How Poverty Fell
How Poverty Fell is a recent paper examining poverty trends from rich data available for five countries:
We focus on five countriesāChina, India, Indonesia, Mexico, and South Africaāthat have collectively accounted for 70% of global poverty decline since 1990
Abstract
The share of the global population living in extreme poverty fell dramatically from an estimated: 44% in 1981 to 9% in 2019. We describe how this happened: the extent to which changes within as opposed to between cohorts contributed to poverty declines, and the key changes in the lives of households as they transitioned out of (and into) poverty. We do so using cross-sectional and panel sources that are representative or near-representative of countries that collectively accounted for 70% of global poverty decline since 1990. The repeated cross-sections show that all birth cohorts experienced the decline of poverty over time in parallel, such that poverty decline can be viewed as a primarily within-cohort phenomenon. The panels show substantial within-cohort churn: gross transitions out of poverty were much larger than net changes, as many households also lapsed back into poverty. The overall picture is of a āslippery slopeā rather than a long-term trap. The role of sectoral transitions varied across countries, though progress within sectors generally played a larger role than transitions between sectors.
Tyler Cowen is excited:
This stands a good chance of being the most important paper of the year, and it has many other results of interest.
I was unware of the rate of poverty change - 44% -> 9% over 40 years. The researchers use survey data from these countries and look at trends. Some key findings:
- Poverty is evenly distributed over age groups at a given time - eg: people in 20s are no more likely to be in poverty than those in their 60s.
- Poverty rates for each age group has decreased at a similar rate over time - eg: people in (20s, 1990) vs (20s, 2000) and (40s, 1990) vs (40s, 2000) have similar changes.
- In Mexico and South Africa moving to wage-work (job) contributed to poverty reduction, while in India, Indonesia and China becoming self-employed (small-business or a farm?) contributed to poverty reduction.
- Women entering workforce generally contributes to poverty reduction, and women leaving labour lower poverty reduction. Peculiarly, only in China a selection effect is found where women leave labour as the family becomes more affluent. I do not have a good model for Indian rural society but I would not be surprised if the same effect is prevalant in India.
- No strong effect observed in switching from or to agriculture sector.
The defination for poverty used is "living on less than $2.15 per day in 2017 PPP dollars". This can be income or consumption and wherever possible the authors crunch the numbers for both metrics. I am also concerned about political incentives of reporting a poverty decrease during any survey for ruling governments. I do believe strongly poverty has gone down (technology and human productivity), but I am not so sure of the extent being reported.