Monitoring national poverty is important for country-specific development agendas. National poverty lines are used to make accurate estimates of poverty consistent with the country’s specific economic and social circumstances, based on the actual cost of a minimum set of goods and services every human should be able to consume (such as basic nutrition and lodging).

In assessing poverty in a given country, and how best to reduce poverty according to national definitions, one naturally focuses on a poverty line that is considered appropriate for that country. Within a country, the cost of living is typically higher in urban areas than in rural areas. Some countries may have separate urban and rural poverty lines to represent different cost of living (to attain the same minimum standard or to accommodate different needs such as not needing mosquito nets in high altitudes but requiring heating which may not be needed in tropical areas).

Poverty Line: Threshold below which individuals in the reference population are considered poor and above which they are considered non-poor. The threshold is generally defined as the per-capita monetary requirements an individual needs to afford the purchase of a basic bundle of goods and services.

Household in poverty: Households are defined as poor if their income or consumption expenditure is below the poverty line taking into account the number of household members and composition (e.g., number of adults and children).

Consumption is the preferred welfare indicator for several reasons. Income is generally more difficult to measure accurately. For example, the poor who work in the informal sector may not receive or report monetary wages; self-employed workers often experience irregular income flows; and many people in rural areas depend on idiosyncratic, agricultural incomes.

Consumption is measured by using household survey questions on food and nonfood expenditures as well as food consumed from the household’s own production, which is particularly important in the poorest developing countries. This information is collected either through recall questions using lists of consumption items or through diaries in which respondents record all expenditures daily. But these methods do not always provide equivalent information, and depending on the approach used, consumption can be underestimated or overestimated. Different surveys use different recall or reference periods. Depending on the true flow of expenditures, the rate of spending reported is sensitive to the length of the reporting period. The longer the reference period, the more likely respondents will fail to recall certain expenses—especially food items—thus resulting in underestimation of true expenditure.

Best-practice surveys administer detailed lists of specific consumption items. These individual items collected through the questionnaires are aggregated afterward. But many surveys use questionnaires in which respondents are asked to report expenditures for broad categories of goods. In other words, specific consumption items are implicitly aggregated by virtue of the questionnaire design. This shortens the interview, reducing the cost of the survey. A shorter questionnaire is also thought to reduce the likelihood of fatigue for both respondents and interviewers, which can lead to reporting errors. However, there is also evidence that less detailed coverage of specific items in the questionnaire can lead to underestimation of actual household consumption. The reuse of questionnaires may cause new consumption goods to be omitted, leading to further underreporting.

Invariably some sampled households do not participate in surveys because they refuse to do so or because nobody is at home. This is often referred to as “unit nonresponse” and is distinct from “item nonresponse,” which occurs when some of the sampled respondents participate but refuse to answer certain questions, such as those pertaining to consumption or income. To the extent that survey nonresponse is random, there is no concern regarding biases in survey-based inferences; the sample will still be representative of the population. However, households with different incomes are not equally likely to respond. Relatively rich households may be less likely to participate because of the high opportunity cost of their time or because of concerns about intrusion in their affairs. It is conceivable that the poorest can likewise be underrepresented; some are homeless and hard to reach in standard household survey designs, and some may be physically or socially isolated and thus less easily interviewed. If nonresponse systematically increases with income, surveys will tend to overestimate poverty. But if compliance tends to be lower for both the very poor and the very rich, there will be potentially offsetting effects on the measured incidence of poverty.

Even if survey data were entirely accurate and comprehensive, the measure of poverty obtained could still fail to capture important aspects of individual welfare. For example, using household consumption measures ignores potential inequalities within households. Thus, consumption- or income-based poverty measures are informative but should not be interpreted as a sufficient statistic for assessing the quality of people’s lives. The difficulties in measuring intra-household inequality and poverty differentials means there are limitations in using this metric to assess individual child poverty. The best information that the disaggregation of the indicator provides is the proportion of children living in poor households, only an indirect measure to assess children’s poverty and well-being.

The formula for calculating the proportion of the total population living below the national poverty line, or headcount index, counts and adds up all the persons with income or consumption below the poverty line. This group is presented as a percentage of the total population.

Consumption or income data are gathered from nationally representative household surveys, which contain detailed responses to questions regarding spending habits and sources of income.

Consumption, including consumption from own production, or income is calculated for the entire household. In some cases, an “effective” household size is calculated from the actual household size to reflect assumed efficiencies in consumption; adjustments may also be made to reflect the number of children in a household. The number of people in those households is aggregated to estimate the number of poor persons.

National poverty rates use a country specific poverty line, reflecting the country’s economic and social circumstances. In some case, the national poverty line is adjusted for different areas (such as urban and rural) within a country, to account for differences in prices or the availability of goods and services. Typically the urban poverty line is set higher than the rural poverty line; reflecting the relatively higher costs of living in urban areas and different needs to live in different geographic areas.

The only aggregation is by rural and urban areas.

Missing values in consumption of particular items are counted as zero. This is a standard practice in processing survey data. If the consumption is not reported, it is taken as zero consumption, and thus the consumption expenditure is zero.

Because national poverty lines are country-specific. There is no aggregation at the regional or global
level.

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National poverty estimates is a different concept from international poverty estimates. National poverty rate is defined at country-specific poverty lines in local currencies, which are different in real terms across countries and different from the $1.90-a-day international poverty line. Thus, national poverty rates cannot be compared across countries or with the $1.90-a-day poverty rate.

Data availability depends on the availability of household surveys and analysis of survey data. Data for total, rural and urban poverty are currently available for 132, 101 and 103 countries, respectively.

Data are available from 1985 to 2015. Because the effort and capacity of collecting and analysing survey data are different for each country, the length of the time series for each country varies greatly.

National poverty estimates are typically produced and owned by country governments (e.g., National Statistic Office), and sometimes with technical assistance from the World Bank and UNDP. Upon release of the national poverty estimates by the government, the Global Poverty Working Group of the World Bank assesses the methodology used by the government, validates the estimates with raw data whenever possible, and consults the country economists for publishing. Accepted estimates, along with metadata, will be published in the WDI database as well as the Poverty and Equity Database of the World Bank.

Another source is World Bank’s Poverty Assessments. The World Bank periodically prepares poverty assessments of countries in which it has an active program, in close collaboration with national institutions, other development agencies, and civil society groups, including poor people’s organizations. Poverty assessments report the extent and causes of poverty and propose strategies to reduce it. The poverty assessments are the best available source of information on poverty estimates using national poverty lines. They often include separate assessments of urban and rural poverty.

Source collection is ongoing by the Global Poverty Working Group of the World Bank. The data in World Development Indicators (WDI) are updated quarterly following the WDI database2 updating schedule.

The schedule of source collection is determined by the country governments. Some are annual, and most others are less frequent.

End of March 2017.

Poverty and Equity Data Portal http://povertydata.worldbank.org/poverty/home/
Deaton, Angus. 2003. “Household Surveys, Consumption, and the Measurement of Poverty”. Economic Systems Research, Vol. 15, No. 2, June 2003
Deaton, Angus; Zaidi, Salman. 2002. Guidelines for Constructing Consumption Aggregates for Welfare Analysis. LSMS Working Paper; No. 135. World Bank.
World Bank 2008. Poverty data: A supplement to World Development Indicators 2008. Washington, DC.