Abstract
The goals of ending extreme poverty by 2030 and working towards a more equal distribution of incomes are part of the United Nations’ Sustainable Development Goals. Using data from 166 countries comprising 97.5% of the world’s population, we simulate scenarios for global poverty from 2019 to 2030 under various assumptions about growth and inequality. We use different assumptions about growth incidence curves to model changes in inequality, and rely on a machine-learning algorithm called model-based recursive partitioning to model how growth in GDP is passed through to growth as observed in household surveys. When holding within-country inequality unchanged and letting GDP per capita grow according to World Bank forecasts and historically observed growth rates, our simulations suggest that the number of extreme poor (living on less than $1.90/day) will remain above 600 million in 2030, resulting in a global extreme poverty rate of 7.4%. If the Gini index in each country decreases by 1% per year, the global poverty rate could reduce to around 6.3% in 2030, equivalent to 89 million fewer people living in extreme poverty. Reducing each country’s Gini index by 1% per year has a larger impact on global poverty than increasing each country’s annual growth 1 percentage point above forecasts. We also study the impact of COVID-19 on poverty and find that the pandemic may have driven around 60 million people into extreme poverty in 2020. If the pandemic increased the Gini index by 2% in all countries, then more than 90 million may have been driven into extreme poverty in 2020.
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Acknowledgements
The authors wish to thank R. Andrés Castañeda, Shaohua Chen, Francisco Ferreira, La-Bhus Fah Jirasavetakul, Dean Joliffe, Aart Kraay, Peter Lanjouw, Christian Meyer, Prem Sangraula, Umar Serajuddin, and Renos Vakis, as well as two anonymous referees and the editor for helpful comments and suggestions. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. We gratefully acknowledge financial support from the UK government through the Data and Evidence for Tackling Extreme Poverty (DEEP) Research Programme, as well as the EFO No. 1340 (Measuring Poverty in a Changing World), and the Strategic Research Program (TF018888) for earlier versions of this paper.
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Lakner, C., Mahler, D.G., Negre, M. et al. How much does reducing inequality matter for global poverty?. J Econ Inequal 20, 559–585 (2022). https://doi.org/10.1007/s10888-021-09510-w
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DOI: https://doi.org/10.1007/s10888-021-09510-w