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June/July 2017 — Theme: Measuring and Monitoring Global Poverty
Arrow-bullet New research points to the future of global poverty monitoring
Arrow-bullet A better foundation for assessing basic needs
Arrow-bullet Updating the international extreme poverty line to $1.90/per person per day
Arrow-bullet Societal poverty—a supplement to the headcount of extreme poverty
Arrow-bullet Collecting data in 78 IDA countries to better monitor poverty
Arrow-bullet Measuring inequality at the global level faces formidable data constraints
Arrow-bullet In data-poor environments prediction estimators may provide a valuable option
Arrow-bullet Events
Arrow-bullet Announcements
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New research points to the future of global poverty monitoring

For more than three decades the World Bank has estimated the number of people living in extreme poverty by setting a single international poverty line — currently US$1.90/day in 2011 dollars. At a Policy Research Talk in April, Dean Jolliffe, a World Bank economist noted that recent advances in data, and progress in the fight against extreme poverty, have prompted consideration of monitoring complementary global poverty indicators in addition to the current measure of extreme poverty. The first proposed set of two complementary measures are based simply on global poverty lines that are higher in value than the extreme line and reflect estimated cost of basic needs in (lower- and upper-) middle income countries. Jolliffe and co-author Espen Beer Prydz, have also proposed a global societal poverty line, which is a relative measure that counts the poor as those whose incomes fall below the sum of $1 and 50 percent of the median income of a country. For the poorest countries, the societal poverty line continues to be the extreme poverty line of $1.90/day, but for slightly better-off countries, the societal poverty line is higher and increases in value as median income in the country increases.

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A better foundation for assessing basic needs

In most countries of the world, national poverty lines reflect socially acceptable assessments of minimum needs. Because of their social acceptance, the World Bank has historically used a dataset of national poverty lines to estimate the international extreme poverty line. The current $1.90/day line and the previous $1.25/day line were both estimated from a set of national poverty lines that are now over 20 years old. A methodology was developed to create a new set of harmonized national poverty lines that are consistent with national poverty rates, expressed in common units, and provide greater support to the estimated international poverty line. While $1.90/day in 2011 dollars continues to be a relevant average assessment of minimum needs in some of the poorest countries of the world, the two higher-value poverty lines of $3.20 and $5.50 reflect typical minimum needs as assessed in lower- and upper-middle-income countries.

Estimating International Poverty Lines from Comparable National Thresholds by Dean Jolliffe and Espen Beer Prydz, Journal of Economic Inequality 14 (Issue 2): 185–198, June 2016 | World Bank Policy Research Working Paper 7606.

Updating the international extreme poverty line to $1.90/per person per day

The 2014 release of new purchasing power parity conversion factors (PPPs) for 2011 prompted a revision of the World Bank’s international poverty line. To maintain the same goalposts used for international targets such as the Sustainable Development Goals and the World Bank’s twin goals, the new poverty line was chosen to preserve the real purchasing power of the earlier $1.25 line (in 2005 PPPs) in poor countries. Using the 2011 PPPs, the new line equals $1.90 per person per day. Because the line was designed to preserve real purchasing power in poor countries, the revisions lead to relatively small changes in global poverty incidence: from 14.5 percent in the old method to 14.1 percent in the new method for 2011. In 2012, the new reference year for the global count, 12.7 percent of the world’s population, or 897 million people, lived in extreme poverty, with a relatively small change in regional composition. The methodological process of updating both the poverty line and the total count of poor people is described, as are the various caveats and limitations of the approach taken.

A global count of the extreme poor in 2012: data issues, methodology and initial results, Ferreira, F. H. G., Chen, S., Dabalen, A., Dikhanov, Y., Hamadeh, N., Jolliffe, D., Narayan, A., Prydz, E., Revenga, A., Sangraula, P., Serajuddin, U., and N. Yoshida, Journal of Economic Inequality 14 (Issue 2): 141–172, June 2016 | Policy Research Working Paper 7432.

Societal poverty — a supplement to the headcount of extreme poverty

Poverty lines are typically higher in richer countries and lower in poorer ones, reflecting the relative nature of national assessments of who is considered poor. In many high-income countries, poverty lines are explicitly relative, set as a share of mean or median income. Despite systematic variation in how countries define poverty, global poverty counts are based on fixed-value lines. This study proposes a supplemental measure of societal poverty to better reflect national assessments of poverty in a global headcount of poverty. The proposed societal poverty line is derived from 699 harmonized national poverty lines, and has an intercept of $1 per day and a relative gradient of 50 percent of median national income or consumption. The societal poverty line is more closely aligned with national definitions of poverty than other proposed relative lines. By this measure, societal poverty has fallen steadily since 1990, but at a much slower pace than absolute extreme poverty.

