Absolute Poverty: When Necessity Displaces Desire

The global absolute poverty rates of the World Bank demonstrate a continued decline of poverty in developing countries between 1983 and 2012. However, the methodology applied to derive these results has received extensive criticism by scholars for requiring the application of PPP exchange rates and CPIs that are not constructed to capture the consumption habits of those who live in absolute poverty. Those methodological concerns cast reasonable doubts on the poverty rates reported. First, in this paper, I demonstrate the validity of the hypothesis that the World Bank’s method inconsistently measures global absolute poverty. Second, I introduce new estimates of global absolute poverty based on a consistent methodology suitable for comparisons in time and between countries. For this purpose, I follow a well known concept of measuring bare bones subsistence using a consumption basket. This absolute poverty yardstick tracks bare bones survival costs and is priced in domestic nominal terms. The minimum caloric requirements are calculated separately for each country and year based on the demographic composition. The exact composition of the baskets is determined separately for each combination of country and year. The non-food component contains, among others, clothing and fuel consumption for basic heating, linked to monthly average temperature data. The results validate the critique on the World Bank’s methodology. They demonstrate large discrepancies in levels, which I find in many cases several times lower of what they report. This difference is far from being a linear change in all countries, which in turn fundamentally changes the geography and development of global absolute poverty. A sharp post 1990 increase together with a thereafter modest but longer decline brings the 2012 estimate only 1% lower than 1990.

Policy Research Working Papers, 2007

This paper proposes a new method for ex ante analysis of the poverty impacts arising from policy reforms. Three innovations underlie this approach. The first is the estimation of a global demand system using a combination of micro-data from household surveys, and macro-data from the International Comparisons Project. The second innovation relates to a methodology for postestimation calibration of the global demand system, giving rise to country specific demand systems and an associated expenditure function which, when aggregated across the expenditure distribution, reproduce observed per capita budget shares exactly. The third innovation is use of the calibrated expenditure function to calculate the change in the head-count of poverty, poverty gap and squared poverty gap arising from policy reforms, where the poverty measures are derived using a unique poverty level of utility, rather than an income or expenditure-based measure. We employ these techniques with a demand system for food, other non-durables and services estimated using a combination of 1996 ICP data set and national expenditure distribution data. To illustrate the usefulness of these calibrated models for policy analysis, we assess the impacts of an assumed five percent food price rise as might be following a multilateral trade agreement.

Food and nutrition bulletin, 2014

Current tools assessing affordability of nutritious diets are incomplete. "Food poverty" uses expenditure data to identify households unable to acquire a diet adequate in energy but does not consider other nutrients. The "minimum cost of a nutritious diet" method provides a threshold for purchasing a nutritious diet but must rely on other data to identify "nutrient-poor" households. Integrating both methods into a single framework using a common data source, we sought to jointly estimate the proportions of a population that are food and nutrient poor. Household expenditure data from the 2010/11 Nepal Living Standards Survey were used, focusing on representative samples of households from the mountain region (n = 401) and Kathmandu (n = 857). Food poverty thresholds were set at the cost for a low-income household to purchase a basket of foods providing adequate energy following the Cost of Basic Need method. Linear optimization was used to calculate a &q...

2005

It has been common to anchor poverty lines in nutritional requirements, generally calorie norms. There are many ways in which these calculations are conducted, but broadly people in households are designated as poor if they are estimated not to command sufficient calories in their diet to meet their computed requirements. Various calorie based methods of computing poverty lines or poverty are calculated for India and Bangladesh for recent years, including Food Energy Intake and Cost of Basic Needs methods. These two methods are shown to be essentially similar once constraints are introduced on the cost per calorie of the FEI method. However, poverty aggregates based on these calorie anchored poverty lines do not show the same spatial or temporal patterns of ill-being as other indicators which are plausibly related closely with poverty. This paper argues that anchoring PLs in calories is not a reliable way to compute comparable poverty lines for different domains of social groups, geographical spaces, or time periods; that is they do not produce poverty lines which represent the same standard of living in these different domains, and consequently poverty comparisons based on these lines may be comparing not differences in poverty but differences in the standards by which poverty is assessed.

