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New Estimates Reveal Drop In Extreme Poverty 2005-2010

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  • Extreme poverty eased in all six developing regions from 2005 to 2008, and probably 2010
  • About 1.29 billion people lived in extreme poverty in 2008
  • Poverty reduction remains uneven across the globe

Feb. 29, 2012 – The number of people in extreme poverty and the poverty rate declined in every region of the developing world during 2005-2008, the first time it ever happened over a three-year monitoring cycle since the World Bank started tracking extreme poverty.

The data released today by the World Bank’s Development Research Group show that 22% of the developing world’s population – or 1.29 billion people – lived on $1.25 or less a day in 2008, down from 43% in 1990 and 52% in 1981. The update draws on 850 household surveys conducted by nearly 130 countries, representing 90% of the developing world’s population. It covers 1981 to 2008, mainly because newer data from low-income countries are either scarce or not comparable with previous estimates, though more recent statistics are available for middle-income countries and a handful of poorer countries to allow preliminary estimates for 2010.

Those preliminary estimates, which are based on a smaller sample size than in the global update, indicate that by 2010 the $1.25-a-day poverty rate fell to less than half of the 1990 rate. That means the developing world has achieved, ahead of time, the United Nation’s first Millennium Development Goal of cutting the 1990 extreme-poverty rate in half by 2015. It also means most countries recovered quickly from the recent food, fuel and financial crises.

“The developing world has made remarkable progress in fighting extreme poverty, and it has proved resilient to recent economic shocks and rising food and oil prices,” says Martin Ravallion, director of the Development Research Group and leader of the team that produced the numbers. “But even with the current rate of progress, about one billion people would still live in extreme poverty in 2015. And the bunching up we see just above the $1.25-a-day line points to the continuing vulnerability of poor people across the world.”

Some regions have seen greater progress than others. East Asia cut the proportion of people living on less than $1.25 a day to 14% in 2008 from 77% in 1981. China, in particular, had 663 million fewer people living on less than $1.25 a day in 2008 than 1981, around the time the country’s reform period began. But the developing world without China tells a more mixed story: The total poverty count in all other developing countries was around 1.1 billion people in 2008, roughly the same as in 1981, though the number had risen and then fallen since 1999. Sub-Saharan Africa has reduced the $1.25-a-day poverty rate to 47% in 2008, the first time it has dipped below 50%. And the region has seen falling numbers of the extreme poor since 2005, reversing the long-run increase since 1981.

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Over the period as a whole, there was only a small drop in the number of people living on less than $2 per day, to 2.47 billion in 2008 from 2.59 billion in 1981, although the number rose then fell within the period, and has fallen substantially since 1999, when 2.94 billion lived below $2 a day.

The estimates, which are updated every few years by the Bank's Development Research Group, are widely used in international development. The Bank’s official international line is set at $1.25 a day, the average of the poverty lines in the world’s poorest 10 to 20 countries. Each country has its own poverty line and (naturally) richer countries tend to have higher lines. The Bank also looks at other lines, such as $2, which is the median poverty line for all developing countries.

The poverty line is designed to compare spending power across different countries. That is done using the purchasing-power parity exchange rates, which are derived from the results of the price surveys conducted for the 2005 International Comparison Program. The researchers first convert those numbers to local currency units using the purchasing-power parity rate, and then convert the line to the prices prevailing at the time of each household survey, using the best available Consumer Price Index.

The poverty lines are applied to data on household consumption of commodities, or income if consumption is not available. However, it is recognized that consumption does not allow for non-market goods, such as access to health care and schooling. Nor does it allow for inequality within the household. To get a full picture of the welfare of low-income people, the Bank also analyzes other indicators of well-being, like schooling attainments and health status.

The public can access all statistics underlying the new international estimates via the online tool, PovcalNet, which allows users to calculate poverty rates using global, regional and national numbers. Many data, especially those from middle-income countries and regions, are more recent than 2008.

“PovcalNet is the Bank’s interactive, open-data tool for poverty and inequality measurement,” says Shaohua Chen, senior statistician in the Bank’s Research Group who manages PovcalNet. “With our newly-revamped site, users can easily duplicate our results, or conduct their own research using any line or country grouping to their liking.”

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