A Proposal for Truly Global Poverty Measures

A Proposal for Truly Global Poverty Measures

Standard absolute poverty measures probably understate poverty rates in rich countries, given that their residents face higher welfare costs of social inclusion and relative deprivation. At the same time, standard measures of relative poverty probably understate the extent of poverty in poor countries, given that these measures attach little value to social inclusion needs at low mean income. This article provides the first estimates of a new class of truly global measures that aim to avoid these deficiencies of past measures. The results indicate that worsening distribution in the set of high-income countries has pushed up the incidence of relative poverty since 1990, but not by as much as success against absolute poverty has swelled the ranks of the relatively poor in the developing world. The incidence of purely relative poverty is now higher in the developing world than among rich countries – reversing the historical pattern.

Policy Implications

  • The very different methods used to measure poverty in poor vs rich countries can be unified to obtain a truly global measure of poverty. This allows for the costs of avoiding social exclusion and relative deprivation in both poor and rich countries
  • Economic growth has generally meant a lower absolute poverty rate, but over time it has also meant that in many developing countries relative considerations have become more important.
  • Not only is the incidence of extreme absolute poverty higher in the developing world, so too is relative poverty. Over 90 per cent of globally poor people live in the developing world.
  • While economic growth will remain important to reducing poverty by this new measure, it also underlines that policy efforts must pay greater attention to reducing inequality than in the past, when the main focus was on absolute poverty
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