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The State of the Poor: Where Are The Poor, Where Is Extreme
Poverty Harder to End, and What Is the Current Profile of the
World’s Poor?
Pedro Olinto, Kathleen Beegle, Carlos Sobrado, and Hiroki Uematsu
Although the world witnessed an unprecedented pace of poverty reduction over the last decades, reducing the number of
people living in extreme poverty by more than 700 million, approximately 1.2 billion people remained entrenched in
destitution in 2010.1 In order to leverage developing country efforts and galvanize the international development commu-
nity to exert concerted effort to end extreme poverty, the World Bank has established the twin goals of ending extreme
poverty by 2030 and promoting shared prosperity by fostering income growth of the bottom 40 percent of the population
in every country. Ending extreme poverty in just one generation is a formidable challenge by all accounts that requires a
thorough understanding of the state of the poor.
The objective of this note is to analyze some of the diverse by 33 percent between 1981 and 2010. This is due to an in-
characteristics of 1.2 billion poor people who are the focus of crease in the number of extremely poor individuals in LICs by
the poverty reduction efforts of governments and the interna- more than 100 million, and the stagnant average income
tional development community. Despite the impressive prog- among the poor that remained almost as low in 2010 as it was
ress in the fight against poverty in the developing world as a back in 1981.
whole, the progress has been much slower in Low Income As a share of the GDP of the developing world, the Ag-
Countries (LICs). Poverty for middle and high income coun- gregate Poverty Gap is now less than one tenth of what it was
tries fell by more than a half since 1981. For LICs, however, 30 years ago. For LICs, the share in 2010 was approximately 8
extreme poverty fell by less than a third. percent of their GDP, down from 24 percent in 1981. Not-
The depth of extreme poverty, that is, how far the average withstanding this significant decline, the Aggregate Poverty
extremely poor person is from the $1.25 per day poverty line, Gap/GDP ratio in LICs is 16 times larger than the average for
has fallen by 25 percent in the past 30 years for the developing the developing world.
world as a whole. But most of this drop seems to have hap- The note also features an in-depth profile of extreme pov-
pened in China and India. For the rest of the developing erty at a global scale using household survey data collected in
world, individuals living in extreme poverty today appear to 73 countries during the 2000s. On the one hand, it offers
be as poor as those living in extreme poverty 30 years ago. valuable insights as to where poverty is deeply seated and
The aggregate additional annual income needed to lift where stronger efforts are needed: more than three quarters
every individual in the developing world out of extreme pov- of those living in extreme poverty are in rural areas and nearly
erty (the Aggregate Poverty Gap) has been reduced by more two thirds of the extremely poor earn a living from agricul-
than half for the developing world. For LICs, it has increased ture. On the other hand, some results are alarming and dis-
84
87
90
93
96
99
02
05
08
10
19
19
19
19
19
19
19
20
20
20
20
erty reduction surpassed expectations—the Mil-
lennium Developing Goal 1 of halving extreme Source: World Bank staff estimates based on PovcalNet.
1,800 1,731
smarter as extreme poverty becomes a more diffi-
cult problem to solve requiring more targeted and 1,600
835 43%
highly effective solutions. To start, we need to 1,400
1,210
know who the extremely poor are, where they live, 1,200
155 13%
and where poverty is deepest and harder to end. 1,000 96 5% 48 4%
To reach the goal of ending extreme poverty 800 428 394 33%
22%
by 2030, the pace of poverty reduction in LICs will 600
260 22%
have to increase substantially.2 While extreme 400 322 17%
poverty has fallen across the developing world in 200 352
249 13% 29%
the last three decades, the pace was considerably 0
1981 1990 1999 2010
slower in LICs (figure 1). Poverty for middle and
high income countries (including India and Chi- low income upper middle + China
lower middle India total
na) fell by more than a half since 1981. For LICs,
extreme poverty fell by less than a third. By 2010, Source: World Bank staff estimates based on PovcalNet.
Figure 4. The Income of the Extremely Poor Has Increased, But Not at the Same Rate Everywhere
1.25
poverty line
PPP$1.25
1.15
India 2010
average gap
average daily income for the poor
India PPP$0.29
1.05 gap
PPP$
0.41
India, 0.96
0.95
China, 0.95
23.7
the GDP of developing countries. In 2010, it was only 0.5
20
percent. That is, if developing countries were able to sud-
denly raise the incomes of all extremely poor individuals to 15
$1.25 per day, they would have needed 0.5 percent of their 10 India, 9.8 low income, 7.9
India, 1.1
GDP to do so. Three decades ago, they would have needed 5.4 lower middle, 1.0
5 5.3 1.5
developing world, 0.5
more than 10 times that. The decline of the APG/GDP ra- 0
0.4 2.3 China, 0.2
tio for China is astonishing. It fell from a third of its GDP in 1981 1990 1999 2010 upper middle +, 0.1
1981 to only 0.2 percent in 2010. That is, in 1981 the ag- Source: World Bank staff estimates based on PovcalNet.