Economic and Political Weekly, 2005

The mounting evidence on the inconsistency between the official poverty estimates in India and those based on a direct specification of the calorie requirements raises serious questions on the credibility of the official poverty line as a measure of the true cost of obtaining the minimum calorie requirements today. This study provides evidence, based on estimated nutrient prices and a ?balanced diet?, that shows how far the official poverty lines have fallen out of line with their ?true? measure. The paper provides robust evidence, with special reference to the socially disadvantaged groups, that suggests that the poverty situation in India is much worse than that revealed in official poverty statistics (?adjusted? or not). This paper makes a methodological contribution by proposing an expenditure-based poverty line, using the household specific estimated nutrient prices, that serves as a compromise between the official poverty line and that specified directly in terms of calories. ...

RePEc: Research Papers in Economics, 1984

Poverty and Food Security: CasualAcquaintances Poverty measurement activities and food security policymaking are acquainted with each other, but are not, as yet, close friends. Food security policiesare said to he undertaken out of a concern for the poor; but they do not seem intended as measuresto deliberately reduce the incidence of poverty. The measurement of poverty is not yet undertaken too frequently; when it is, nutritional status or access to food is the most common criterion that is used. Yet this.hasdot implied that poverty reduction policies include food related policies and give them higher priority than policies related to other commodities. Is it in the very nature of the food security problem that a polite distance needs to be maintained from the condition of poverty? In a recent paper,Siamwalla and Valdes (1980) assertthat: Foodsecuritymay be defined asthe abilityof food-deficit countries, or regions or households withinthesecountries, to meettargetlevels of consumptionon a yearly basis. Whatconstitutes targetconsumption levels, andwhoseability to maintainconsumption isbeingreferredto, aretwo central issues of acountry's foodpolicy.(p. 258) By confining the food security problem area to a short-term perspective, they relegatethe poverty problem to another compartment: Althoughthemostsevere impactof short-term food supplyinstability is felt by the poor, chronic malnutrition caused by persistent povertyconstitutesa long-term problem whose dimensions andsolutions liewell beyond the question of food-security, whichweconsider to bea problem of short-Vice-President, Researchfor DevelopmentDepartment,DevelopmentAcademyof the Philippines.Paper presentedat the Fourth I_iennlalConferenceof the Agricultural Eco-nomicsSociety of SoutheastAsia,Singapore, November3, 1981. 191 1. In the Foreword to Valdes(1981,pp.xv], xvii). Interestingly enough, Siamwalla and Valdes arcstaffmembers of IFPRI,of whichM¢!loris President.

RePEc: Research Papers in Economics, 2012

Journal of Policy Analysis and Management, 2010

The multitude of available poverty measures can confuse a policy maker who wants to evaluate a poverty-reduction policy. We proposes a rule for ranking poverty measures by use of the food-gap, calculated as the cost-difference between a household's normative food basket, derived from a healthy diet, and the actually chosen food basket. The rationale for this indicator is based on the fact, that (1) basic food needs reflect an ultimate necessity, (2) food expenditure is highly divisibility, thus allowing for efficient marginal substitution between competing necessities when the household's economic hardship increases. For these reasons we believe this to be an objective indicator for the sacrifice in the standard of living of a family under economic stress. A household is identified as 'truly' poor or non-poor by a given poverty measure if the diagnoses coincide and vice versa. The ranking is obtained by a gain-function, which adds up congruent and deducts contradicting outcomes for each poverty measure. We calculate four types of gainfunctions -of headcounts, food-gaps, FGT-like powered food-gaps and an augmented version of the latter. The poverty measures include expenditure-based, income-based, relative, absolute, mixed measures and a multidimensional measure of social deprivation. The most qualitative measure is found to be Ravallion's Food Energy Intake and Share measure, though it suffers from a possible bias, since it includes the food-norm in its design. The 60%-median income measure from all sources ranks highest among the unbiased measures. The absolute poverty measure yields the worst performance.

2009

To monitor changes in absolute poverty across time, it is crucial to ensure that the established poverty line is a fixed standard of living that represents the minimum standard required by an individual to fulfill his or her basic food and non-food needs. Typically, the food (component of the) poverty line is set with the cost of basic needs method,