Friday, December 25, 2009

Poverty and the numbers game

Consider an economy in which the incidence of poverty has been falling 1 percentage point a year. This is a good rate of decline, especially for an African country. At this rate, depending on the initial poverty level, an economy would be well on its way to achieving the first Millennium Development Goal, which is focused on reducing the incidence of income poverty.

But suppose the population in this economy is growing 2 percent a year. In this case, although the proportion of those living below the poverty line is declining by 1 percentage point a year, the absolute number of poor people is increasing by 1 percentage point a year. This explains why soup kitchens are fuller than ever, there are more street children than ever, and there are more distressed farmers than ever, even though official “headline numbers” suggest declining poverty.

The disconnect is sharpest in economies where poverty incidence is declining relatively slowly and where the population is growing relatively quickly—as in many countries in Africa. But the tendency is present in all economies. Even in China, which has seen a spectacular decline in both the incidence of poverty and the absolute number of poor people in recent years, the rate of decline of poverty incidence is greater than the rate of decline of the number of poor people.

That’s Ravi Kanbur arguing why poverty statistics may not fully capture discontent among the poor (that things have not really improved despite a fall in overall incidence of poverty).

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