the important example of the latter?

A potentially important example of the latter is the fact that their definition of poverty does not directly reflect inequality within the household. 

Q5. What is the main argument for using consumption in preference to income?

Whenever there is a choice the authors use consumption in preference to income, on the grounds that consumption is likely to be the better measure of current welfare. 

Q6. What is the plausible explanation for the decline in poverty in China?

The most plausible explanation would appear to be China’s reforms starting in the late 1970s; the reforms de-collectivized agriculture and introduced the “household responsibility system” giving farmers considerably greater control over their land and output choices (Chen and Ravallion, 2004c, discuss this and alternative explanations for China’s success against absolute poverty.) 

Q7. What is the basis for the PPPs for 69 of their 97 countries?

For 69 of their 97 countries, the PPPs are based on price and consumption basket data collected by the 1993 International Comparison Project (ICP). 

Q8. How much has the elasticity of the poverty gap index fallen in the developing world in 2001?

The elasticity has fallen (in absolute value) over time in Africa, though only slightly (from –1.4 in 1981), but has risen in the developing world as a whole (from -1.9 in 1981).