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Poverty: An Introduction to the
Problem
by
James E. Foster
Professor of Economics
Vanderbilt University
August 20, 2007
Owen School - Base of the Pyramid
Motivation
Poverty and deprivation
• Central challenge to:
– Economic system
– Belief systems
• Key - Synergies
– Across dimensions of life
– Across people
• Strategies
– Multifaceted
– Collaborative
– Innovative
Outline
• Definitions
– What is poverty?
– How is it evaluated?
• World
• In the US
• What do the numbers say?
– World poverty
– US poverty
• Implications
– Health and other dimensions
• Strategies
– Progresa, Grameen, Headstart
What is Poverty?
Conceptual definition
Absense of basic freedoms, rights, capabilities and
access to resources
- Amartya Sen “Development as Freedom”
Inherently multidimensional and self-perpetuating
Current research: How to implement?
Mexico
Practical definition
Inadequate access to resources
Identification Step
World Bank $1 a day
US $13.25 a day
Evaluation Step
Headcount, Poverty rate, Poverty gap, FGT
World Poverty
Poverty line:
$1 per day
Number poor in the world:
1,093.0 million
Poverty rate in the world:
21.1%
Average income of poor:
$0.77 per day
Poverty gap:
6 cents
Source: Chen and Ravallion (2004)
World Poverty
Higher poverty line:
$2 per day
Number poor in the world:
2,736.0 million
Poverty rate in the world:
53%
Average income of poor:
$1.25 per day
Poverty gap:
21 cents
Source: Chen and Ravallion (2004)
International Poverty over space
and time
Where are the world’s poor?
Answer is rapidly changing
1980 East Asia, South Asia, Africa
2001 South Asia, Africa, East Asia
Note Rapid economic growth in East Asia
Source: Chen and Ravallion (2004)
International Poverty
Numbers of poor
Note: Key role played by China and India
Source: Chen and Ravallion (2004)
International Poverty
Numbers of the poor (below $1 per day)
1981 1990 2001
East Asia 796 472 271
China 634 375 212
E.Europe/C. Asia 3 2 18
L. America/Carrib. 36 49 50
M.East/N. Africa 9 6 7
S. Asia 475 462 431
India 382 357 359
Sub-Saharan Africa 164 227 316
Source: Chen and Ravallion (2004)
International Poverty
What percentage of the population is poor?
Poverty rates = number of poor/total population
Note: China and India
International Poverty
Poverty Rates
1981 1990 2001
East Asia 58 30 15
China 64 33 17
E.Europe/C. Asia 1 1 4
L. America/Carrib. 10 11 10
M.East/N. Africa 5 2 2
S. Asia 52 41 31
India 55 42 35
Sub-Saharan Africa 42 45 47
Source: Chen and Ravallion (2004)
International Poverty
How poor are the poor?
Average income of the poor
Look at Sub-Saharan Africa and Latin America
International Poverty
Average income of poor
2001
East Asia 0.83
China 0.82
E.Europe/C. Asia 0.85
L. America/Carrib. 0.70
M.East/N. Africa 0.87
S. Asia 0.87
India 0.86
Sub-Saharan Africa 0.83
Source: Chen and Ravallion (2004)
Future of World Poverty
Numbers of the poor (below $1 per day)
2001 2015
East Asia 271 117
E.Europe/C. Asia 18 19
L. America/Carrib. 50 62
M.East/N. Africa 7 8
S. Asia 431 309
Sub-Saharan Africa 316 398
Totals 1093 913
Source: Chen and Ravallion (2004)
Implications
• Malnutrition
• Mortality
• Illiteracy and limited edu. achievements
• Limited access to credit and other markets
• Limited access to healthcare
• Child Labor
• Preventable diseases
• Low work capacity
• Powerlessness
• Exclusion
• Highly correlated (not perfectly)
US Poverty
Poverty threshold for a family of four:
$19,307
•About $13.25 per person per day
Number poor in US:
37.0 million
Poverty rate in US:
12.7%
Source: Census Bureau
US Poverty - over time
US Poverty - over space
Where are the nation’s poor?
Answer is changing slowly
1980 South, Midwest, Northeast, West
2004 South, West, Midwest, Northeast
Source: Census Bureau
Numbers of poor by region (thousands)
40000
35000
30000
25000
West
Number
Northeast
20000
Midwest
15000 South
10000
5000
0
1979 1984 1989 1994 1999 2004
Year
US Poverty depth
How poor are the poor?
Income deficit of families in poverty:
$2300 per person
about $6 per day
Source: Census Bureau
US Poverty in states
Poverty rates across the states
Highest: Mississippi 18.6%
High: Tennessee 15.9%
US 12.7%
Lowest: New Hampshire 5.4%
Source: Census Bureau
Poverty by Demographics
Group Number Rate
(Millions)
Black 9.0 25%
White 25.3 11%
Hispanic 9.1 22%
Asian 1.2 10%
Under 18 13.0 18%
18 to 64 20.5 11%
Over 65 3.4 10%
Implications
Percent of children without health insurance
2004
Percent uncovered
All children 11%
Poor children 19%
Source: US Census Bureau
Strategies that Work
Grameen Bank (Bangladesh)
Progresa/Oportunidades (Mexico)
Head Start (USA)
Characteristics:
Comprehensive
Targeted
Use Feedback to Improve
Empowering: Help Poor help themselves
Collaborative
Investment programs
