The challenges faced in calibrating poverty and welfare measures to objective data have long been recognized. Until recently, most economists have resisted a seemingly obvious solution, namely to ask people themselves: "Do you feel poor?" The paper studies the case for and against this approach. It is argued that, while one would not want to use self-assessments as welfare metrics in their own right, there is scope for using such data to help calibrate multidimensional measures. Indeed, the idea of a "social subjective poverty line" (below which people tend to think they are poor, but above which they do not) is arguably the most conceptually appealing way of defining poverty. However, the paper points to a number of concerns that have received insufficient attention, including the choice of covariates, survey design issues, measurement errors, frame-of-reference effects, and latent heterogeneity in personality traits and personal tradeoffs. Directions for future research are identified.

National poverty lines vary greatly across the world, from under $1 per person per day to over $40 (at 2005 purchasing power parity). What accounts for these huge differences, and can they be understood within a common global definition of poverty? For all except the poorest countries, the absolute, nutrition-based, poverty lines found in practice tend to behave more like relative lines, in that they are higher for richer countries. Prevailing methods of setting absolute lines allow ample scope for such relativity, even when nutritional norms are common across countries. Both macro data on poverty lines across the world and micro data on subjective perceptions of poverty are consistent with a weak form of relativity that combines absolute consumption needs with social-inclusion needs that are positive for the poorest but rise with a country s mean consumption. The strong form of relativism favored by some developed countries -- whereby the line is set at a fixed proportion of the mean -- emerges as the limiting case for very rich countries.

The authors report new estimates of measures of absolute poverty for the developing world over 1981-2004. A clear trend decline in the percentage of people who are absolutely poor is evident, although with uneven progress across regions. They find more mixed success in reducing the total number of poor. Indeed, the developing world outside China has seen little or no sustained progress in reducing the number of poor, with rising poverty counts in some regions, notably Sub-Saharan Africa. There are encouraging signs of progress in reducing the incidence of poverty in all regions after 2000, although it is too early to say if this is a new trend.

The rapid economic growth since 2000 has been the main driver of poverty reduction in Romania. However, even under the current positive growth scenario, there are still people who live in poverty, and some who are unlikely to benefit from future growth and thus may continue to be left behind. For these people an effective redistributive social policy and targeted interventions are needed. The purpose of this note is to assist the Ministry of Labor, Family and Equal Opportunities (MLFEO) to analyze and monitor the effectiveness of the main social safety net benefits to fight social exclusion and reduce poverty. To determine the extent to which social transfers offer protection to the poorest groups of the population, the paper uses the last available (2004-2006) rounds of the household budget survey data. The analysis presented here uses the consumption aggregate and the absolute poverty definition presented in the 2003 and 2007 poverty assessments. Three main indicators are used to assess the effectiveness of social protection (SP) programs: coverage (share of population covered by the programs)...

The paper describes the main methodological issues underlying the estimation of poverty rates for Croatia. Volume one focuses on the construction of the consumption aggregate as a summary measure of living standards which is the summary measure used to proxy living standards. Special attention is devoted to the estimation of the consumption flow from durable goods. Volume two focuses on the estimation of the (absolute) poverty line. Both elements are at the core of the poverty measurement exercises carried out in two companion papers in this volume. This paper is organized into three sections with the first dealing with the construction of the consumption aggregate. The second section describes the choice of the equivalence scale used to adjust the consumption aggregate for differences in household composition, and the third section details the procedure used to estimate the poverty line.

The paper describes the main methodological issues underlying the estimation of poverty rates for Croatia. Volume one focuses on the construction of the consumption aggregate as a summary measure of living standards which is the summary measure used to proxy living standards. Special attention is devoted to the estimation of the consumption flow from durable goods. Volume two focuses on the estimation of the (absolute) poverty line. Both elements are at the core of the poverty measurement exercises carried out in two companion papers in this volume. This paper is organized into three sections with the first dealing with the construction of the consumption aggregate. The second section describes the choice of the equivalence scale used to adjust the consumption aggregate for differences in household composition, and the third section details the procedure used to estimate the poverty line.

The objective of this report is to contribute towards institutional capacity building for regular monitoring and analysis of poverty, as well as other indicators of living conditions and social inclusion. This report analyzes the poverty trends and profile using the national absolute poverty line, which measures changes in the level of welfare and allows for a more straightforward interpretation of comparisons over time. Chapter 1 presents an overview of poverty dynamics using both relative and absolute measures of poverty, and explores the reasons for the observed difference in trends between the two measures. Chapter 2 investigates the relationship between economic growth, inequality and poverty in Romania during the period 1995 and 2006.

