A Measured Approach to Ending Poverty and Boosting Shared Prosperity Concepts, Data, and the Twin Goals

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1 World Bank Seminar December 8, 2014 Tokyo Dean Jolliffe, Peter Lanjouw; Shaohua Chen, Aart Kraay, Christian Meyer, Mario Negre, Espen Prydz, Renos Vakis, and Kyla Wethli A Measured Approach to Ending Poverty and Boosting Shared Prosperity Concepts, Data, and the Twin Goals Comments by Yasuyuki Sawada University of Tokyo

2 Outline Summary Poverty goal Shared prosperity Twinning the goals Comments on policies Structural Transformation Redistribution 2

3 6 key takeaways from the report Assessing and decoding the goals Reaching the poverty goal is ambitious: Business as usual and growth alone will not get us there by 2030 Shared prosperity has some appeal as an articulation of inclusive growth as a development goal, with historical antecedents in the literature Synergies to twinning the goals-progress in boosting shared prosperity is critical to eliminate extreme poverty Data challenges Research important both for policy & for improving data collection methods Progress is made at the country level Policies need to be informed by highquality household surveys More frequent data is not the right call to action PRR calls for greater emphasis on data quality and data systems. 3

4 Measuring Poverty f(c) = density function of income or consumption C: 貧困比率 P(0): Head count ratio Z= 貧困線 (1 人 1 日 1.25 ドル ) P(0) f(c) Z C 4

5 % 80 Measuring Poverty Z=1.25 USD per day 年 East Asia and Pacific South Asia Subsahara Africa Latin America and Caribbian Data) Regional aggregation using 2005 PPP and $1.25/day poverty line, Data last updated: April 18, 2013, Povcal Net, World Bank. 5

6 Japan 6

7 7

8 The World Bank Twin Goals Ending extreme poverty by 2030 (< 3% of global pop. below $1.25 a day) Boosting shared prosperity (Growth of incomes of bottom 40% of population in every country) 8

9 The World Bank Twin Goals Ending extreme poverty by 2030 (< 3% of global pop. below $1.25 a day) Boosting shared prosperity (Growth of incomes of bottom 40% of population in every country) 9

10 Twinning Goals Synergies Ending extreme poverty by 2030 (< 3% of global pop. below $1.25 a day) Boosting shared prosperity (Growth of incomes of bottom 40% of population in every country) 10

11 Comments Great study, integrating theoretical framework of poverty and inequalities with highest quality data 1. Very solid measured approach but the lack of economic structure to understand pro-poor/shared growth policies 2. Policy instruments and political feasibilities for redistribution policies unclear 3. Other dimensions such as risks, i.e., chronic and transient poverties (related to Chap 4; see Ravallion s work on poverty dynamics) as well as poverty transition matrix (e.g., Palanpur village of Peter Lanjouw) 4. Other measures such as subjective well-being measures (happiness and depression, e.g., K6 and CES-D), experimental data (individual and social preferences), biological data (e.g., cortisol to capture stress level). 11

12 1. The lack of economic structure for growth Per capita income, poverty ratios, and bottom 40% income are all from the same distribution function f (C). It s important to capture f(c) accurately But probably it s more important to understand how f(c) is generated. 12

13 PRR Shared Prosperity DECRG Departmental Review Meeting 13

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15 Hayashi and Prescott (2008) JPE The lack of internal migration in Japan impeded rapid growth (See Figure 3 and 5 of the paper) 15

16 Esteban-Pretel and Sawada (2014) JEDC Internal labor mobility and high non-agriculture TFP growth were the sources of rapid economic growth 16

17 2. Political feasibility of redistribution? Atkinson, Piketty, and Saez (2011) Top Incomes in the Long Run of History, JEL Figure 11 tells that top 1% income shares in China, Indonesia, Argentina, India, and Singapore decline until 1980 and after 1980, the shares increased simultaneously. 17

18 2. Political feasibility of redistribution? Besley and Burgess (2003) JEP: To cut P(0) in SSA by 64%, crosssectional std(y) should be reduced from 0.86 to 0.64 The case of Japan after WWII by externally-imposed land reform Income Distribution in Japan before and after WWII Study Year Gini Std(y) Minami (2000) Otsuki and Takamatsu (1978) Ono and Watanabe (1976) Mizoguchi (1974) Wada (1975) Terasaki and Mizoguchi (1995)