World Bank Revises Pakistan Poverty Rate Sharply Down
Oops! The World Bank made a big mistake. The number of Pakistanis living below the 2005 $1.25 poverty line (set at $1.44 for 2011) is 4.8 million, less than one-seventh of the 35.1 million reported earlier. It is a huge drop from about 20% of the population to 3% of the population living below the international poverty line.
Poverty rates for many other nations, including India and Bangladesh, have also seen dramatic downward revisions. As a result, India now has 102 million poor, just slightly above China's 99 million. In fact, the new report has cut the world poverty rate in half from 19.7% to 8.9%. Reduction from 21% to 3% for Pakistan poverty is much sharper than the rest of the world because ICP 2011 found it to be the second cheapest in the world.
The revision became necessary after the World Bank's International Comparison Program (ICP) completed a detailed study of a list of around 800 household and non-household products to compare real purchasing power for trans-national income comparison program (ICP). The 2011 ICP findings concluded that Pakistan's per capita income is US$4,450.00, just slightly below India's US$4,735.00
Here's how the Center for Global Development blog post by Sarah Dykstra, Charles Kenny and Justin Sandefur explains the reasons for the latest revisions:
"In checking our methodology (prompted by Laurence Chandy, to whom thanks), we realize that we underestimated the impact of the new PPP lines on poverty due to two mistakes in the computer code underlying the original version of this post: we used 2010 CPI figures where we meant to use 2011, and conversely, we used 2011 population figures where we meant to use 2010."
The CDG post explains the new poverty figures for Pakistan and many other developing countries as follows:
"What lies behind the dramatic changes in calculated GDP and poverty rates? A big factor may be that the national inflation rates used to convert incomes into 2005 PPP dollars in the last few years appear to be higher than the rate of inflation reflected in the baskets of goods and services measured by the two rounds of ICP surveys: Pakistan’s PPP conversion rate for GDP was 19.1 Rupees to the dollar in 2005 and 24.4 in 2011 — a gentle increase of 28 percent. The Consumer Price Index in Pakistan has gone up 102 percent over that same period. That might reflect changing or inadequate ICP commodity baskets or consumption data in one or both years, or mismeasurement of prices by Pakistan’s statistical agencies. But whatever the reason, it appears to apply to a lot of countries. Very few places saw PPP conversion rates climb close to or more than CPIs between 2005 and 2011, which is why poverty rates based on the 2011 PPP numbers tend to be lower."
The CDG staffers have offered the following apology to everyone who used their incorrect data: "We have egg on our faces. We're very sorry to those who quoted our original estimates and are contacting a number of them to notify them of the mistake and updated post".
Related Links:
Haq's Musings
Pakistan's Revised PPP GDP 2011
Pakistan Among Top 25 World Economies
Pakistan's Per Capita Income
Pakistan Fares Better Than Neighbors on World Misery Index
Pakistan's Underground Economy
India Pakistan Comparison
Pakistan Economic History
Pakistan's Expected Demographic Dividend
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| World Bank's Revised Poverty Estimates (Source: CGD) |
Poverty rates for many other nations, including India and Bangladesh, have also seen dramatic downward revisions. As a result, India now has 102 million poor, just slightly above China's 99 million. In fact, the new report has cut the world poverty rate in half from 19.7% to 8.9%. Reduction from 21% to 3% for Pakistan poverty is much sharper than the rest of the world because ICP 2011 found it to be the second cheapest in the world.
The revision became necessary after the World Bank's International Comparison Program (ICP) completed a detailed study of a list of around 800 household and non-household products to compare real purchasing power for trans-national income comparison program (ICP). The 2011 ICP findings concluded that Pakistan's per capita income is US$4,450.00, just slightly below India's US$4,735.00
Here's how the Center for Global Development blog post by Sarah Dykstra, Charles Kenny and Justin Sandefur explains the reasons for the latest revisions:
"In checking our methodology (prompted by Laurence Chandy, to whom thanks), we realize that we underestimated the impact of the new PPP lines on poverty due to two mistakes in the computer code underlying the original version of this post: we used 2010 CPI figures where we meant to use 2011, and conversely, we used 2011 population figures where we meant to use 2010."
The CDG post explains the new poverty figures for Pakistan and many other developing countries as follows:
"What lies behind the dramatic changes in calculated GDP and poverty rates? A big factor may be that the national inflation rates used to convert incomes into 2005 PPP dollars in the last few years appear to be higher than the rate of inflation reflected in the baskets of goods and services measured by the two rounds of ICP surveys: Pakistan’s PPP conversion rate for GDP was 19.1 Rupees to the dollar in 2005 and 24.4 in 2011 — a gentle increase of 28 percent. The Consumer Price Index in Pakistan has gone up 102 percent over that same period. That might reflect changing or inadequate ICP commodity baskets or consumption data in one or both years, or mismeasurement of prices by Pakistan’s statistical agencies. But whatever the reason, it appears to apply to a lot of countries. Very few places saw PPP conversion rates climb close to or more than CPIs between 2005 and 2011, which is why poverty rates based on the 2011 PPP numbers tend to be lower."
The CDG staffers have offered the following apology to everyone who used their incorrect data: "We have egg on our faces. We're very sorry to those who quoted our original estimates and are contacting a number of them to notify them of the mistake and updated post".
Related Links:
Haq's Musings
Pakistan's Revised PPP GDP 2011
Pakistan Among Top 25 World Economies
Pakistan's Per Capita Income
Pakistan Fares Better Than Neighbors on World Misery Index
Pakistan's Underground Economy
India Pakistan Comparison
Pakistan Economic History
Pakistan's Expected Demographic Dividend
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