Internationally Comparable Poverty Lines By N. Kakwani Director International Poverty Centre Brasilia Brazil Email: nanak.kakwani@undp-povertycentre.org

Definition of Poverty Line Poverty line specifies the level of income or consumption that is just sufficient to maintain the basic minimum standard of living. A person is poor if his or her income or consumption is less than the poverty line.

When are global poverty counts internationally comparable? Suppose u* is the utility level, which measures the international minimum standard of living, anyone whose enjoyment utility is less than u* is identifies as poor. If u* is fixed for all countries, then the poverty counts so obtained are internationally comparable.

Three Poverty Lines National Poverty Line: reflecting minimum standard of living at the national level. Regional poverty line such as Latin America: reflecting average minimum standard of living in the region. Global poverty line: reflecting average minimum standard of living in the world.

The World Bank Poverty Counts The World Bank in 1990 WDR determined that $1 a day in 1985 PPP is a typical poverty line among low income countries in the mid-1980s. Compiled national poverty lines for 33 counties Australia, Belgium, Canada, Germany, Japan and USA. Only 10 low income countries. Semi-logarithm between poverty line and mean per capita consumption. Eye-balling the scatter plot of this equation.

World Bank Poverty Counts1 Changing the base of PPP dollars to 1993. New threshold should be $1.50 because there was an Inflation of 50% in the US between 19985 and 1993. The new poverty threshold is $1.08 in 1993 PPP dollars Which is the medium of 10 countries with the lowest poverty lines. The World has lowered the original $1 a day poverty line.

New Global Poverty Counts Based on Caloric Norms A household utility function is defined as : Food basket Non-food basket : r : Household’s per capita calorie requirement n : Basic non-food needs u* : Minimum standard of living, which every household should enjoy.

International Food Poverty Line Food poverty line of a household=r*ccost where ccost is the calorie cost in PPP dollars. Lemma 1: If the people in two countries have the same calorie cost in food PPP dollars, then they will enjoy the same level of utility. Thus, the calorie cost in PPP dollars determine the standard of living people enjoy.

Calorie cost: Russia

Calorie and protein cost in Thailand

Methodology for non-food line Determination of non-food poverty line Total expenditure function Food expenditure function E D C B A F Food poverty line O Utility

Global Poverty Estimates

Concluding remarks The $1 a line is based on a very shaky methodology. It is not a typical poverty line of low income countries. It is not related to satisfaction of basic needs. The new global counts are much higher. The new millennium goal of halving poverty between 1990 and 2015 will not be met by using new global counts based on the observed global trends.