RAWALPINDI, Aug 27: The Asian Development Bank has carried out for the first time a thorough sensitivity analysis of internationally comparable poverty estimates, and says the new poverty line, called the Asian Poverty Line, is roughly $1.35 a day.
In a report released on Wednesday which offered a new way to measure poverty in the Asia and Pacific region, the ADB says while the one dollar a day poverty line remains an appropriate benchmark for counting the extent of extreme poverty in Asia, in a region that has witnessed rapid economic growth it might also be time to evaluate poverty incidence using a benchmark that reflects the regions dynamism.
The report published in a special chapter of Key Indicators 2008 titled Comparing Poverty Across Countries: The Role of Purchasing Power Parties says the construction of the one-dollar-a-day poverty line (and corresponding estimates of poverty) is not based on market exchange rates, not on purchasing power parties (PPPs).
PPPs are conversion factors that ensure a common purchasing power over a given set of goods and services.
In terms of an Asian poverty line fixed at $1.35 per day, the total number of poor in 2005 across the 16 countries of Asia and the Pacific including Pakistan is estimated at 1,042 million, on the basis of consumption PPPs, the report says.
This number declines to 1,013 million when ICP PPPs are used. A far bigger drop appears when PS PPPs are used, to an estimated 843 million. These findings on the sensitivity of PPPs and corresponding estimates of poverty indicate that the selection of the PPP can impact significantly on international comparisons of poverty.
Given that the majority of developing Asias population still lives in rural areas, this is a fundamental weakness. There is also scope for harmonizing the ICP and Consumer Price Index (CPI) price collection.
This would not only benefit future rounds of the International Comparison Programme (ICP) by simplifying price data collection for future PPP calculations, it would also benefit countries through the use of innovative ICP methodologies for collecting and validating prices, and developing PPPs for sub-regions within countries.
The report, using original data collected specifically for its study, examines where the poor shop, what they buy, in what quantity, as well as the quality of the products they purchase.
The report notes, for example, that there is a considerable difference in quality and price between packaged rice bought in a supermarket and rice bought by the scoop in a wet market where the poor traditionally shop. The prices paid for the products purchased by the poor are used to generate a new set of PPPs, called poverty PPPs.