80 61 years
60 62.8 47% or older
58.4
50 59%
percentage
53.1 60 19 to 60
40 years old
40.7 40 13%
30 34.9 13 to 18
years old
13%
20 20
34% 12 years or
10 20% younger
0
0 extremely nonpoor
rural agriculture poor
Source: World Bank staff estimates based on I2D2. Source: World Bank staff estimates based on I2D2.
Figure 8. Poor Women Have Lower Schooling Than Poor Men Figure 10. Poverty Rate among Children Exceeds 50 Percent in
10
Low-Income Countries
50 female 9 low-income countries
50% 50% male 9.0 52% developing world
8.6 8
40
years of education
7
42%
6.7
percentage
6
30
5.7 5 32%
20 4
3
2 19%
10
1
0 0
percentage of extremely nonpoor 12 years or 13 years or
extremely poor younger older
poor education 15–30 years old
Source: World Bank staff estimates based on I2D2.
Source: World Bank staff estimates based on I2D2.
60 dle Income are countries for which the per capita GNI is be-
61
56 tween $1,036 and $4,085. Upper Middle Income are coun-
49 tries for which the per capita GNI is between $4,086 and
40
$12,615, and High Income are countries for which per capita
26
GNI is above $12,615. See appendix for the list of countries
20
20 by the latest World Bank classification.
3. In other words, if we had a magic wand and could perfectly
0 target every extremely poor individual, and magically raise
poor (extreme) nonpoor
their incomes to the $1.25 per day extreme poverty line, in
Source: World Bank staff estimates based on I2D2.
2010 the world needed approximately $169 billion per year
(in 2005 PPP dollars) to end extreme poverty. The value of
mains prevalent and where stronger efforts are called for. The the Aggregate Poverty Gap, however, is not the same as the
analyses repeatedly pointed toward LICs where progress in cost of ending extreme poverty. It is the size of the problem
poverty reduction has been the slowest over the last three de- which is different from the size (cost) of the solution.
cades. Our first attempt to profile extremely poor individuals 4. Another way of interpreting the APG/GDP ratio is the fol-
at a global scale revealed alarming living conditions under lowing: Suppose that the real GDP growth for the developing
which they live and that more than one third of the poor are world as a whole is 5 percent per year. If 10 percent of this
children 12 years old or younger. The analysis presented here, GDP growth accrued to the 21 percent of the developing
as well as future work on the state of the poor, should be in- world’s population who are extremely poor, and this 10 per-
strumental in enhancing awareness of the issue of extreme cent was distributed in a way that the growth in income of
poverty amongst the broader public and facilitate discussion each poor person was exactly his/her distance to the $1.25
on effective poverty reduction policies in the international line, extreme poverty would end in one year.
development community to put an end to extreme poverty, 5. The primary data source for the profiles of the poor is the
once and forever. International Income Distribution Database (I2D2), a glob-
About the Authors ally harmonized database drawn from more than 600 na-
tionally representative household surveys. See appendix for
Kathleen Beegle is Lead Economist, Pedro Olinto and Carlos Sob- more detail about the I2D2 and how global poverty profiles
rado are Senior Economists, and Hiroki Uematsu is Junior Profes- are prepared.
sional Officer, all at the World Bank.
References
Notes
Chen, S. and M. Ravallion. 2010. “The Developing World Is Poorer
1. In this note we interchangeably use the terms poor and ex- Than We Thought, But No Less Successful in the Fight Against
tremely poor to refer to those living with an income below Poverty.” Quarterly Journal of Economics 125(4): 1577–1625.
$1.25 per day in 2005 Purchasing Power Parity dollars as de- Ravallion, M., S. Chen, and P. Sangraula. 2009. “Dollar a Day Revis-
ited.” The World Bank Economic Review 23(2): 163–84.
scribed in Chen and Ravallion (2011) and Ravallion et al.
(2009). While we sometimes refer to those living with in- Appendix
comes above $1.25 per day as nonpoor, needless to say, many
of them are still very poor, even though not classified as ex- The appendix documents data sources and describes the
tremely poor or poor. methodology used to calculate global poverty profiles report-
2. In this note, developing countries are grouped into one of ed in this note. Three data sources are consulted: PocvalNet,
the following 5 categories: India, China, Low Income, Lower World Development Indicators (WDI), and the International
Middle Income and Upper Middle Income. The Low Income Income Distribution Database (I2D2). Data from PovcalNet
and Lower Middle Income groups correspond to the World and WDI are publicly available.
Bank's latest income classification as of July 1st, 2013. The PovcalNet
Upper Middle Income group, as defined for this note, in- All poverty estimates in this note are from PovcalNet (http://
cludes the countries currently classified as Upper Middle In- iresearch.worldbank.org/PovcalNet /index.htm), an online
The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. They are produced by the Poverty
Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect
those of the World Bank. The notes are available at: www.worldbank.org/economicpremise.