Wednesday, November 8, 2017

A Range of International Poverty Lines

Poverty is inevitably a relative phenomenon; that, whether you are "poor" depends on the typical standard of living in your society. For example, the World Bank has used a poverty line of $1.90 per person per day since 2015. If you multiplied this poverty line by a family of 3, for 365 days in a year, it equates to an annual poverty line of $2,080 per year for that family. For comparison, the US poverty line in 2016 for a three-person family with a parent and two children would be $19,337.

It would take some odd mixture of clueless, heartless, and moral blindness to argue that poverty in the United States or other high-income countries should be defined in the same way as in low-income countries. But by similar logic, it seems unsuitable to use the same poverty line for what the World Bank would classify as "low-income" countries with a per capita GDP of less than $1,005 per year (for example, Afghanistan, Ethiopia, and Haiti), "lower middle income" countries with a per capita GDP between $1,006 TO $3,955 (like Bangladesh, Nicaragua, and Nigeria), and "upper middle-income" countries with a per capita GDP from $3,956 TO $12,235 (like Mexico, China,and Turkey). Thus, the World Bank is now planning to use "A Richer Array of Poverty Lines," in the words of Franciscon Ferreira.

The figure shows per capita income on the horizontal axis, with the groups of countries separated by income level. The corresponding poverty line for each country as determined by that country is plotted on the vertical axis. The horizontal line shows an average poverty line for the countries within that income group.

The underlying data for national poverty lines is from an article by Dean Jolliffe and Espen Beer Prydz, "Estimating international poverty lines from comparable national thresholds," which appeared in the Journal of Economic Inequality (2016, 14, pp. 185-198). An ungated version is available from the World Bank here.