This Poverty report is aimed at improving the understanding of poverty in Ukraine, and providing linkages between growth, the evolution of economic sectors, and poverty. The main findings can be summed up as follows: An absolute poverty line and a revised consumption aggregate -- jointly developed with Ukraine experts -- indicate that around 19 percent of the population lived in poverty by 2003. While in 1999 Ukraine had a poverty incidence higher than Poland, Russia, Lithuania, or Bulgaria, by 2003 it was the lowest compared with these countries. The overall improvement, however, has been paralleled by an increasing poverty gap between rural and urban households, reflecting the fast but unbalanced economic growth: The growth experience has not changed the rather stagnant level of employment. The improvement in labor markets are associated to gains in productivity and efficiency with resulting wage gains. There is also increased differentiation within workers since the fraction of underemployment has also increased, reflecting partly the subsistence agriculture, and precarious labor markets in some small towns. The combined effects of higher productivity but lower employment in commercial farms left real incomes in agriculture lagging behind other sectors. Rural areas had a slower reduction in poverty due to the combined effect of weather shocks...

This report draws lessons for improving the policy design of poverty alleviation schemes in Jordan. The conclusions herein are based on analyses of trends in consumption poverty in Jordan and assessment of the impact of government programs (including food subsidies and cash transfers) on poverty alleviation in the 1990s. Poverty declined between 1992 and 1997 because inequality declined. Government programs, especially those targeted to the poor like the National Aid Fund, contributed to poverty alleviation. However, poverty continues to be a major policy challenge for Jordan: the poor and near-poor remain vulnerable as a result of the shallowness of poverty in Jordan (many people are concentrated close to the poverty line) and the adverse effects of potential shocks. The report concludes the following: 1) sustainable poverty reduction requires resumption and sustainability of growth; 2) there is a need for a policy response to the vulnerability of the poor and near-poor to economic shocks; 3) the capacity of the National Aid Fund (NAF) needs to be significantly enhanced; and 4) continued priority needs to be placed on human development policies...

Despite the impressive performance of the economy in the last five years, however, poverty in Albania has remained high, and per capita income, at around US$1,230 in 2002, has remained one of the lowest among transition economies. In an effort to adopt policies to share widely the benefits of growth, and reduce poverty, the Government outlined a poverty alleviation strategy in the 2000 Interim Poverty Reduction Strategy Paper (I-PRSP), and developed it in detail two years later in the Growth and Poverty Reduction Strategy (GPRS), the precursor to the current National Strategy for Socio-Economic Development (NSSED). However, in recognition of the data limitations, the first round of a five-year Living Standards Measurement Survey (LSMS) program was launched in 2002. This survey provides valuable information on a variety of issues related to living conditions in Albania, including details on income and non-income dimensions of poverty in the country, and, forms the basis of the present assessment of poverty in Albania. The poverty line used for this assessment is the first absolute poverty line based on nationally representative...

Madagascar has been entirely unsuccessful in reducing the number of its people that are poor, or extremely so, in the ten years since 2001, when poverty was already at a very high level. This well-known conclusion draws on the analysis of three successive rounds of the national household expenditure surveys (enquete periodiques aupres des menages, EPM) conducted by the Madagascar National Institute of Statistics (INSTAT) in 2001, 2005, and 2010. The objective of the analysis in this report is to document the levels and changes in poverty in Madagascar, and provide a detailed review of correlates of poverty and inequality in various dimensions, including gender, age, the structure of households, and place of residence. The report is an assessment of past poverty trends, and while policy implications are highlighted in many cases, the report is focused mainly on the descriptive, rather than prescriptive. It is found that the poverty headcount did not decrease between 2001 and 2005, rising instead from 71 to 75 percent of the population...

Ukraine recorded one of the sharpest declines in poverty of any transition economy in recent years. The poverty rate, measured against an absolute poverty line, fell from a high of 32 percent in 2001 to 14 percent in 2004, and then again to 8 percent in 2005. This Update presents simulations of the direct influence of an increase in energy prices on the poverty rate. Using 2005 as a base period, the simulations estimate the poverty rates that might result from alternative increases in the price of energy. In this simple model, the main determinant of the impact of the increase in energy prices on poverty is the share of energy in total household expenditures. An increase in energy prices will harm the poor slightly more than the rich because the poor have a slightly higher share of energy in their expenditures.

Consumption of food away from home is rapidly growing across the developing world. Surprisingly, the majority of household surveys around the world haven not kept up with its pace and still collect limited information on it. The implications for poverty and inequality measurement are far from clear, and the direction of the impact cannot be established a priori, since consumption of food away from home affects both food consumption and the poverty line. This paper exploits rich data on food away from home collected as part of the National Household Survey in Peru, shedding light to the extent to which welfare measures differ depending on whether they properly account for food away from home. Peru is a relevant context, with the average Peruvian household spending 28 percent of their food budget on food away from home by 2010. The analysis indicates that failure to account for the consumption of food away from home has important implications for poverty and inequality measures as well as the understanding of who the poor are. First...

The 2014 release of a new set of purchasing power parity conversion factors (PPPs) for 2011 has prompted a revision of the international poverty line. In order to preserve the integrity of the goalposts for international targets such as the Sustainable Development Goals and the World Bank’s twin goals, the new poverty line was chosen so as to preserve the definition and real purchasing power of the earlier $1.25 line (in 2005 PPPs) in poor countries. Using the new 2011 PPPs, the new line equals $1.90 per person per day. The higher value of the line in US dollars reflects the fact that the new PPPs yield a relatively lower purchasing power of that currency vis-à-vis those of most poor countries. Because the line was designed to preserve real purchasing power in poor countries, the revisions lead to relatively small changes in global poverty incidence: from 14.5 percent in the old method to 14.1 percent in the new method for 2011. In 2012, the new reference year for the global count, we find 12.7 percent of the world’s population...

