4.5 percent if the 2010 distribution is used. However, if the 1999 distribution is used, the required growth rate would be only 3.4 percent. Therefore, implications of distributional changes are likely large.

In conclusion, both the linear projection and the distribution-neutral approach appear to suggest that if the developing world continues its pace of growth and poverty reduction in the past few decades, the poverty rate of the developing world can be reduced to 3 percent by 2027. However, some assumptions made for these projections are deemed too optimistic. In the next section, we will propose a new benchmark scenario after replacing these optimistic assumptions with more realistic ones.

# **IV. Projections of Poverty Rates under a Benchmark Scenario**

As discussed above, the distribution-neutral approach used by Ravallion (2013) makes the following assumptions, which are deemed too optimistic:

- Population growth rates are the same for all countries;

- Growth rates of household expenditure (or income) per capita are the same for all countries; and

- The distribution of household expenditure within a country will not change over time.

Instead, we replace these with more realistic ones and call them a “Benchmark Scenario”:

- The World Bank Data Group’s latest population growth projections for 2030, which differ across countries.

- Growth rates of household expenditure per capita are estimated for each country separately, based on estimated mean expenditures of 2002 and 2010 available in PovcalNet (as of October 2013); and

- The effect of changes in distribution of household expenditure per capita on poverty rates for each country are estimated and incorporated into the projection of poverty rates.

# _Population projections_

Following a convention of PovcalNet, we draw the latest version of the World Bank Data Group’s database for population estimates and projections (as of October 1, 2013), which is available in <u>http://data.worldbank.org/data-catalog/population-projection-tables. This database is updated twice a year</u> (April and July).

For around 70 percent of countries, this database draws projections calculated under a “medium fertility” scenario in the United Nations Population Division's World Population Prospects (WPP) 2012 Revision (http://esa.un.org/unpd/wpp/Documentation/publications.htm). For the remaining countries, which have good vital registration data or frequent updates of population data, the World Bank projects future population figures using its own population estimates of the base year (2010 when this paper was prepared) and information on future fertility (medium fertility), mortality, migration, and population composition from UN WPP 2012 Revision.

# _Growth rates of mean household expenditure per capita_

Annual growth rates of mean household expenditure (or income) per capita between 2002 and 2010 are estimated using data in PovcalNet (October 2013). PovcalNet is an interactive web-based database, with which poverty rates can be estimated with any level of poverty lines. The World Bank research department maintains the PovcalNet database and also estimates global and regional poverty rates using this database. In PovcalNet, users can estimate global and regional poverty rates for so called “lining-up” 10