The key objective of this paper is to systematically explore the robustness of the shared prosperity indicator to different methodological choices in the estimation process such as: grouped versus microdata, nominal welfare aggregate versus adjustments for spatial price variation, and different treatment of income with negative and zero values. The analysis is conducted using household survey data used for estimating extreme poverty and shared prosperity indices. For most tests, we randomly selected at least two countries from each of the six regions to reflect global representation. In addition to robustness tests, we briefly present the most recent results and findings from the Global Database of Shared Prosperity (GDSP) circa 2007‐2012 to provide context and familiarize the readers with the most recent trends in shared prosperity in the world.

The paper continues as follows. Section 2 provides a brief overview of the GDSP. In section 3, we focus on special technical issues in the construction of the shared prosperity index that may affect the obtained results and empirically test them. Section 4 concludes.

# **2. AN OVERVIEW OF THE GLOBAL DATABASE OF SHARED PROSPERITY**

This section provides a brief overview of data and trends in the Global Database of Shared Prosperity (GDSP). This is merely a complement to recent publications on shared prosperity such as Cruz et al. (2015), the World Bank Global Monitoring Report (2015b), and the World Bank Policy Research Report (2015a), which provide a more exhaustive analysis and results on shared prosperity. The GDSP is a collection of the shared prosperity index across the world, where the index is defined as the average annualized growth rate of consumption or income among the bottom 40 percent of the population. The latest version of the GDSP, published in October 2015,<sup>2</sup> has the shared prosperity index for 94 countries, up from 72 in the version published in September 2014.<sup>3</sup> In the latest GDSP, the shared prosperity index is calculated using household surveys circa 2007–2012. The average years for the first and the second surveys are 2006.6 and 2011.7, respectively.<sup>4</sup> With the paucity of household survey data as recently documented in Serajuddin, et al. (2015), it is remarkable that as many as 94 countries satisfied the substantial data requirements to calculate the shared prosperity index. Of the 134 countries included in PovcalNet,<sup>5</sup> however, only 71 countries (53 percent) are also included in the latest version of the GDSP. Using the World Bank’s regional classification, three regions are relatively underrepresented in the GDSP. For East Asia and the Pacific, the GDSP has 7 out of 18 countries (39 percent); for the Middle East and North Africa, 4 out of 11 countries (36 percent); and for Sub‐Saharan Africa, 15 out of 43 countries (35 percent). In the other four regions, the GDSP contains 45 out of 72 or about 70 percent of the countries in PovcalNet. IDA countries and countries designated as fragile and conflict affected states are also under‐represented. The GDSP includes about 35 percent of IDA countries and 65 percent of all other countries in PovcalNet. Of the 24 fragile and conflict affected states in PovcalNet, only five of them are in the GDSP.

Notwithstanding, the GDSP appears to be a fairly good representation of the developing world in terms of poverty incidence. The 71 countries that are present in both the GDSP and PovcalNet in total account for approximately 800 million of the poor population and 5.1 billion of the total population,<sup>6</sup> both of which

> 2 Available at: <u>http://www.worldbank.org/en/topic/poverty/brief/global‐database‐of‐shared‐prosperity</u> 3 Most of the increase is due to the addition of high income countries in Europe and Central Asia as well as North America.

> 4 For a more detailed description on how the Shared Prosperity indicator is calculated, please refer to Box 1 in the annex.

> 5 PovcalNet is the primary source of the World Bank’s international poverty estimates, available at: <u>http://iresearch.worldbank.org/PovcalNet/</u>

> 6 Based on figures in the World Development Indicators as of the year of the second survey for each country.

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