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"One billion people in the world live on less than $1 a day." What is this widely cited statistic based on? Any credible accounting of how much poverty there is in the world must ultimately come from information supplied by families themselves, including of course poor families. They are the only ones who really know how they are living. Nearly 850 socio-economic sample surveys spanning 127 economies underlie the 1 billion number. About 1.2 million randomly sampled households were interviewed, mostly by staff of the governmental statistics offices of the economies they live in. Detailed questions were asked about their sources of income and what they spend it on, as well as other household characteristics such as the number of people sharing that income.

From these surveys, an assessment is made of how aggregate consumption or income is distributed across the population in each economy at the date of each survey. From these data one can calculate what proportion of people do not reach any given "poverty line". The "$1 a day" poverty line has historically been based on the poverty lines commonly found in low-income economies. This line was later updated to $1.25 a day in 2005 prices, which was the mean of the national poverty lines in the poorest 15 economies. The latest international poverty line is $1.90 a day in 2011 prices.In 2017 we estimate that about 696 million people lived below this line (down from 1.9 billion in 1981). The higher poverty lines of $3.20 and $5.50 per day (in 2011 prices) are more typical of national poverty lines found in lower- and upper-middle income economies, respectively.

To convert national poverty lines into a common currency, and then convert the international poverty line back into local currency units, we use exchange rates that reflect the differences in the prices of goods and services (both traded and non-traded) across economies. Market exchange rates are not valid for this purpose given that they only reflect purchasing power over internationally traded goods, while other goods, not traded internationally, figure prominently in the consumption bundles found in developing economies and tend to be cheaper there than in rich economies. So market exchange rates over-state the extent of poverty in the world. To address this well-known problem we use "Purchasing Power Parity" exchange rates for consumption constructed by the World Bank's Development Data Group from the price surveys done by the International Comparison Program. The latest version of PovcalNet uses the PPPs from the revised 2011 ICP (as published in May 2020), based on price surveys for about 199 economies. Since the surveys do not all line up conveniently in time, one also needs a method of interpolating to non-survey years. National accounts data can help here. And one needs census-based estimates of the population of each economy at each date.

By combining all this information, a team in the World Bank's research department calculates the total number of people living below various international poverty lines, as well as other poverty and inequality measures, some of which are published annually in the World Bank's World Development Indicators. The project began in 1989, and the first estimates were published in the 1990 World Development Report: Poverty. The database is updated regularly and a major reassessment of progress against poverty is made about every two years.

PovcalNet was developed by staff of the World Bank's Development Research Group to allow users to replicate the calculations made by the World Bank's researchers. PovcalNet also allows you to calculate the numbers under different assumptions. For example, instead of $1.90 a day, you can try $2.50, or $3.00. Or you can try different PPP rates. You can also assemble the estimates using alternative economy groupings or a selected set of individual economies. PovcalNet is an interactive computational tool; it has reliable built-in software that immediately does the relevant calculations for you from the built-in database.

The background paper, "The developing world is poorer than we thought, but no less successful in the fight against poverty" gives you details on the data sources and methods used in deriving the World Bank's estimates. The paper "Dollar a Day Revisited" gives details on the international poverty lines based on the 2005 ICP. The paper "A global count of the extreme poor in 2012" explains how the global poverty measurement was updated to the 2011 PPPs. As a first step, you might try using this web site to replicate the numbers in that paper.

I hope you find this a useful tool.

Martin Ravallion
Edmond D. Villani Professor of Economics
Georgetown University
(Formerly Director of Development Research Group, World Bank)