Reaching Poor People Finance & Development, December 2017, Vol. 54, No. 4
Caitlin Brown, Martin Ravallion, and Dominique van de Walle
Sobering evidence from Africa illustrates how hard it is to target antipoverty efforts well
It has often been said that the world’s aggregate poverty gap—the total monetary amount by which all poor people fall below the poverty line—is modest when one uses poverty lines typical of low-income countries. For example, Annie Lowrey wrote in the New York Times magazine on Feb. 23, 2017, that “one estimate … recently calculated that the global poverty gap … is roughly what Americans spend on lottery tickets every year, and it is about half of what the world spends on foreign aid.”
The implication is sometimes drawn that only a modest sum of money is needed to eliminate global poverty—to bring all poor people up to the international poverty line that separates the poor from the nonpoor.
However, eliminating poverty is a lot harder than the size of the aggregate poverty gap might suggest. Identifying who is poor and by how much is particularly challenging. The calculation cited in the New York Times could therefore be way off the mark. Some who are truly poor go wanting while funds end up in the hands of others. Because of imperfect information about levels of living, the amount of money needed to eliminate poverty can quickly balloon.
We have tried to assess whether the data typically available and routinely used by policymakers in sub-Saharan Africa—the poorest region of the world by most measures—are adequate to reliably determine who is poor.
Finding poor householdsIdentifying poor households is often complicated by a lack of reliable data. It is difficult, or even impossible, in many cases to assess the living standards of all individuals in the population. In higher-income countries, income tax records help. But tax records are not a feasible option in many developing economies, given that many households work in the informal sector or traditional agriculture. Governments are often hindered by constraints on record keeping for reliably measuring all incomes, and these constraints can be severe in poor countries. In addition, household-level data may not be a good indicator of the living standards of individuals within the household.
To try to overcome this obstacle, governments across the world have increasingly turned to some form of proxy means test to identify poor households. The idea is simple. A score is given to each household based on a (usually small) set of readily observable household characteristics that are suggestive of...