# **2.2.Methodology**

The major technical challenge in generating global poverty profiles is combining surveys from different countries and years. Since the availability and frequency of household surveys differ significantly from one country to the next, it is not feasible to produce a global profile that maintains adequate geographical coverage of the poor using data from one particular year. This raises the challenge of how to reliably describe the characteristics of the poor based on national surveys collected in different years.

PovcalNet, the primary source of international poverty estimates maintained by the Research Department of the World Bank, reports global and regional poverty rates for particular reference years. For the reference year 2013, for example, PovcalNet uses approximately 50 surveys conducted that year. For the rest of the countries, the available survey data are “lined up” to 2013 using a complex procedure. First, the welfare measure in each country is multiplied by a constant scale factor to account for changes in welfare between the survey year and 2013. In most countries, the scale factor is the real growth between the survey year and 2013 in per capita household final consumption expenditure (HFCE), which come from the World Development Indicators Database. For the others, mostly in Sub-Saharan Africa, HFCE is either not available or has not been used, so real growth in GDP per capita in local currency units is used instead. Second, after this scale factor is applied to the welfare aggregate, extreme poverty in 2013 is calculated as the share of the sample population whose welfare falls below $1.90 per day in PPP terms.

Two assumptions underpin this line-up method. The first is that the relative distribution of welfare across households remains constant over time; and the second is that HFCE or GDP growth provides a reasonable approximation to the growth in survey consumption means. World Bank researchers have attempted to validate these assumptions in both Africa and India.<sup>17</sup> In India, the relative distribution of welfare across households changes little across years. However, in both India and Africa, GDP growth significantly exceeded the growth in household consumption collected in surveys, meaning that the line-up procedure overstates poverty reduction.<sup>18</sup> The inconsistency between macro and survey-based measures of consumption growth further justifies setting a minimum year threshold of 2009 for surveys to be included in the analysis.

Using the lined up estimates to generate a poverty profile, instead of an estimated poverty rate, has two additional drawbacks. First, the procedure assumes that it is those households closest to the poverty line that either escape or fall into poverty when economic growth or decline occurs. In reality, households enter and exit poverty from a variety of points in the welfare distribution. Second, the line-up procedure does not account for changes in individual or household characteristics, such as increased urbanization or educational attainment that occurred between the survey year and the reference year. This means that the key variables that describe the poor, such as location, sector of work, and education, are not lined up to a common year.

> 17 See Joliffe et al, 2014, p. 250-254, and Beegle et al, p. 43.

> 18 In addition, HFCE is typically calculated as a residual, meaning that its quality can vary greatly across countries and subsequent revisions can be substantial (Jerven, 2013).

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