poverty reduction

There's been much talk in recent months about the revision of the International Comparison Program and the PPP (Purchasing Power Parity) figures derived from it. The Bank's China Quarterly Update launched in early February included a special section on the implications of this revision for China, and our own David Dollar explained here that the new PPPs show poverty in China has in fact reduced more than previously calculated.

For more details and full estimates, check out this site that includes explanatory sections on the Poverty PPPs, the methodology used, and the final results for Asia. Also, you can create and download your own data query here.

In the Bank's recent China macro quarterly we included an appendix on the implications of the new PPP estimates for poverty analysis in China (PPP or Purchasing Power Parity).  Perhaps because it was an appendix it did not receive much attention. 

The new PPPs reveal that prices are about 40 percent higher than had been assumed under the old PPP, which was an academic guestimate.  Some researchers immediately applied the new PPP conversion factor for GDP to household data and came up with hugely higher estimates of the $1 per day poverty rate for China.  However, the World Bank does not use the GDP conversion factor in measuring poverty.  The research department of the bank will produce a conversion factor for poverty analysis that takes account of two important things:

(1) the basket actually consumed by the poor is different from the GDP basket; and

(2) the poor almost exclusively live in rural areas where prices are lower.