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New Measures of Progress in Development

Paper Session

Saturday, Jan. 3, 2026 8:00 AM - 10:00 AM (EST)

Philadelphia Convention Center
Hosted By: American Economic Association
  • Chair: Lant Pritchett, London School of Economics

Raising the Bar – A Prosperity Line for Global Inclusion

Lant Pritchett
,
London School of Economics
Martina Viarengo
,
Graduate Institute of International and Development Studies

Abstract

Sustainable Development Goal 1 is “End poverty in all its forms everywhere." This implies moving from the dollar-a-day poverty line (Ravallion, Datt, Van de Walle 1991) raises the obvious question: is there a useful global upper-bound poverty line (GUBPL)? We propose, empirically estimate, and defend a GUBPL based on two criteria. First, the poverty line is absolute level of material wellbeing and treats all households equally, not relative to residence or location as national poverty lines, even those based on nutritional adequacy (Ravallion 1998, 2010, Ravallion and Chen 2019). Second, the distinctive property that separates the standard poverty measures (Foster, Greer, Thorbecke 1984) from all other distribution sensitive money metric measures of social welfare is that above the poverty line gains in household income/consumption count for exactly zero in reducing poverty. A GUBPL should be set at a high enough level that zero gains to a goal or social wellbeing measure, if not literally true, is a “close enough” approximation. Our two empirical approaches, based on completely different material wellbeing indicators, both suggest a GUBPL in the range of P$19 toto P$40. This is consistent with the World Bank (2023) “prosperity gap” standard of P$25 and a focal point value of P$21.5, that is ten times higher than the current “lower bound” of P$2.15. A global upper-bound poverty line of P$21.5 makes “development as poverty reduction” a broader, more inclusive, and widely acceptable global vision.

A Simple Decomposable Distribution Sensitive Welfare Index

Aart Kraay
,
World Bank
Berk Ozler
,
World Bank
Nishant Yonzan
,
World Bank
Chritoph Lakner
,
World Bank
Dean Jolliffe
,
World Bank

Abstract

Simple welfare indices such as mean income are ubiquitous but not distribution sensitive. In contrast, distribution sensitive measures are rarely used, as many are difficult to understand. We propose a new, simple measure to overcome these shortcomings: the average factor by which individual incomes must be multiplied to attain a given reference income level. The “welfare gap,” which decreases as incomes increase, is subgroup decomposable with population weights and satisfies the three main definitions of distribution sensitivity. It also neatly decomposes into mean income and an inequality index. We illustrate its properties using the global distribution of individual incomes (1990-2019).

How Many Days to Get a Dollar? A Robust and Inclusive Measure of Poverty

Oliver Sterck
,
University of Antwerp and University of Oxford

Abstract

How has global poverty evolved over the past decades? Mainstream poverty measures fail to provide robust answers because they heavily depend on the selected poverty line. I address this limitation by proposing a
new, inclusive poverty measure, where individual poverty is defined as the reciprocal of income. Average poverty is simply the average time needed to get $1. The measure is inclusive, distribution sensitive, decomposable, and aligns with how both experts and the public conceptualize poverty. Using this metric, I find that global poverty declined by 55% since 1990, from about half a day to five hours to get $1.

Integrating Mortality Into Poverty Measurement Through the Poverty Adjusted Life Expectancy

Benoit Decerf
,
World Bank
Guilhem Cassan
,
CEPR, CRED, DEFIPP and University of Namur
Jean-Marie Baland
,
CRED, DEFIPP and University of Namur

Abstract

Poverty measures typically do not account for mortality, resulting in counterintuitive evaluations. The reason is that they (i) do not attribute intrinsic value to the lifespan and (ii) suffer from a mortality paradox. We propose the first poverty index that always attributes a positive value to lifespan and does not suffer from the mortality paradox. This index, called the poverty-adjusted life expectancy, follows an expected lifecycle utility approach à la Harsanyi and is based on a single normative parameter that transparently captures the tradeoff between poverty and mortality. Empirically, we show that accounting for mortality substantially changes cross-country comparisons and trends. We also quantify the fraction of these comparisons that are robust to the choice of the normative parameter.

Discussant(s)
Charles Kenny
,
Center for Global Development
Shruti Rajagopalan
,
George Mason University
JEL Classifications
  • I3 - Welfare, Well-Being, and Poverty
  • D6 - Welfare Economics