"1.1 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. Over 400 socio-economic sample surveys spanning 100 countries underlie the 1.1 billion number. About 1.1 million randomly sampled households were interviewed, mostly by staff of the governmental statistics offices of the countries 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 country at the data of each survey. From this distribution one can calculate what proportion of people do not reach any given "Poverty line." The "$1 a day" poverty line (it is actually $1.08 at 1993 international prices) is based on the poverty lines commonly found in low-income countries. The "$2 a day" line that is sometimes used instead is a poverty line more typical of middle-income countries. To convert these international poverty lines into local currencies one needs to use exchange rates that reflect the differences in the prices of goods and services across countries. This is done using "Purchasing Power Parity" exchange rates for consumption constructed by the World Bank's Data Group. 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 country at each date.

By combining all this information, a team in the World Bank's research group 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 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 three years. A summary of the results from the latest such assessment can be found in the 2004 issue of World Development Indicators.

PovcalNet was developed by staff of the Bank's research group to allow users to replicate the calculations made by the Bank's researchers. PovcalNet also allows you to try calculating the numbers under different assumptions. For example, instead of $1 a day, you can try $1.50, or $3. Or you can try different PPP rates. You can also assemble the estimates using alternative country groupings or a selected set of individual countries. 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. We plan to update the database annually.

The attached paper, " How did the world's poorest fare since the early 1980s",written by Shaohua Chen and myself, gives you details on the data sources and methods used in deriving the Bank's estimates. The other paper, "Absolute Poverty Measures for the Developing World, 1981-2004", gives our latest update of the estimates. As a first step, you might try using this web site to replicate the numbers in Tables 1 and 2 of that paper.

I hope you find this a useful tool.

Martin Ravallion
Senior Research Manager
Development Research Group
World Bank