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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).

Poverty with no Poverty Line

Oliver Sterck
,
University of Antwerp and University of Oxford

Abstract

This paper proposes a new measure of poverty that is consistent with the intuition that someone with half the income of another person is twice as poor. Mathematically, poverty is defined as the reciprocal of income. Aggregated across a population, this yields a simple and intuitive measure: the average number of days needed to attain a fixed reference income level. Unlike traditional poverty measures, this new index is inclusive, capturing poverty as a continuous spectrum rather than a binary status defined by a poverty line. It is

Global Income Poverty Measurement with Preference Heterogeneity: Theory and Application

Benoit Decerf
,
World Bank
Mery Ferrando
,
Tilburg University
Natalie Quinn
,
University of Oxford

Abstract

There is growing support for monitoring global poverty using a measure that accounts for both own and relative income. We show how – in the context of heterogeneous preferences over these factors – the well-known conflict between fairness and welfare-consistency can be resolved, establishing the first preference-based foundation for both the established societal global poverty line and recently proposed hierarchical poverty indices. We reformulate one hierarchical index as a modified headcount ratio. Unlike all classic poverty indices, this index is necessarily reduced when an individual escapes poverty. Our application highlights that our proposed index substantially changes the assessment of global poverty reduction.

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