Click here for search results

Newsletter

Site Tools

Research Highlights 2006: Poverty

Themes
Research Highlights
 There are costs of high inequality, but things can be done to reduce it
  Antipoverty programs have larger long-term impacts for certain types of households
  Better tools for poverty & inequality analysis
Team
Publications in 2006
Forthcoming in 2007

The Poverty Team’s research program has two main objectives. The first is to improve current data and methods of poverty and inequality analysis. This has included producing new household-level data (notably through the group’s Living Standards Measurement Study), monitoring poverty and inequality using household-level data (including the global poverty monitoring task, which produces the Bank’s official "$1 a day" poverty counts) and developing more reliable "poverty maps," which combine sample survey data with census data. The second objective is to use the improved data and existing data sources to better understand the economic and social processes determining the extent of poverty and inequality and to assess the effectiveness of specific policies in reducing poverty.

Themes

The central themes of the group’s work are laid out in two new research programs, both launched in 2006. The first is the new Equity and Development program, funded by the Bank’s Research Support Budget. This large multiyear program will build on the insights from the World Development Report 2006: Equity and Development. The program aims to add rigorous new thinking and evidence in those areas where the development report was more speculative, given limitations on the existing stock of knowledge. This will be done in two main areas: better data for describing inequity and research on understanding and breaking poverty and inequality traps.

In support of the Bank’s role as a leader in the production of accurate and policy-relevant micro-level data, the Living Standard Measurement Study (LSMS), also begun in 2006, is an innovative new multiyear program of research aimed at improving the quality of household-level measurement of key concepts in poverty and policy analysis. Through methodological field validations, as well as reviews of existing knowledge, the program aims at providing sound advice for improving LSMS and other surveys in developing countries.

Research Highlights

There are costs of high inequality, but things can be done to reduce it

Inequality is rising in some countries but falling in others, and the group’s past research has revealed a tendency for inequality to fall in high inequality countries, while rising in low-inequality countries. To better understand the economic processes involved, the team has been studying specific country experiences. As one of the world’s most unequal countries, Brazil is an interesting example. In recent times, inequality has been falling in Brazil. Two new papers have tried to explain why. The research found that Brazil’s distribution of income improved due to declines in the average returns to education, pronounced convergence between urban and rural areas, and an increase in the amounts and progressivity of social assistance transfers [forthcoming 91]. A second paper investigated the role of the country’s substantial trade liberalization during 1988-95, and found that openness contributed to reducing wage inequality, both by raising the relative returns to unskilled labor, and by encouraging worker flows to exporting sectors [266].

A theme of the group’s work is the efficiency cost of high inequality. Two research papers completed in 2006 studied one of the important but poorly understood channels through which inequality affects a country’s overall progress in development and poverty reduction, namely its effect on political processes. The first paper suggests that, contrary to popular belief, the relative distortions introduced by lobbying and corruption need not always benefit the rich. Distortions tend to benefit those who are relatively more efficient as lobbyists than as producers, and there are circumstances under which these may be the poor [forthcoming 90]! A second paper investigates elite capture of local development projects, through unequal influence over project choice. Looking at Ecuador’s Social Investment Fund, the authors find evidence that more unequal villages tend to choose fewer projects that provide private goods favored by the poor (relative to more egalitarian communities) [256].

Another factor perpetuating inequality is that particular social groups sometimes find themselves persistently disadvantaged because of the prevailing rules systems that consign them to a subordinate status and provide few avenues for redress. This issue is explored in a new book published this year, Law, Equity and Development—a joint product of the World Bank’s Legal and Development Economics Vice Presidencies. This book brings together the ideas of many of the world’s leading scholars and practitioners of legal anthropology, aiming to inform recent operational initiatives that focus on improving the quality and accessibility of judicial institutions for the poor [238].

Antipoverty programs have larger long-term impacts for certain types of households

There has been very little research studying the longer-term impacts of the Bank’s development projects. This year saw the completion of a 10-year study of the impacts of a World Bank-financed, rural development program in China. Very detailed household survey data were collected on 2,000 households in both project and comparison villages during 1995–2005, spanning both the project’s disbursement period and a four-year period after disbursements ended.

The program emphasized community participation in multisectoral interventions (including farming, animal husbandry, infrastructure, and social services). Only modest gains to mean consumption emerged in the longer-term, in rough accord with the gain to permanent income. However, the study found that certain types of households gained more than others. The educated poor were undercovered by the community-based selection process, greatly reducing overall impact [258].

Better tools for poverty and inequality analysis—updated Povcalnet & new poverty analysis toolkit

To assure its continuing relevance to development policy discussions, the poverty analysis conducted in the World Bank requires more-or-less continual innovation in developing new analytical tools. The standard "off-the-shelf" software packages lag behind the new trends in research, or do not put high weight on the needs of poverty analysis, including in Bank Operations and client governments.

To respond to this need, the team has developed several new software programs, some of which have become "industry standards," such as the widely used Povcal and PovcalNet. The new version of PovcalNet released in 2006 incorporates a number of improvements to this interactive data tool, which allows users to access the distributional data from 600 household surveys to replicate the Bank’s global "$1 a day" poverty measures, and to estimate a great many other measures.

In 2006 the team also unveiled a new Poverty Analysis Toolkit that offers a set of STATA programs for various types of poverty decompositions and tools for the pro-poor growth analysis. The programs developed by the Poverty team are now widely used by researchers both within and outside the Bank. For example, last year’s web download statistics from the STATA corporation placed the software developed by the team in the top 20 most downloaded programs.

Team

Martin Ravallion, Research Manager




Permanent URL for this page: http://go.worldbank.org/PQNL6X5D30