ERADICATING POVERTY IN FRAGILE STATES: PROSPECTS OF REACHING THE “HIGH-HANGING” FRUIT BY 2030 Our analysis of the prospects for fragile states also has important implications for the goal with respect to the global poverty goal. As a result of the lagging of poverty reduction in FCS, the rest of the world would need to reach a 0.2% poverty rate (20.7 million people) to bring the global poverty rate below 3% by 2030. However, even with a 20% poverty rate in fragile states, it would not be possible to bring the poverty rate of the developing world to 3% by 2030.

As this paper went to press, the International Comparison Project released newly revised Purchasing Power Parity values, rebased to 2011. Our early analysis of these new numbers suggest the need for adjustments to our base year values of poverty in fragile states that will collectively reduce the estimate of $1.25 poverty rate downward in 2010 from 44% to 34%. Similarly preliminary re-analysis of our scenarios with the new values suggests the likelihood of ultimate downward revisions of our 2030 forecasts of fragile state poverty rates by 5-6% across all scenarios. Although such adjustments are quite significant, they still leave even our most optimistic forecasts well above the 3% threshold for poverty eradication.

# 6.2 AREAS OF ADDITIONAL RESEARCH

Our analysis has focused on improvement potential with respect to poverty reduction in fragile states. It has not given attention to the downside risks. Those are many, of course, including the possibility that other states could fall into the fragile set for reasons such as deterioration in leadership quality and conflict that spills across borders. Nor does our analysis include any attention to change in climate and effects that would have. Fragile states are particularly vulnerable to disasters (Keefer et al., 2011) and many of the countries that will be most affected by climate change are currently fragile (Shepherd et al., 2013). The effects of climate change add an additional obstacle to poverty reduction in fragile states, and, like inequality, the global discourse increasingly includes climate change as an issue to be addressed in the post-2015 agenda. Our work would be enhanced by an analysis on the degree to which countries, especially fragile states, may be affected in coming years by climate change and the resultant effects on poverty reduction.

Chronic poverty, as opposed to more episodic incidence, is another issue that has increasing salience in poverty reduction research and its incorporation into our analysis would be beneficial. However, the concept of chronic poverty is not easily modeled; it is not yet conceptually well-defined, and it is often based on household-level data rather than country-level data.

# 6.3 SUMMARY OF POVERTY REDUCTION POSSIBILITIES IN FRAGILE STATES

<mark>Based on current trends and past performance (the Base Case) the poverty rate for fragile states is expected to fall from 43% in 2010 to 32% in 2030. However, due to population growth in these countries, the absolute number of people living under $1.25 a day is expected to rise from 200 million in 2010 to 231 million in 2030. Because this is concurrent with overall progress in poverty reduction in other developing countries, the percentage of the developing world’s poor in FCS is projected to increase from 16% in 2010 to 37% in 2030. Under an ambitious scenario with improved institutions and peace in fragile states, the poverty rate in FCS decreases by two percentage points from 2010 to 2030, which brings the number of poor down by nearly 12 million in 2030 versus the Base Case. However, we note that political reforms and peace are necessary but insufficient on their own to eradicate poverty. When effective poverty reduction policies are added to these peace and good governance effects (under the IISE scenario), the poverty rate is reduced to 24% in 2030, and the poverty headcount falls to 168 million by 2030. We believe this scenario to be at least potentially achievable.</mark> <mark>In the most optimistic of our scenarios, we explore what would happen if fragile countries experienced very high rates of growth with shared prosperity. We developed this scenario to consider what might be something closer to a true limit on poverty reduction potential. The result for fragile states in this highly optimistic scenario, framed by macro level assumptions rather than policy level assumptions, is a poverty rate of 20.1% and a poverty headcount of 143 million in 2030.</mark> 22