Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch

Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch

Measuring global poverty requires two types of spatial price adjustments: inter-country price adjustment based on the international purchasing power parities (PPPs) and intra-country price adjustment to account for cost-of-living variations in diff...

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Main Authors: Nakamura, Shohei, Yoshida, Nobuo
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2021
Subjects:
GLOBAL POVERTY
POVERTY MEASUREMENT
PURCHASING POWER PARITY
COST OF LIVING
INTERNATIONAL COMPARISON PROGRAM
Online Access:http://documents.worldbank.org/curated/en/730391622558489592/Linking-Intra-and-Inter-Country-Spatial-Price-Adjustments-in-Global-Poverty-Measurement-Urban-PPP-Bias-and-Reference-Price-Mismatch
http://hdl.handle.net/10986/35646
id okr-10986-35646
recordtype oai_dc
spelling okr-10986-356462021-06-03T05:10:50Z Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch Nakamura, Shohei Yoshida, Nobuo GLOBAL POVERTY POVERTY MEASUREMENT PURCHASING POWER PARITY COST OF LIVING INTERNATIONAL COMPARISON PROGRAM Measuring global poverty requires two types of spatial price adjustments: inter-country price adjustment based on the international purchasing power parities (PPPs) and intra-country price adjustment to account for cost-of-living variations in different parts of a country, especially between urban and rural areas. Current global poverty measurement lacks an adjustment mechanism for this within-country price variation for many countries, particularly in Sub-Saharan Africa. This paper highlights the need for matching reference prices with those the International Comparison Program (ICP) uses for PPP calculation to avoid poverty estimation bias, largely because many countries collected 2011 ICP price information only in urban areas. Data from four Sub-Saharan African countries are used to show that potential bias in estimated poverty rates due to such reference price mismatches ranges from 0.3 to 6.2 points in absolute terms. A larger bias is observed in countries where gaps between urban and rural prices are greater. The analysis also shows potentially large bias due to lack of intra-country price adjustments. These potential biases underscore the urgent need for conducting within-country price adjustments and matching purchasing power parity reference prices with country spatial price deflators. An important first step is to identify what reference prices the 2011PPPs used for each country, which currently is not clear. The World Bank, with ongoing relationships with National Statistics Offices, is well positioned to take up this task to improve the accuracy of the methodology for estimating poverty at the global, regional, and national levels. 2021-06-02T15:43:27Z 2021-06-02T15:43:27Z 2021-06 Working Paper http://documents.worldbank.org/curated/en/730391622558489592/Linking-Intra-and-Inter-Country-Spatial-Price-Adjustments-in-Global-Poverty-Measurement-Urban-PPP-Bias-and-Reference-Price-Mismatch http://hdl.handle.net/10986/35646 English Policy Research Working Paper;No. 9684 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic GLOBAL POVERTY
POVERTY MEASUREMENT
PURCHASING POWER PARITY
COST OF LIVING
INTERNATIONAL COMPARISON PROGRAM
spellingShingle GLOBAL POVERTY
POVERTY MEASUREMENT
PURCHASING POWER PARITY
COST OF LIVING
INTERNATIONAL COMPARISON PROGRAM
Nakamura, Shohei
Yoshida, Nobuo
Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch
relation Policy Research Working Paper;No. 9684
description Measuring global poverty requires two types of spatial price adjustments: inter-country price adjustment based on the international purchasing power parities (PPPs) and intra-country price adjustment to account for cost-of-living variations in different parts of a country, especially between urban and rural areas. Current global poverty measurement lacks an adjustment mechanism for this within-country price variation for many countries, particularly in Sub-Saharan Africa. This paper highlights the need for matching reference prices with those the International Comparison Program (ICP) uses for PPP calculation to avoid poverty estimation bias, largely because many countries collected 2011 ICP price information only in urban areas. Data from four Sub-Saharan African countries are used to show that potential bias in estimated poverty rates due to such reference price mismatches ranges from 0.3 to 6.2 points in absolute terms. A larger bias is observed in countries where gaps between urban and rural prices are greater. The analysis also shows potentially large bias due to lack of intra-country price adjustments. These potential biases underscore the urgent need for conducting within-country price adjustments and matching purchasing power parity reference prices with country spatial price deflators. An important first step is to identify what reference prices the 2011PPPs used for each country, which currently is not clear. The World Bank, with ongoing relationships with National Statistics Offices, is well positioned to take up this task to improve the accuracy of the methodology for estimating poverty at the global, regional, and national levels.
format Working Paper
author Nakamura, Shohei
Yoshida, Nobuo
author_facet Nakamura, Shohei
Yoshida, Nobuo
author_sort Nakamura, Shohei
title Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch
title_short Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch
title_full Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch
title_fullStr Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch
title_full_unstemmed Linking Intra- and Inter-Country Spatial Price Adjustments in Global Poverty Measurement : Urban PPP Bias and Reference Price Mismatch
title_sort linking intra- and inter-country spatial price adjustments in global poverty measurement : urban ppp bias and reference price mismatch
publisher World Bank, Washington, DC
publishDate 2021
url http://documents.worldbank.org/curated/en/730391622558489592/Linking-Intra-and-Inter-Country-Spatial-Price-Adjustments-in-Global-Poverty-Measurement-Urban-PPP-Bias-and-Reference-Price-Mismatch
http://hdl.handle.net/10986/35646
_version_ 1764483488409452544

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