Sunday, September 21, 2008

New global poverty line: Ravallion replies to Reddy

The IPC has a one pager on Ravallion’s reply to Reddy objections to the methodology used in the calculation of the new global poverty line ($1.25 a day at 2005 PPP prices). This is a much condensed version of a long reply by Ravallion to various objections to the new paper, its methodology, and the new poverty line.

...As Reddy notes, $1.25 is lower than the value in the US of our old poverty line, which works out to be $1.45 in 2005 prices. This has nothing to do with Reddy’s claimed faults in our methods, but stems from the revisions to the PPPs in the light of the better price data from the 2005 ICP; naturally, with higher PPPs in poor countries, the $US value of their national poverty lines falls.

Reddy thinks $1.25 a day is “…far too low to cover the cost of purchasing basic necessities,” He asserts that: “A human being could not live in the US on $1.25 a day in 2005 (or $1.40 in 2008), nor therefore on an equivalent amount elsewhere, contrary to the Bank’s claims.” I have no idea how Reddy reconciles this view with the fact that one quarter of (say) India’s population manages to live below the country’s official poverty line, which is about $1.00 per day in 2005 prices—even lower than our international line.