Societal Poverty: A Relative and Relevant Measure, Dean Jolliffe and Espen Beer Prydz, World Bank Policy Research Working Paper 8073, May 2017.

Collecting data in 78 IDA countries to better monitor poverty

In 2015, World Bank Group President Jim Yong Kim announced the World Bank Group’s commitment to support the 78 poorest countries in implementing a multi-topic household survey every three years through 2030, to monitor progress toward ending extreme poverty and boosting shared prosperity. The resources required to implement 390 surveys across 78 International Development Association countries from 2016 to 2030, and to provide direct technical assistance to the national statistical offices on all facets of survey design, implementation, and dissemination toward timely production of quality household survey data is estimated at US$945 million. Of this, US$692 million covers the survey implementation costs across 78 countries, and US$253 million covers the costs of direct technical assistance to national statistical offices.

Costing household surveys for monitoring progress toward ending extreme poverty and boosting shared prosperity, Talip Kilic, Umar Serajuddin, Hiroki Uematsu, and Nobuo Yoshida, Policy Research Working Paper 7951, January 2017.

Measuring inequality at the global level faces formidable data constraints

In the 2000s, global inequality fell for the first time since the Industrial Revolution, driven by a decline in the dispersion of average incomes across countries. Between 1988 and 2008, a period of rapidly increasing global integration, income growth was largest for the global top 1 percent and for country-deciles in Asia, often in the upper halves of the national distributions, while the poorer deciles in rich countries lagged behind. Although within-country inequality increased in population-weighted terms, for the average developing country the rise in inequality slowed in the second half of the 2000s. However, like any analysis based on household surveys, these results could miss important increases in inequality if they are concentrated at the top. An important question is whether a more accurate measure of top incomes would reverse the conclusions reached from household surveys on inequality trends. These data constraints remain especially serious in developing countries where only very limited information on capital incomes and savings for the top tail exists.

“Global Inequality,” Christoph Lakner. In After Piketty: The Agenda for Economics and Inequalityedited by Heather Boushey, J. Bradford DeLong, and Marshall Steinbaum. Harvard University Press, 2017 | World Bank Policy Research Working Paper 7776 | Three blogs on recent trends in national inequality.

In data-poor environments prediction estimators may provide a valuable option

In developing countries, where poverty and poor health outcomes are most pressing, statistical agencies often do not have the budget to collect data frequently. Thus, official estimates of poverty and childhood stunting are often outdated. One way to reduce the cost of data collection is to leverage existing data to predict missing data. If real data on the variable of interest is collected for a sub-sample of households, then this sub-sample can be used to build the model used for prediction. This approach is referred to as double sampling, which collects the expensive outcome variable for a sub-sample only while collecting the covariates used for prediction for the full sample. This study considers a wide range of parameter values that are plausible to real applications to identify the conditions under which the cost savings from using predicted data are relatively large (and small). The benefits of using double sampling are found to be modest. Circumstances for which the gains can be more substantial do exist, but these are exceptions rather than the rule. The recommendation is to rely on real data whenever there is a need for new data, and use prediction estimators to leverage existing data.

Is Predicted Data a Viable Alternative to Real Data? Tomoki Fujii and Roy van der Weide, World Bank Policy Research Working Paper 7841, September 2016 | Blog.

EVENTS

September 8, 2017: 4th Urbanization and Poverty Conference: Building Cities for Growth.

This conference will bring together researchers and policy makers to discuss how cities in developing countries can improve their land and housing sector (Session 1: Land), their transportation networks (Session 2: Transportation) or their sanitation infrastructure (Session 3: Public Services). In other words, how can we build, or rebuild, cities in the future to promote economic growth and reduce poverty? You can pre-register here.

All upcoming events

ANNOUNCEMENTS

New Book
Building State Capability: Evidence, Analysis, Action, Matt Andrews, Lant Pritchett, and Michael Woolcock, Oxford University Press, 2017 (FREE DOWNLOAD)

This book presents clear, evidence-based analysis of development failures and explains why development failures persist. It’s not just a critique; it offers a way of doing things differently. Readers can use the tools presented to personalize and apply these ideas to their own context.

