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Challenging new poverty lines

Dec 15, 2008

The World Bank recently released its ‘updated’ global poverty estimates. Sanjay G. Reddy in his paper titled: The New Global Poverty Estimates – Digging Deeper into a Hole published by the International Poverty Centre, identifies important gaps in the methodologies for gathering data and its availability across countries.

The New Global Poverty Estimates – Digging Deeper into a Hole
Author: Sanjay G. Reddy
Publisher: International Poverty Centre, UNDP, September 2008

This article argues that the World Bank’s revised poverty estimate gives a rosy picture of reality. The author in this one pager focuses on the impact of the ‘updated’ global poverty estimates released by the World Bank, which adjust the poverty line benchmark to $1.25 per day.

While the Bank has made some improvements, its calculations are neither reliable over time nor comparable between countries.

The World Bank data miss the central issue of characterising a modern and transparent concept of poverty. The new purchasing power parity (PPP) indexes do not introduce any improvement in tracking the dimension of poverty over time and they are inadequate at analysing its likely determinants.

The new poverty line is itself allegedly based on an average of poverty lines used in poor countries. PPPs reflect the relative costs for a worldwide pattern of consumption prevailing at only one moment in time, and this pattern is constantly changing.

They merely present a snapshot of relative prices across countries at a point in time, which is no more authoritative than similar snapshots of the relative prices taken at other points in the time period being examined.

He cautions that the new poverty line is too low to cover the purchasing of basic necessities, and that an individual above the poverty line might not be able to afford the basic nutritional requirements.

The author suggests alternative methods like careful coordination of household surveys and poverty line construction across countries, ensuring comparability from the first.

Source : UNDP
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