A new paper by Laurence Chandy and Geoffrey Gertz at the Brookings Institution reports a remarkable acceleration in the pace of progress against absolute poverty since 2005, as can be seen in Figure 1 of their paper (found here). This would be great news if it could be believed, but there are reasons for doubt.
In “updating” the World Bank’s estimates using the Bank’s PovcalNet site, Chandy and Gertz have relied heavily on forecasts rather than estimates based on new surveys. Household surveys are the only credible method of measuring poverty. The technology has improved, but naturally the data take time to collect and process. We still do not have sufficiently recent surveys for many countries, especially in Sub-Saharan Africa, the region with the highest overall poverty rate. The next edition of the World Bank’s regular three-yearly updates of its survey-based estimates of global poverty measures is scheduled for release later this year, and will go up to 2008, and revise consistently back to 1980. (Information on the last update can be found here. The paper documenting the methods and testing their robustness can be found here.)
So forecasts have their role, and the Bank’s team also produces forecasts of its poverty measures, to both update in lieu of new surveys and to project forward, in assessing likely future progress. But we have to make sure that the forecasts use all the available information and avoid predictable biases.
There are two reasons to question the forecasting methods used by Chandy and Gertz. First, they assume that there is no change in inequality during periods of rapid economic growth. This ignores the fact that the growth processes in the two most populous countries, China and India, as well as a number of other countries, have come with rising inequality (markedly so in China), which has of course dulled the impact of growth on poverty. (For further discussion and references to the literature see my paper here.) Second, Chandy and Gertz assume that all of the economic growth indicated by the national accounts is reflected in the mean consumption of households. This has not been the case in the recent past (as I demonstrated here).
The World Bank’s forecasting methods try to take account of both factors, and we get less optimistic results (as reported in Global Monitoring Report 2010 for example), though we still expect considerable progress against poverty, albeit uneven progress across countries and regions.
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Also see, Poverty's success story, The Washington Post.
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