Health Nutrition and Population (HNP) Database
This new database presents HNP data by wealth quintile since the 1990s to the present. It covers more than 70 indicators, including childhood diseases and interventions, nutrition, sexual and reproductive health, mortality, and other determinants of health, for more than 90 low- and middle-income countries. The data sources are Demographic and Health Surveys (DHS) and Multiple Indicator Cluster Surveys (MICS).
View data

The World Bank’s Bureaucracy Lab offering Pre/Post-doctoral and PhD Fellowships
The World Bank’s Bureaucracy Lab is seeking applications from upcoming, current or recent graduate students for three positions: (i) a paid pre-doc opportunity; (ii) unpaid PhD fellowships that provide access to our data sets and opportunities to collaborate on surveys of civil servants/analysis of related data; and (iii) a paid post-doc opportunity. The Bureaucracy Lab stands at the center of the World Bank’s research and operational work on public administration reform. Fellows will work on continued development of the Worldwide Bureaucracy Indicators, civil servant surveys, and other activities of the Bureaucracy Lab. Fellows can be from any applied policy research area but preference will be given to candidates who have an established interest or research profile in the study of the public sector, fluency in Stata, experience of survey design and fieldwork, and/or have worked in the public sector. The position is full time. Fellows are expected to be resident in the Washington, DC, area during their time with the Lab.

Send a CV and a brief description of why you’re a great fit for the position you are applying to kkay@worldbank.org. Please include which program you’re applying for — PhD Fellowship or Pre-/Post-doctoral Fellowship — in the subject line. We will accept applications until the positions are filled.

World Bank Research Observer Submission Deadline for Editorial Board Meeting, Fall 2017
The World Bank Research Observer (WBRO) seeks to publish policy-relevant surveys of development issues, aimed at a non-specialist audience. Papers for consideration at the Fall 2017 meeting of the Editorial Board of the Observer should be submitted at wbro@worldbank.org, no later than Monday, September 5, 2017.

MEDIA AND BLOGS

Trouble with pre-analysis plans? Try these three weird tricks

Development Impact blog, 12 July 2017

Pre-analysis plans increase the chances that published results are true by restricting researchers’ ability to data-mine.  Unfortunately, writing a pre-analysis plan isn’t easy, nor is it without costs, as discussed in recent work by Olken and Coffman and Niederle. Two recent working papers — “Split-Sample Strategies for Avoiding False Discoveries,” by Michael L. Anderson and Jeremy Magruder (ungated here) and “Using Split Samples to Improve Inference on Causal Effects,” by Marcel Fafchamps and Julien Labonne (ungated and updated here) — propose some very clever refinements to address some of the challenges inherent in pre-analysis plans.

Read the blog by Owen Ozier.

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Rural electrification: How much does Sub-Saharan Africa need the grid?

Let’s Talk Development blog, 11 July 2017

An intense debate continues on how best to provide electricity to the 1.1 billion people currently without access to it — of whom 600 million are living in Sub-Saharan Africa, many of them in rural areas. According to a 2015 IEG evaluation, low-access countries received about 3.6 billion USD per year into the electricity sector from all sources over 2000 — 2014. The bulk of these funds has gone into extension of the traditional electricity grid. The IEG report also states that to achieve universal grid access in current low-access countries by 2030 will require over 17 billion USD per year, including about 12 billion USD per year for new transmission and distribution capacity.  An additional 20 billion USD per year will be needed to address current supply inadequacies and expand generation capacity to meet growing demand.  The largest share of this investment would be in Sub-Saharan Africa, given the size of the population without access and the challenges of making effective infrastructure investments there (Foster and Briceño-Garmendia, 2010).

Read the blog by Michael Toman and Jörg Peters.

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What does a game-theoretic model with belief-dependent preferences teach us about how to randomize?

Development Impact blog, 10 July 2017

The June 2017 issue of the Economic Journal has a paper entitled “Assignment procedure biases in randomized policy experiments” (ungated version). The abstract summarizes the claim of the paper:

“We analyse theoretically encouragement and resentful demoralisation in RCTs and show that these might be rooted in the same behavioural trait –people’s propensity to act reciprocally. When people are motivated by reciprocity, the choice of assignment procedure influences the RCTs’ findings. We show that even credible and explicit randomisation procedures do not guarantee an unbiased prediction of the impact of policy interventions; however, they minimise any bias relative to other less transparent assignment procedures.”

Of particular interest to our readers might be the conclusion “Finally, we have shown that the assignment procedure bias is minimised by public randomisation. If possible, public lotteries should be used to allocated subjects into the two groups”

Given this recommendation, I thought it worth discussing how they get to this conclusion, and whether I agree that public randomization will minimize such bias.

