1. Global extreme poverty rates for children, adults and the elderly 2013 CSAE conference / March 19 / Oxford / Cockburn Yélé Batana, Maurizio Bussolo and John Cockburn

2. Conclusions If we follow Chen-Ravallion with a per capita analysis, the average global incidence of extreme poverty (31.4% in 2000) disguises an alarmingly higher incidence among children: 41.5%, vs. 27.1% for adults and 22.0% for the elderly If, on the contrary, we allow for moderate economies of scale in household consumption and sex/age differences in individual needs, we conclude instead that global extreme poverty rates are much lower than the Chen-Ravallion estimates (6.1% vs. 31.4%), and that child and adult rates do not diverge significantly

3. Global extreme poverty rate estimates are widely publicized National studies show important child-adult divergences (e.g. 28.3% vs. 23.4% in Uganda) Children represent a huge share of the population in the poorest countries (nearly 50% in Africa). Children suffer from short and long term consequences of poverty: o Malnutrition o Morbidity/mortality o Low school participation o Mental/physical/psychological development delays Human capital losses from child poverty compromise economic growth Motivation

4. Chen-Ravallion estimates

5. Does this imply that 22.4% of children, adults and the elderly are in extreme poverty in 2008 ? … or do these rates vary by age group? Example: poor households have a higher share of children  So the share of extreme poverty among children should be greater than in the adult population.  Independently of intra-household allocation issues.

6. New estimates by age group Global Income Distribution Dynamics (GIDD) Global database (2000) Data on 121 countries, representing more than 90% of the global population Detailed household survey data in 73 countries. Information: o Income/consumption, o Household composition (age, sex), o education, etc.

7. New estimates by age group Income per capita: Household income/household size Extreme poverty line: $1.25 per day PPP. Global estimate close to Chen-Ravallion: 31.4% (2000) vs. 30.8% (2002) Much higher rates among children (41.5%) than among adults (27.1%) and the elderly (22%). Age groupsHeadcount Developing countries All 31.4 0 to 17 38.5 0 to 5 41.5 6 to 11 41.5 12 to 17 30.8 18 to 64 27.1 65 and up 22.0

8. A problem of size… and composition Chen-Ravallion: income per capita (income/size) Neglects: Size (economies of scale): costs (lodging, furniture, electricity, etc.) don’t increases proportionately with household size Composition: Children and, to a smaller degree, women and the elderly need to consume less than adult men (ex. caloric requirements) Can this bias our results? Yes: poor households are larger and have a higher share of children How do we compare poverty between small and large households? With more or less children?

9. A problem of size… and composition If a single man requires $1.25/day to avoid extreme poverty based on caloric needs and an estimated non-food component. Do three men living together need $3.75/jour? Maybe only $3/day given economies of scale? If so, does a man living with 2 children (still 3 members in all) also require $3/day? Maybe only $2/day if children consume half as much as a man? The per capita approach assumes $1.25 per day per person in all situations This leads to an overestimation of extreme poverty And of the difference between child and adult poverty rates.

10. Equivalence scales (controversial) Income/male-equivalents (ME) instead of income/size ME=equivalent size in terms of adult single men OECD: ME = 1 + 0.5*(other adults) + 0.3*children Square root: ME = size 0.5 (only economies of scale) FAO/WHO: ME= Food shares near 60% WHO caloric requirements tables by age and sex (and activity) Assume proportional non-food share Estimated economies of scale (Engel curve): 0.78; 0.65; 0.49 and 0.42, respectively, for the 4 poorest quintiels. A problem of size… and composition

11. HouseholdAB Daily consumption33 Men31 Children02 Size33 Male-equivalents (ME): - Per capita33 - OECD21.6 - Square root1.73 - FAO/WHO2.41.74 Individual consumption (per ME): - Per capita11 - OECD1.51.87 - Square root2.12 - FAO/WHO1.251.72 OECD: ME = 1 + 0.5*(other adults) + 0.3*children Square root: ME = size 0.5 FAO/WHO: EH= A problem of size… and composition

12. Age groupPer capitaOECDSquare rootFAO/WHO Developing countries All 31.44.93.06.1 0-17 38.55.73.57.4 0-5 41.55.73.66.6 6-11 41.56.34.18.6 12-17 30.85.12.86.6 18-64 27.14.32.65.2 65+ 22.04.63.05.2 Global extreme poverty rates fall dramatically when we account for economies of scale and differing individual needs … because poor households are larger and with a higher share of children Regardless of the equivalence scale used and the age group analyzed The per capita approach overestimates poverty rates Child poverty is still higher than adults and the elderly, but the difference is much smaller than with the per capita approach A problem of size… and composition

13. Age groupPer capitaOECDSquare rootFAO/WHO Sub-Saharan Africa All 54.622.615.025.6 0 to 17 59.723.415.527.0 0 to 5 59.022.315.423.9 6 to 11 62.724.516.629.4 12 to 17 55.823.114.226.5 18 to 64 50.121.914.424.2 65 and up 47.923.316.024.9 Extreme poverty rates remain high in Africa But the child-adult divergence falls greatly and even inverses in some cases Extreme poverty rates are higher among the elderly than adults A problem of size… and composition

14. Generalization OECD: Square root: FAO/OMS : Robustness:

15. Global incidence of extreme poverty B: per capita (31.4%); C: square root (3%); F: “FAO/WHO” (6.1%) F

16. Child-adult divergence B = per capita; C = square root; F = “FAO/WHO” F