Estimating National and Global Poverty: Crisis of Credibility

The Discussion Map charts important debates from the pages of EPW.

The first global poverty estimates generated by the World Bank in 1990 employed a poverty line of $1.08 per day anywhere in the world. The generation of an international poverty line aided the definition of global poverty based on the estimates of the World Bank. Currently, global poverty is defined as the number of people worldwide who live on less than $2.15 a day, based on the latest World Bank poverty line estimates,  which replaces the $1.90 poverty line. The new extreme poverty line of $2.15 per person per day is based on 2017 PPPs (purchasing power parities)—the main data used to convert different currencies into a common, comparable unit and account for price differences across countries.

The estimation of the poverty line draws critique, debate and evaluation from economists and social scientists who raise fundamental questions about the morality and the logic aiding the estimation of such a poverty line applicable worldwide. A discussion on the popular Global Poverty debate occurred in the pages of EPW when an Editorial titled ‘How Many Poor in the World?’ asked, “What is it that is actually available to the interested consumer of statistics on global poverty?” soon after the third set of estimates, released by a World Bank working paper in 2008, employed a poverty line of $ 1.25 per day at 2005 PPP. The editorial questions the credibility of the description of global poverty according to the estimation of the poverty line by world bank. Pointing out that the “dollar a day” poverty lines may just be a little more than “destitution line”. Further, the possibility of PPP exchange rates affected by prices of irrelevant commodities raises the question of the credibility of the data due to contaminated cross-section comparisons. The editorial emphasises that “ poverty comparisons are meaningful only if a common standard of comparison is employed”. The editorial illustrates that the standard of comparison used to measure the estimates does not demonstrate consistency over time and therefore is uninterpretable. The editorial concludes that “the lower the poverty line employed, the more flattering is the resulting trend decline in poverty”.

The discussion unfolds when Martin Ravillion responds to all the concerns raised in the editorial through his article ‘How Many Poor in the World?': A Reply.’Although he acknowledges that data may not be ideal, it must be put to the best use as poverty measurement is no different than any other social or economic research. Ravillion’s short reply receives a longer and detailed critique from S Subramanian. In ‘How Many Poor in the World?’: A Critique of Ravallion’s Reply.’ Subramanian tackles all the counter arguments posed by Ravillion in defence of the poverty line estimates. He argues that the debate on Global Poverty estimation is difficult, occasionally charged, but unfailingly important discussion. This discussion map charts the key problems with the international estimation of poverty, which are pertinent to understanding the ramifications of the poverty line estimation released once in almost a decade.