This is the first study of poverty, and income distribution in Croatia, which aims to provide an assessment of the country's poverty status, to explain the causes of poverty, and recommend actions to efficiently reduce poverty. In comparing international poverty standards across transition economies, the study finds that the incidence of absolute poverty in Croatia is low, however, these standards may not adequately reflect country-specific conditions. It is estimated that the level of total household expenditure - after paying for essential non-food expenditures - just attain minimal nutritional needs, and it is this level which therefore represent an absolute poverty line. Thus, less than ten percent of Croatia's population fall below this national specific poverty line, and the report shows it would be affordable for the country to eliminate absolute poverty. It presents the historical, and political context for understanding poverty, which examines Croatia's independence conditions, war consequences...

Despite Tajikistan's sustained economic growth of the past few years and the country's notable achievements, poverty and low standards of living remain a pressing problem for the majority of Tajik people. Poverty reduction is therefore one of the priority goals of the Government of the Republic of Tajikistan, of its national and international partners, and of Tajik society as a whole. This report presents a comprehensive analysis of poverty in Tajikistan using the most recent Tajikistan Living Standards Survey (TLSS) data, which is for 2007. The report provides an in-depth analysis of poverty dynamics (since 2003); a poverty profile; the linkages between labor markets, migration, and poverty; the importance of social transfers for poverty alleviation; and the key issues in the health and education sectors. The report also simulates possible poverty impacts from the reduction in migration and remittances related to the global financial crisis. The report shows that migration and remittances are a significant factor in the observed improvements in living standards between 2003 and 2007. However...

In this paper the authors analyze the evolution and the determinants of in-work poverty in Poland, according to three poverty lines: relative, absolute, and the 1998-adjusted poverty line. The authors find that behind moderately high in-work poverty incidence in Poland there is very high in-work poverty in agriculture and modest in-work poverty in all other sectors. Workers are much less likely to be poor than jobless individuals, especially the unemployed. In fact, the share of adults out of employment is a much stronger predictor of households' risk of poverty than the level of wages at which they work. Moreover, the share of jobless adults or of agricultural workers has become an increasing determinant of in-work poverty over time. The risk of in-work poverty is also inversely related to the educational attainment and the stability of employment of an individual, which is especially important considering that the incidence of temporary contracts in Poland is the highest across both European Union (EU) and Organization of Economic Cooperation and Development (OECD) countries. Existing fiscal and benefit policies have not been sufficient to address in-work poverty and some of its underlying causes in the labor market: the author presents four policy recommendations aimed at tackling in-work and total poverty...

When the World Bank dreams of 'a world free of poverty,' what should it be dreaming? In measuring global income or consumption expenditure poverty, the World Bank has widely adopted the $1 a day standard as a lower bound. Because this standard is based on poverty lines in the poorest countries, anyone with income or expenditures below this line will truly be poor. But there is no consensus standard for the upper bound of the global poverty line: above what level of income or expenditures is someone truly not poor? This article proposes that the World Bank compute its lower and upper bounds in a methodologically equivalent way, using the poverty lines of the poorest countries for the lower bound and the poverty lines of the richest countries for the upper bound. The resulting upper bound global poverty line will be 10 times higher than the current lower bound and at least 5 times higher than the currently used alternative lower bound of $2 a day. And in tracking progress toward a world free of poverty, the World Bank should compute measures of global poverty using a variety of weights on the depth and intensity of poverty for a range of poverty lines between the global lower and upper bounds. For instance...

In order to inform discussions on the extent of poverty in a country, it is often useful to compare the country's poverty measures to estimates obtained in other countries with similar levels of development within the same region of the world. Beyond gains from the point of view of cross-country comparisons that such an approach provides, there are also potential gains from such comparisons in terms of realigning a country's poverty estimates and better informing policy choices within the country. This is because where the poverty line or threshold is set is somewhat normative and thereby open to debate, and because poverty estimates are highly sensitive to the choice of the poverty line (even if poverty comparisons over time or across groups may not be), it is often difficult for agencies such as National Statistical Offices or government units in charge of Poverty Reduction Strategies in any given country to adopt a critical perspective on their own poverty estimates. This issue of Findings looks at how to use simple cross country comparisons and how to guide measurement of poverty in the CFA franc zone.

The paper presents the first major update of the international "$1 a day" poverty line, first proposed in 1990 for measuring absolute poverty by the standards of the world's poorest countries. In a new data set of national poverty lines we find that a marked economic gradient only emerges when consumption per person is above about $2.00 a day at 2005 purchasing power parity. Below this, the average poverty line is $1.25, which we propose as the new international poverty line. Relative poverty appears to matter more to developing countries than has been thought. The authors' proposed schedule of relative poverty lines is bounded below by $1.25, and rises at a gradient of $1 in $3 when mean consumption is above $2.00 a day.