FRIDAY GRAPH: POVERTY RATES

Here is a graph (hat tip: Mark Perry) from a 2009 NBER working paper “Parametric Estimations of the World Distribution of Income,” by Maxim Pinkovskiy and Xavier Sala-i-Martin (Columbia University):

Abstract: We use a parametric method to estimate the income distribution for 191 countries between 1970 and 2006. We estimate the World Distribution of Income and estimate poverty rates, poverty counts and various measures of income inequality and welfare. Using the official $1/day line, we estimate that world poverty rates have fallen by 80% from 0.268 in 1970 to 0.054 in 2006 (see chart above). The corresponding total number of poor has fallen from 403 million in 1970 to 152 million in 2006. Our estimates of the global poverty count in 2006 are much smaller than found by other researchers. We also find similar reductions in poverty if we use other poverty lines. We find that various measures of global inequality have declined substantially and measures of global welfare increased by somewhere between 128% and 145%. We analyze poverty in various regions.

Mark Perry noted on his blog that if these estimates are accurate, the 80% reduction in poverty between 1970 and 2006 has to be the greatest reduction in world poverty in such a short time span in the history of the world, and the 97% reduction in East Asia has to be the most significant improvement in regional standard of living in history as well.  The reasons for the record reduction in world poverty might be globalisation, market-based reforms, liberalisation, information age technology, productivity gains in agriculture and the collapse of central planning in China and India.  Even the trend for Africa is encouraging.

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One thought on “FRIDAY GRAPH: POVERTY RATES

  1. Merely goes to show that – thanks to NZ’s ruinous state spending – poverty rates in NZ are far too low for us to be a competitive economy

    Perhaps that fact that our entire benefit spend had to be borrowed this year might finally force National to see reason?

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