Raising the Bar: A Poverty Line for Global Inclusion

Abstract

The first of the Sustainable Development Goals adopted by the United Nations in 2015 is “End poverty in all its forms everywhere,” which implies moving beyond “extreme poverty” to an array of poverty lines. This raises the obvious question: to complement the dollar-a-day (now P$2.15) global lower-bound poverty line, what is the global upper-bound poverty line (GUBPL)? We propose, empirically estimate, and defend a GUBPL based on two criteria. First, the global poverty line is an absolute level of material wellbeing and treats the world’s people and households equally, not relative to birthplace, residence or citizenship. Second, the distinctive property that separates the standard poverty measures (Foster, Greer, Thorbecke 1984) is that gains in household income/consumption above the poverty line count for exactly zero in reducing poverty. Our second criteria is that a GUBPL should be set at a high enough level of income/consumption that zero gains, while not literally true, is a “close enough” approximation. Our two empirical approaches, based on completely different material wellbeing indicators, both suggest a GUBPL in the range of P$19 to P$40 per person per day. This range for a GUBPL is consistent with a variety of considerations, like national poverty lines and achievement of basics and is consistent with the new World Bank “prosperity gap” standard. A GUBPL of P$21.5 has a nice “focal point” appeal as it is exactly ten times the current global lower bound of P$2.15. A poverty line of P$21.5 makes “development as poverty reduction” an inclusive and ambitious global vision, compatible with existing and future development goals.

Growth Lab Working Paper Series

No. 250

Keywords

Poverty Measurement, Global Poverty, Welfare Economics

JEL Classification

I32, D63