Welfare-Consistent Global Poverty Measures
The paper provides new measures of global poverty that take seriously the idea of relative-income comparisons but also acknowledge a deep identification problem when the latent norms defining poverty vary systematically across countries. Welfare-consistent measures are shown to be bounded below by a fixed absolute line and above by weakly-relative lines derived from a theoretical model of relative-income comparisons calibrated to data on national poverty lines. Both bounds indicate falling global poverty incidence, but more slowly for the upper bound. Either way, the developing world has a higher poverty incidence but is making more progress against poverty than the developed world.
The authors thank Prem Sangraula and the World Bank’s regional focal points for help in setting up the data base on national poverty lines and Qinghua Zhao for programming assistance. Helpful comments were received from Rebecca Blank, Benoît Decerf, Francisco Ferreira, Garance Genicot, Stephan Klasen, Dominique van de Walle and Michael Woolcock. These are the views of the authors and need not reflect those of their employers, the World Bank, or the National Bureau of Economic Research.