Poverty 7

Is the incidence of absolute poverty in the developing world higher in urban or rural areas in general? Is the nominal urban poverty line typically higher or lower than the rural poverty line? Why?

Allowing for differences in cost of living, the incidence of absolute poverty is significantly higher in rural areas compared to urban areas. In 2008, the ruaral poverty rate of 31% is more than double the urban rate. Poverty is becoming more urban over time. On average, the nominal urban poverty line is about 30% higher than the rural line on average

How do urban/rural poverty numbers vary across various regions? How have these numbers changed between 1990 and 2008?

Almost half of Latin America's poor live in urban areas, while less than 20% of East Asia's poor live in urban areas. In Eastern Europe and Central Asia there are signs of a ruralization of poverty. Between 1990-2008, the count of $1.25 a day poor in urban areas fell by only 10 million, from 320 to 310 million. However, the number of rural poor fell by over 500 million (from 1464 million in 1990 to 926 million in 2008).

How has the middle class changed between 1990 and 2005?

An extra 1.2 billion people joined the developing world's middle class over 1990-2005. This has been called the "bulging middle."

What are some issues with global relative poverty measures?

Definitions of poverty often ignore the fact that the costs of avoiding relative deprivation and social exclusion cannot fall to zero, but must have a positive minimum. This means requiring that the costs of social inclusion has a positive lower bound.

In what region of the world has the least progress against poverty been made over the last 30 years? Where has had the most progress?

East Asia has seen the most progress, while Sub-Saharan Africa (SSA) has seen the least however, the poverty rate has been falling since 2000. SSA switched places as the region with the highest poverty rate with East Asia.

Why are China and India sometimes excluded in calculations of global inequality and poverty? What has happened to international inequality over the past few decades excluding China and India?

Excluding China alone, the number of ppl living below $1.25 a day is no lower in 2008 than in 1981. China accounts for half of the 1.2 billion middle class entrants in 1990-2005. China and India have played a large role in the "bulging middle" due to their unbelievable growth. If you exclude these countries, it is clear that there is little or no overall decrease in inequality worldwide.

What are some issues that Sub-Saharan Africa faces in poverty reduction?

Health issues like infant mortality and life expectancy are key issues in reducing poverty there.

Explain the formula for the weakly relative poverty line.

It begins with an absolute line of $1.25 a day at 2005 prices, while the relative line rises with the country and year-specific survey mean above $1.25 a day, at a gradient of 1:2. The schedule of weakly relative lines is: Zit = $1.25 + 0.5max(Mit- -$1.25, 0)

What are the limitations of using market exchange rates in measuring global poverty and inequality? How are those limitations addressed?

Market exchange rates do not take into account the fact that prices for goods that are not internationally traded tend to be lower in poorer countries. Purchasing Power Parity exchange rates allow for this tendency and are based upon surveys of the prices actually paid for domestically traded goods and services.

Has there been any progress against relative poverty in developing countries between 1990 and 2008? How does the share of relative poverty in developing countries compare to the share in developed countries?

No, relative poverty has increased in developing countries between 1990 and 2008.

How many people, as of 2008, live below $1.25 a day? How does this compare to the total number of poor people?

Over 1 billion people. There is a market decline in the absolutely poor, and a rising number of relatively poor ppl.

How has inequality changed since 1980? What component of inequality is this change mostly due to?

Percentage of population of developing world living below $1.25 a day has more than halved (53% to 19%). China's success against absolute poverty played a major role. There is much less progress however at very high poverty lines.

Which regions have seen increases in average inequality within countries?

Rich countries like the US, UK, and the Netherlands since 1980 and Canada, Nordic nation, and Germany since 1990.

In what region of the world do we find the highest incidence (%) of absolute poverty? What about for relative poverty? How has this changed between 1990 and 2008?

SSA now has by far the highest absolute poverty. Latin America now has the highest incidence of relative poverty. East Asia has seen a decline in both absolutely and relative poor. South Asia saw the largest increase in the number of relatively poor.

What is the "truly global" poverty rate? How has it changed between 1990 and 2008?

The "truly global" poverty rate combines absolute poverty (as judged by poverty lines found in the poorest countries) with social inclusion needs (as judged by poverty lines typical of the country one lives in). And it represents all countries, whether rich or poor. It has been steadily falling from 50% in 1990 to 44% in 2008.

What is the definition of "middle class" in the developing world? What is the "upper middle class"?

The middle class in the developing world is defined as between $2 (above avg poverty line), with the it going up to as high as $9 in some countries. The upper middle class is those living above $9 a day but below $13 a day.

What has been the trend over the last 30 years for the headcount index for poverty lines at both $1.25 and $2 a day? What happened to the number of people living between these two poverty lines?

The number of people living between $1.25 and $2 a day has doubled between 1981 and 2010. There is significant "bunching up" of people just above the $1.25 line.

How has the definition of poverty typically differed between high and low income countries?

The rich world of "high-income countries" has, by and large, maintained a highly relative idea of what poverty means, emphasizing the distribution of relative incomes in the place of residence. The developing world has instead viewed poverty as absolute, meaning that two people with the same command over commodities are treated the same way irrespective of where they live.

Has there been a "poverty-inequality" trade off in the developing world? Explain.

There are no signs here of a "poverty-inequality tradeoff" whereby higher inequality is to be anticipated as the "price" to be paid for faster poverty reduction.

Has there been convergence of poverty rates between high and low-income countries? If so, what are some possible explanations?

Underlying this, we see sharply falling absolute poverty rates for the developing world, and rising (weakly) relative poverty rates in both worlds, though less steeply for HICs. There are also clear signs of convergence in the overall poverty rates between the two worlds; in 1990, the overall poverty rate (absolute plus relative) was three times higher in the developing world, but this had fallen to double by 2008.

Can you say conclusively that poverty rates have fallen in the developing world for all poverty lines and poverty measures up to the U.S. line between 1981 and 1999? Why or why not?

yes, while the precise counts are naturally sensitive to the choice of the poverty line, a decline in the incidence of absolute poverty since 1980 is indicated over a wide range of lines and measures in developing nations. It did not fall significantly for people making above $5 a day.