The Poverty of Statistics and the Statistics of Poverty

This paper offers a critique of the picture of world growth and world inequality generally disseminated by international agencies. The positive view commonly presented depends on the widespread consensus that economic performance should be measured using ‘Purchasing Power Parity’ (PPP) statistics, instead of market exchange rates. Although originally conceived narrowly as a basis for comparing living standards, PPP indicators are now indiscriminately promoted as an unexceptionable standard for comparing and aggregating national income statistics. This article highlights the flaws in the PPP approach by accepting the claims made on their behalf at face value. It shows that, even on the basis of these claims, the wrong conclusions have been drawn. By comparing PPP and market exchange rate measures of inequality it shows that what really took place, at the end of the last century, was a systematic reduction in the prices of consumption goods in the Third World. PPP statistics have concealed this underlying and unsustainable trend, allowing it to be packaged as a stable reduction in poverty. Neither genuine growth, nor lasting poverty reduction was achieved over this period. The fall in the price of consumer goods masked a systematic failure to overcome the central problem of development—the high price of capital goods, which PPP statistics understate, and of intermediate goods, which they completely omit.     

Noncomparable Poverty Comparisons

Poverty estimates based on enumeration from a single point in time form the basis for most country-level analysis of poverty. Cross-country comparisons of poverty, and global counts of the poor, implicitly assume that country-level poverty headcounts are comparable. This paper illustrates that the assumption of comparability is potentially invalid when households are interviewed multiple times throughout the year, as opposed to a single-visit interview. An example from Jordan illustrates how the internationally comparable approach of handling data from repeat visits yields a poverty rate that is 26 per cent greater than the rate that is currently reported as the official estimate.     

Poverty and Survival

A recent literature highlights the uncertainty concerning whether economic growth has any causal protective effect on health and survival. But equal rates of growth often deliver unequal rates of poverty reduction and absolute deprivation is more clearly relevant. Using state-level panel data for India, we contribute the first estimates of the impact of changes in poverty on infant survival. We identify a significant within-state relationship which persists conditional upon state income, indicating the size of survival gains from redistribution in favour of households below the poverty line. The poverty elasticity declines over time after 1981. It is invariant to controlling for income inequality but diminished upon controlling for education, fertility and state health expenditure, and eliminated once we introduce controls for omitted trends.     

Institutions and Poverty

This study utilises eight alternative measures of institutions and the instrumental variable method to examine the impacts of institutions on poverty. The estimates show that an economy with a robust system to control corruption, an effective government, and a stable political system will create the conditions to promote economic growth, minimise income distribution conflicts, and reduce poverty. Corruption, ineffective governments, and political instability will not only hurt income levels through market inefficiencies, but also escalate poverty incidence via increased income inequality. The results also imply that the quality of the regulatory system, rule of law, voice and accountability, and expropriation risk are inversely related to poverty but their effect on poverty is via average income rather than income distribution.     

Remittances and Working Poverty

Abstract

This article shows that the level and the predictability of remittances reduce working poverty in receiving economies through their effects on labour market dynamics. It takes advantage of the new cross-country dataset (ILO, KILM 7th edition) containing information on the share of individuals working for less than US$2 per day. To identify the main impacts, the article proposes a novel approach to deal with the endogeneity of remittances and migration. In addition, the results are robust to the possible error in measuring working poverty, to the potential attrition bias, and to the presence of various control variables.     

The Economics of Poverty Traps and Persistent Poverty: Empirical and Policy Implications

The moral and economic imperatives to intervene in poverty traps motivate the identification of poverty traps and their structural causes so as to inform the design of appropriate policy responses. However, empirical identification remains challenging because of poverty traps’ complexity. After reviewing mechanisms that can generate poverty traps, we focus on one – multiple financial market failures – emphasising its heretofore underappreciated testable implications, including specific behaviours that are rational only in the presence of a poverty trap. We therefore recommend tests for these behaviours rather than more econometrically challenged efforts to directly test for poverty traps in estimated asset dynamics.     

Microfinance and Poverty in Bolivia

Both in its institutional range and in its penetration of financial markets, the microfinance sector in Bolivia rivals any in the world, and has played a major part in extracting the macro-economy from meltdown since the mid-1980s. We seek specifically to assess its impact on poverty, and do this through small-sample surveys on four microfinance institutions, two urban and two rural, using a range of poverty concepts: income (generated both through the borrower's enterprise and through the labour market), asset holdings and diversity, and various measures of vulnerability. All the institutions studied had, on balance, positive impacts on income and asset levels, with income impacts correlating negatively with income on account of poor households choosing to invest in low-risk, low-return assets. Microfinance may, however, augment vulnerability: average debt-service ratios of microfinance clients are disturbingly high, and if the coping mechanisms used by borrowers fail, borrowers may be forced out of the microfinance system, possibly resulting in decapitalisation and impoverishment. Poorer households are more restricted in their choice of coping strategy, and many as a consequence 'choose' coping strategies more likely to jeopardise their long-term income prospects, in particular asset sales and cuts in children's schooling. The more successful low-income borrowers are those who have voluntary savings deposits and do not rush into fixed capital purchases too early: collapse back into poverty is associated with multiple crises and the failure of one or more 'safety nets', in particular of one or more 'safety nets', in particular support from a member's solidarity group. The following actions appear to be promising for the further reduction of poverty in Bolivia: stronger efforts to mobilise rural savings, removal of lower limits on loan size, and the introduction of appropriate insurance mechanisms. In comparison with other anti-poverty measures, microfinance appears to be successful and relative cheap at reducing the poverty of those close to the poverty line, but ineffective, by comparison with labour-market and infrastructural measures, in reducing extreme poverty.     