Read the blog by David McKenzie.

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Measuring outpatient safety at scale: Infection prevention and control practices in Kenya

United Nations University blog, June 2017

Primum non nocere — first, do no harm. This most basic tenet of medical care is routinely violated in clinics and hospitals around the world today. But the absence of routine data means that when it comes to improving patient safety, we are often in the dark. Available studies frequently rely on self-reported data from healthcare workers, focus on a single domain such as hand hygiene and are based on small samples: one review found that only 10 of 41 studies on hand hygiene interventions were collected in more than one hospital!

Read the blog by Guadalope Bedoya and Jishnu Das.

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Foreign banks and the international transmission of monetary policy

VoxEU blog, 6 July 2017

Monetary policies pursued by lending countries may have negative spillovers for financial stability in emerging markets, because monetary policy is transmitted through its effect on the aggregate supply of cross-border loans. This column uses data on the international syndicated loan market to argue that foreign bank ownership in a borrower country reduces the negative impact of lender-country monetary policy on cross-border syndicated loan supply. This suggests that countries could stabilise their cross-border credit supply by reducing restrictions on foreign bank entry into local markets.

Read the blog by Asli Demirgüç-Kunt, Bálint Horváth, and Harry Huizinga.

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Globalization and banking

All About Finance blog, 5 July 2017

Since the global financial crisis of 2007, international banking has attracted heightened interest from policy makers, researchers, and other financial sector stakeholders. Perhaps no sector of the economy better illustrates the potential benefits — but also the perils — of deeper integration than banking. Before the crisis, international banks (banks that do business outside of the country they are headquartered in) were generally considered to be an important contributor to financial development as well as economic growth. This belief coincided with a significant increase in financial globalization in the decade prior to the crisis, particularly for banking institutions.

Read the blog by Asli Demirgüç-Kunt.

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Industrial policies versus public goods to spur growth

Future Development blog, 29 June 2017

Ask finance ministers around the world what they are worried about, and they will likely reply “how to spur economic growth.” They all think they must do something, but the question is what exactly. In the aftermath of the economic crisis of 2008-2009, there has been a revival of interest in industrial policies as governments looked for ways to increase productivity in the face of severely constrained finance. Are industrial policies the best instrument to increase productivity? Or is investing in public goods a better use of scarce resources? Since the heydays of industrial policies in the 1960s, these questions have been hotly debated.

Read the blog by Norman Loayza.

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Can temporary subsidies and agricultural extension build sustainable adoption?

Development Impact blog, 28 June 2017

A fair number of governments in developing countries support agricultural subsidy programs. One of the arguments for these subsidies is that there is some kind of market failure (information is often cited) that the subsidy is meant to overcome. So, that means when the subsidy is removed (which is the politically hard part), we should see adoption sustained. There isn’t much clear evidence on this, but two recent papers provide some insight.
  
Read the blog by Markus Goldstein.

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Which features of procurement systems increase competition and reduce corruption?

Let’s Talk Development blog, 26 June 2017

Public procurement of services, works and supplies is estimated to account for 15–20% of GDP in developing countries, and up to 50% or more of total government expenditure. Efficient and effective procurement is vital to core government functions, including public service delivery and provision of infrastructure. Weaknesses in procurement systems can lead to large-scale waste of public funds, reduced quality of services, corruption, and loss of trust in government.

There is relatively little systematic evidence, however, on the links between procurement systems and procurement outcomes.  A new Policy Research Working Paper adds to the evidence base, using data on almost 34,000 firms from the World Bank’s Enterprise Surveys, in 88 countries that also have data on procurement systems from PEFA (Public Expenditure and Financial Accountability) assessments conducted between 2011 and 2015. This study finds that in countries with more transparent procurement systems, where exceptions to open competition in tendering must be explicitly justified, firms are more likely to participate in public procurement markets.  Moreover, firms report paying fewer and smaller kickbacks to officials in countries with more transparent procurement systems, with effective and independent complaints mechanisms, and with more effective external auditing systems. These findings — particularly on kickbacks — are robust to the inclusion of numerous controls and to a range of sensitivity tests.

Read the blog by Steve Knack.

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Can universal basic income boost financial inclusion and transparency?

Future Development blog, 15 June 2017

The main argument for a universal basic income (UBI) is that it would reduce poverty and income inequality. Yet UBI advocates often overlook a range of other potential benefits. Digital UBI payments can bring people into the financial system and build their financial capability, unlocking a range of development benefits for citizens and governments alike. 

