Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)

The extent to which growth reduces global poverty has been disputed for 30 years. Although there are better data than ever before, controversies are not resolved. A major problem is that consumption measured from household surveys, which is used to measure poverty, grows less rapidly than consumption measured in national accounts, in the world as a whole and in large countries, particularly India, China, and the United States. In consequence, measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries. One plausible cause is that richer households are less likely to participate in surveys. But growth in the national accounts is also upward biased, and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys. So it is possible for consumption of the poor to grow less rapidly than national consumption, without any increase in measured inequality. Current statistical procedures in poor countries understate the rate of global poverty reduction, and overstate growth in the world. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.