<mark>extreme poverty. As part of this effort, the World Bank established “The Commission on Global Poverty,” chaired by Sir Anthony Atkinson, to come up with different recommendations on how to improve on the measurement and monitoring of global extreme poverty. This report highlighted current shortcomings in the global poverty measurement infrastructure in detail and offered several suggestions on how to improve the monitoring of global extreme poverty.</mark>

**Table 1. International poverty rate using $1.90 poverty line (in USD 2011 PPP)** **<u>and number of extreme poor by region, 2013</u>**

|**Region**|**International**<br>**poverty rate**<br>**(%)**|**Number**<br>**extreme poor**<br>**(millions)**|
|---|---|---|
|East Asia and Pacific|3.54|71.02|
|Europe and Central Asia|2.15|10.30|
|Latin America and the Caribbean|5.40|33.59|
|Middle East and North Africa|n.a.|n.a.|
|South Asia|15.09|256.24|
|Sub-Saharan Africa|40.99|388.72|
|World Average|12.55|766.01|

Source: Estimates obtained from PovcalNet on September 15, 2017.

<mark>An important recommendation provided by the Commission Report is to calculate and include the ‘total error’ of the poverty estimates for each country.</mark><sup>4</sup> <mark>Specifically, Recommendation 5 suggests that poverty estimates should be based on a total error approach, evaluating the possible sources, and magnitude, of error, particularly non-sampling error and the error introduced by the process of determining the international poverty line. There are many factors that can affect the total error of international poverty rate estimates, such as incomplete coverage of the country’s population, errors in measuring consumption data, errors in calculating the poverty line, using the CPI to deflate prices that may not be consistent with the consumption pattern of the poor, and geographic differences in prices. Because total error may be significant, the report recommended that the Bank provide a margin of error to help policy makers understand how accurate the reported extreme poverty numbers are. Although it would be difficult to implement, the World Bank’s response concurred that reporting total error with the poverty estimates is one of the most important recommendations to implement.</mark> South Asia is a useful laboratory to study how methodological differences in poverty measurement can contribute to total error. This is mainly because South Asia is home to about one-third of the international extreme poor, but consists of only eight countries, making the analysis both significant from a global perspective and tractable. In South Asia, all eight countries compare consumption per capita against the poverty line to identify the international extreme poverty status of an individual.<sup>5</sup> This paper provides new evidence from South Asia on how differences in the construction of the welfare measure in each country contributes to total error in international poverty measurement. To study this in detail, we look at how countries in the region construct the consumption aggregate to assess poverty. A key source of ‘total error’ is the collection and aggregation of household-level

> 4 World Bank (2016) and World Bank (2017).

> 5 This contrasts with what most countries do in Latin America and the Caribbean and Eastern and Central Asia that use per income-based measures to monitor poverty rather than consumption-based ones.

3