Saturday, May 20, 2006

Falling global poverty

I have posted before on the dramatic reduction in extreme poverty that has occurred globally since 1980. A comprehensive study of the world distribution of income is provided by Xavier Sala-I-Martin in a recent Quarterly Journal of Economics covering 1970-2000. There has been a spectacular, recent reduction in world poverty.
‘We estimate the World Distribution of Income (WDI) by integrating individual income distributions for 138 countries between 1970 and 2000. Country distributions are constructed by combining national accounts GDP per capita to anchor the mean with survey data to pin down the dispersion. Poverty rates and head counts are reported for four specific poverty lines. Rates in 2000 were
between one-third and one-half of what they were in 1970 for all four lines. There were between 250 and 500 million fewer poor in 2000 than in 1970. We estimate eight indexes of income inequality implied by our WDI. All of them show reductions in global inequality during the 1980s and 1990s’.
The overall reduction hides uneven performance across regions. East and South East Asia account for a large fraction of the success. Poverty rates and numbers have worsened in Africa across the last three decades. Poverty was an Asian problem 30 years ago but is primarily an African problem these days.

The overall improvement is encouraging. One of the UN’s Millenium Project Development Goals was to halve by 2015 the fraction of people in 1990 who lived on less than $1US per day. In 1990 about 10% of the world’s population lived on less than $1US per day. The target will be met when the fraction is 5%. By 2000 the figure was 6.3% so 69% of the target has been met. Africa remains a key problem but wrong to be overly pessimistic – there was pressimism, on prospects of Asian countries 30 years ago. Jeffrey Sach’s believes directed international aid campaigns will work in Africa.


patrick g said...

Hi Harry,
I was just wondering what you would attribute to the success of these figures, and also, do you know where south america fits in? Has poverty there risen or fallen?

Hmmm, it's interesting, the World Bank and IMF will want to take all the credit I'm sure, and yet countries like Vietnam for example were far more cautious in adopting free-market reforms as reccommended, and they have been a great success.

conrad said...

I think you're being a bit optimistic about Asia -- poverty isn't primarily an Africa problem -- it still is a big problem in Asia, it just isn't as big as before.

hc said...

Patrick g, The aggegate figures are dominated by dramatic reductions in extreme poverty in (i) East Asia - mainly China but also Indonesia and countries like Thailand and (ii) South Asia - similar evolution to East Asia with a dramatic decline in Indian poverty.

Latin America has had a mixed performance. Extreme poverty was cut by more than 1/2 over the 30 years but most of these gains occurred after the first decade - since then not much - indeed the poverty rate grew over the past 20 years. Poverty rates in Latin America are now greater than in Asian regions.

Conrad, On the figures extreme world poverty is now primarily concentrated in Africa. Oberr the 30 years the number of extreme poor grew from 94 million to 297 million. Africa now accounts for 10.7% of the world's population but for 74.5% of the world's poor.

With the high natural fertility in African countries - even given the drastic effects of the AIDs epidemic in many of them - this is a problem that all countries need to focus on.