Read the blog by Leora Klapper.

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The active ingredient of inequality

Let’s Talk Development blog, 15 June 2017

In a post-Piketty world, few people need to be convinced that inequality is important. But which inequality do we care most about? Or, to paraphrase the title of Amartya Sen’s famous 1979 Tanner Lectures, “inequality of what”?

In an ideal world, what is it that ought to be (perfectly) equally distributed? I suspect that very few people would answer “income” or “wealth” to such a question. Of course, many of us might prefer incomes and wealth to be distributed less unequally than they currently are. But would people generally insist that a fair society is one in which everyone has exactly the same level of income, or wealth?

Read the blog by Francisco Ferreira.

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Can Islamic finance boost financial inclusion?

Future Development blog, Thursday, June 8, 2017

Evidence suggests Islamic financial services can encourage Muslims to take advantage of banks and other formal financial institutions for services such as loans. 

In a Muslim majority country like Jordan, offering a Sharia-compliant loan boosted application rates from 18 to 22 percent, according to a recent study by Dean Karlan, professor of economics at Yale University. Karlan spoke at a recent MENA Chief Economist Office Seminar Series entitled “Understanding Demand for Sharia-Compliant Financial Products.”

Generalizing this finding is not so straightforward. To begin, look at the data detailing penetration of formal financial services among adults in Muslim majority countries.

You’ll find that financial inclusion often falls short among Muslim-majority nations. According to the 2014 Findex Database, while 57 percent of adults in Turkey have a bank account, in Jordan the share is 25 percent, and in Pakistan just 13 percent.

Read the blog by Leora Klapper and Saniya Ansar.

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A letter to Oxfam: Reframing the questions around private-sector health care

Future Development blog, 7 June 2017

Dear Oxfam:

As a researcher working on health and education over the last 15 years, I read your 2009 paper on the dangers of private health care in low- and middle-income countries with great interest. I admire the strength of your convictions, but worry that your inaccurate reading of the literature (“what do we know about private health care?”) detracts from your normative question (“what kinds of health systems should we aspire to in a world that is fair?”), leaving readers confused about what to believe.

To be clear, I agree that if we want a world where the poor can access high-quality care, private markets do not offer an easy “out” from much needed investments in the public sector. However, this is not because the private sector provides worse care than the public sector, as you suggest on Pages 19 to 21 of your report. All the available evidence (the little there is) suggests that primary care is either equivalent or higher quality in the private sector.
I support these claims in reverse.

Read the blog by Jishnu Das.

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What do we know about the link between financial inclusion and inclusive growth?

All About Finance blog, 6 June 2017

Adults around the world and in all income groups use a variety of financial services, ranging from digital payments and savings accounts to loans and insurance. Many low-income adults, however, rely largely on informal financial services — 2 billion adults worldwide, or 38 percent, reported not having an account at a formal institution in 2014, according to Global Findex data. The World Bank has launched the ambitious goal of Universal Financial Access by 2020. This goal is not an end in itself. Rather, financial inclusion is a means to an end.

Which bring us to the question: What do we know about the link between financial inclusion and inclusive growth benefiting all income groups?

Read the blog by Asli Demirgüç-Kunt, Leora Klapper, and Dorothe Singer.

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Global talent flows: Causes and consequences of high-skilled migration

Let’s Talk Development blog, 31 May 2017

Highly skilled workers play a starring role in today’s knowledge economy. They make exceptional direct contributions, including breakthrough innovations. As teachers, policy makers, and entrepreneurs they guide the actions of others. They propel the knowledge frontier and spur economic growth. In this process the mobility of skilled workers, within and across national borders, becomes critical to enhancing productivity. Using newly available data, a recent paper by Kerr, Kerr, Özden, and Parsons reviews the landscape of global talent mobility and discusses the causes and consequences of high-skilled migration.

Much attention has been paid to understanding the worldwide distribution of human capital and how global migration flows further tilt the deck against poor countries. The migration patterns we see today are the result of a complex tangle of firms and other employers pursuing scarce talent, governments trying to manage these flows through policy, and individuals seeking their best options given the constraints imposed on them. The central outcome, however, is clear: the flows of high-skilled migrants are very concentrated, both within and across national borders.

Read the blog by Caglar Ozden, Sari KerrWilliam Kerr, and Chris Parsons.

List of New Policy Research Working Papers
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