the fact that those just above the poverty line are vulnerable to downside shocks, including falling into extreme poverty. This would require a higher line. How much higher is unclear.<sup>32</sup> Table 4 gives the average lines by region for 1990 and 2008.<sup>33</sup> Over this period, the average line rose from a little over $2 to almost $3 a day. Across regions, the average lines in 2008 vary from $1.28 a day in South Asia to $6.71 a day in Eastern Europe and Central Asia.

What do the data suggest on the evolution of poverty, by this combined measure?<sup>34</sup> Figure 11 gives the poverty rates (headcount indices), as well as the absolute poverty rates (from Figure 3). We find that 47%—slightly less than one half—of the developing world’s population are either absolutely poor or relatively poor. To put this in perspective, the corresponding number for high-income countries (calculated on a consistent basis) is 24% in 2008 (Ravallion and Chen, 2012b). (As best we can determine, almost nobody lives below $1.25 a day in the high-income countries.<sup>35</sup> ) The total poverty rate fell from 63% in 1981 to 46% in 2010.

Figure 12 gives the corresponding poverty gap indices. The combined PG index fell from 26% in 1981 to 16% in 2010. Notice that the proportionate decline is greater using the PG index than the headcount index. This reflects the fact that the income-gap ratio for total (absolute plus relative) poverty also fell, from 0.41 in 1981 to 0.35 in 2010.

The decline in the incidence of total poverty was not sufficient to assure falling numbers of poor over the period as a whole. The number of people who are “purely relatively poor” (poor by this new measure but not absolutely poor) has been rising, as can be seen from Figure 13. Roughly two-thirds of the increase in the number of people who whose poverty is purely relative is due to the fall in the number of absolutely poor (Chen and Ravallion, 2012).

Extrapolating the rate of progress forward under the optimistic scenario, the combined poverty rate is 45% in 2012, and will be 43% in 2017 and 40% in 2022. The number of poor

> 32 López-Calva and Ortiz-Juarez (2011) offer a way of setting a dividing line between vulnerability and “economic security” using panel data to quantify the probability of falling into poverty at various income levels. Also see the discussion of this approach and alternatives in Ferreira et al. (2012). The issue remains open as to what probability is deemed acceptable and for what poverty line.

> 33 Note that these average lines do not play any role in the calculations of the poverty measures, which are built up from the country-level estimates. The averages given in Table 3 are for purely expository purposes. Note also that the poverty rate in this table can be below 50% even though the mean poverty line is above the median; see, for example, the total for 2008. This stems from the nonlinearities and heterogeneity in the underlying cumulative distribution functions.  The implicit global relative line (that yields the global poverty rate) is $2.18, closer to the median.

> 34 For the remainder of the paper, the discussion of “relative poverty” refers to the weakly relative measures. 35 Note, however, that some of the homeless in rich countries may well be this poor, but that they are underrepresented in standard household surveys.

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