Where the Line is Drawn. A Rejoinder to Ravallion
Abstract:Martin Ravallion’s “One Pager” No. 66 focuses on two key issues: the level of the World Bank’s international poverty line (IPL) and its conversion to other currencies and years. Having written on conversion before (“One Pager” No. 54), I can be brief. The purchasing power parities the Bank uses to convert its IPL into other currencies at best preserve purchasing power equivalence relative to the pattern of international household consumption. Similarly, the consumer price indices the Bank uses to convert the results to other years at best preserve purchasing power equivalence relative to each national household consumption basket. Such conversions are unsuitable within a poverty measurement exercise because the prices of necessaries play a much greater role in the lives of the poor than in general consumption expenditure. (...)
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