Are Poverty Reduction Strategy Papers Associated with Reductions in Poverty and Improvements in Well-being?

Should Poverty Reduction Strategy Papers (PRSPs) be the tool for implementing the new Sustainable Development Goals, as they were for the Millennium Development Goals? Surprisingly, despite the controversies around them, there has never been a quantitative evaluation of PRSPs. This paper estimates the impact of having a PRSP on various targets of the Millennium Development Goals. Results suggest that countries under PRSP treatment achieve much greater reductions than control countries, in head count poverty and infant mortality, while also achieving greater improvements in primary school enrolments and gender parity.     

Post-development and Poverty: an assessment

This article presents a critical assessment of the post-development critique of poverty, distinguishing between claims made about how poverty is represented in ‘modern’ poverty analysis (the ‘representations critique’) and claims about trends in, and causal analysis of, consumption poverty (the ‘marginalisation thesis’). In general empirical evidence does not support ‘headline’ claims concerning the lack of correspondence of consumption poverty to local needs and the worsening of consumption poverty. There is support for other positions concerning the relativity of nutritional adequacy norms and the limits of ‘standard’ causal analysis of poverty. These latter elements, however, add little to existing critiques which are well known in the poverty literature.     

A Method to Update Poverty Maps

The small area estimation method proposed by Elbers et al. (Elbers, C., Lanjouw, J. and Lanjouw, P. (2003) Micro-level estimation of poverty and inequality. Econometrica, 71(1), pp. 355–364) combines a household survey and a census to generate a disaggregated map of poverty measures. Since censuses are often conducted every 10 years, construction of poverty maps on a regular basis is not straightforward. This article discusses methods to update poverty maps for years between censuses by combining an old census and new household surveys. These discussed methods are illustrated by producing a poverty map in Vietnam for the years 2004 and 2006 using the 1999 Population and Housing Census and Vietnam Household Living Standard Surveys in 2002, 2004 and 2006. The validation of the updating methods is examined by comparing poverty estimates in 2006 obtained from the updating methods with benchmark poverty estimates obtained from the standard ‘small area estimation’ method using data from the 2006 Vietnam Household Living and the 2006 Rural Agriculture and Fishery Census.     

Evaluating the Role of Subsidy Reform in Addressing Poverty Levels in Malaysia: A CGE Poverty Framework

Abstract

Malaysia as one of the top subsidised countries around the world has launched to reduce subsidies to capture its development goals. This study, therefore, analyses the effects of the subsidy reform on the macroeconomic, welfare and poverty levels of Malaysia by applying a CGE model. The findings suggest that subsidy removal leads to significant falls in both income and consumption of rural, urban and non-citizen households, and consequently decreases their welfare. However, poverty levels among rural households will most likely increase significantly when compared to urban households due to their relatively low level of income compared to other groups.     

Poverty Effects from Trade Liberalisation in Argentina

This paper aims at analysing the linkages between trade liberalisation and poverty in Argentina. Under a specific-factors setting, a two-step procedure is presented. In the first stage the change in prices of goods and factors in both tradable and non-tradable sectors, after a trade liberalisation episode, is considered. In a second step, these variations are applied to assess the changes in poverty and household welfare. A micro simulation approach, using household survey data, is applied in this last stage. Poverty is reduced as a result of the policy and the households that benefit from this reduction are those linked to the non-tradable sectors.     

Africa and the Poverty of International Relations

The modern condition of poverty in Africa is a global phenomenon, the outcome of world-historical processes of social change, and reproduced by globally structured social relations. This is obscured in academic analysis. The 20th century division of labour produced an absence of theorising the international from the discipline of Development Studies, and an absence of poverty from the concerns of International Relations. Neither Development Studies nor ir have adequately emphasised or theorised the global production and reproduction of local poverty in Africa. Perhaps this can be remedied, thanks to the increasing attention to studying international relations ‘from below’ in recent critical scholarship. However, methodologically, the current critical approaches in ir and ds are disabled by their abandonment of objectivity and a commitment to explanation. The article concludes by arguing for elaboration of the global political economy of poverty in Africa, as a form of social scientific inquiry with necessarily emancipatory implications.