New Delhi: Across the world, poverty has declined dramatically over the last few decades. However, a new study suggests that this decline may be exaggerated because of inadequate poverty measurement. Martin Ravallion in a new working paper critically evaluates existing absolute and relative measurements of poverty and proposes a hybrid model to measure poverty.
Absolute measurements of poverty, used by the World Bank and developing countries like India, rely on a poverty line which remains constant across geographies and over time. The problem with these measures, Ravallion argues, is that they overlook deprivation within countries or the higher cost of living in developed countries. A common way to address is to use relative measures of poverty where poverty lines are set at a constant proportion of the mean or median poverty line. This approach, though, ignores the importance of the absolute standard of living and assumes that relative income is all that matters for welfare.
To address both these issues, Ravallion proposes a hybrid approach which would measure poverty from the perspective of a common global standard of living and relative poverty within countries. The poverty line here would be equivalent to the income required to achieve a certain welfare status, which includes basic nutrition and social inclusion. Using this measure, he finds that though poverty has decreased globally, the extent of this decrease may be overestimated. Based on his hybrid measure, 32% of the world was poor as of 2013 significantly higher than the World Bank estimate of 11% (calculated using a global poverty line of $1.9 a day).
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