years such as 1981, 1984, 1987, 1990, 1993, 1996, 1999, 2002, 2005, 2008, and 2010.<sup>9</sup> When a country does not have a household survey for these years, poverty rates and mean expenditures are interpolated if the year is between two household survey years, and extrapolated using household survey data in the closest year and data from national accounts.

Growth rates of mean household expenditure per capita in PovcalNet are not as popular a statistic as those of GDP per capita or other national accounts, but we prefer these because they are fully consistent with past global and regional poverty estimates. Ravallion (2013) shows that the relationship between growth rates of GDP per capita or other national accounts and those of mean household expenditure per capita in Povcalnet differ largely across countries and over time. Therefore, it is difficult to project future poverty rates from national accounts.

We estimate the growth rates from mean household expenditures per capita of the lining up years of 2002 and 2010, although we could estimate the growth rates of mean household expenditure of survey years. The latter is more direct in that mean household expenditures per capita are estimated directly from household survey data with no influence from other data sources. On the other hand, mean household expenditures per capita in the lining up years are influenced by national accounts if they are either interpolated or extrapolated. However, the benefits of using the mean expenditures in the lining up years are (i) the duration used to estimate the growth rates is exactly the same for all countries and (ii) the global and regional poverty rates are estimated from the same database.

# _Incorporating the effect of changing inequality over time_

As mentioned before, the distribution of household expenditure per capita is changing over time for many countries. In the following analysis, we propose what may be termed “inequality-adjusted growth rate” to capture the impact of change in inequality on poverty. Although we will still have to rely on the distribution-neutral growth assumption using the 2010 income distribution in PovcalNet, we do so, for all available countries, by translating changes in inequality between 2002 and 2010 into the projected growth rate such that countries that have reduced inequality during this period would have a higher projected growth rate than the actual growth rate (so that projected poverty rate in 2030 will be lower) and vice versa. An underlying assumption is that the trend in inequality between 2002 and 2010 would continue between 2010 and 2030.

The inequality adjustment is carried out in the following manner. In PovcalNet, for each country, we choose the 2010 distribution, and keep shifting the mean of the distribution until we obtain the 2002 poverty rate.<sup>10</sup> The ratio of the original mean to the resulting mean will give us the total growth rate required to reduce the poverty rate measured at US$1.25 per day between 2002 and 2010 if the distribution is constant at the 2010 level. Finally, we annualize the required growth rate.

Figure 4 illustrates this process. The upper panel shows the 2002 and the 2010 distributions of household expenditure per capita. In this example, it appears that the 2010 distribution is more unequal than the 2002 distribution. The raw growth rate of mean household expenditure per capita is calculated by comparing mean expenditures. In the lower panel, the 2010 distribution is moved leftward until the poverty rate becomes identical to the 2002 poverty rate, while keeping the shape of distribution the same, except for the mean. In this illustration, the resulting distribution needs to have a higher mean (indicated

> 9 For the lining-up years, Povcalnet produces global and regional poverty estimates for certain years. If some countries do not have household surveys for the years, it estimates poverty of these countries by interpolating or if necessary extrapolating poverty rates of nearby years. This exercise of producing poverty rates for the given years is called “lining-up” and the years “lining-up years”. More details are available in the annex.

> 10 Practically speaking, the user of PovcalNet must keep reducing poverty line (as opposed to increasing the mean) from the default value of US$38 (the monthly value of US$1.25 per day poverty line) until we obtain the 2002 poverty rate, because poverty line is the only variable in PovcalNet.

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