2 ms·

The actual paper is a little clearer than the blog: http://papers.nber.org/tmp/80245-w20791.pdf http://papers.nber.org/tmp/80245-w20791.pdf Basically, it says

The actual paper is a little clearer than the blog: http://papers.nber.org/tmp/80245-w20791.pdf http://papers.nber.org/tmp/80245-w20791.pdf Basically, it says that although the income of the poorest has risen, their consumption has risen at a much lower rate (and significantly lower than the median) -- see figure 2 on pg 28. Table 1.. says consumption (by those under 1.25/day) has increased from 0.73 to 0.88 over the past 30 years. So a 20% increase. The main point seems to be that the poorest have increased their consumption at a lower rate than the median.. so therefore they're being 'left behind'. But it seems to me that consumption would just be a lagging indicator of income...

jordanb 12y ago
Why would it be a lagging indicator? These are people who can't get enough calories in a day. If they get an increase in income they're not going to start saving up for a new car, they're going to spend it on more food. I think a more plausible explanation is simple inflation: Suppose you're a slum dweller earning money collecting scrap. And suppose the country around you sees an improvement in its economy. The value and/or quantity of the scrap you can collect goes up, but so does the price of the food you need.
- rgbrenner 12y ago
  You're right about it not being a lagging indicator. I fell asleep after writing that, and realized something when I woke up... the paper takes those living below $1.25/day and then estimates the consumption floor at 1/2 of that: Both methods of quantifying the floor suggest a consumption floor today that is about half of the international poverty line of $1.25 a day. This is probably close to the consumption of essential foods for those living around $1.25 a day. Then says, even though progress has been made in reducing the number of people living below that level, it has not increased the consumption floor -- which is from the table I mentioned before. But why would you expect to see an increase in consumption if their income is still below $1.25/day? It capped the income, and then somehow expected increased consumption? If I had to guess, the increase in the consumption floor is simply from those increasing their income but still below the $1.25/day (moving from say, $0.80/day to $1/day). The paper acknowledges a decrease in the number of people living below $1.25.. so I think it would be wrong to say no progress has been made in reducing poverty. As far as the paper's point about the consumption floor not increasing at the same rate as average consumption.. I think you could make that argument using income as well.. So I think the paper simply confuses the issue.

jordanb 12y ago

Why would it be a lagging indicator? These are people who can't get enough calories in a day. If they get an increase in income they're not going to start saving up for a new car, they're going to spend it on more food. I think a more plausible explanation is simple inflation: Suppose you're a slum dweller earning money collecting scrap. And suppose the country around you sees an improvement in its economy. The value and/or quantity of the scrap you can collect goes up, but so does the price of the food you need.

rgbrenner 12y ago
You're right about it not being a lagging indicator. I fell asleep after writing that, and realized something when I woke up... the paper takes those living below $1.25/day and then estimates the consumption floor at 1/2 of that: Both methods of quantifying the floor suggest a consumption floor today that is about half of the international poverty line of $1.25 a day. This is probably close to the consumption of essential foods for those living around $1.25 a day. Then says, even though progress has been made in reducing the number of people living below that level, it has not increased the consumption floor -- which is from the table I mentioned before. But why would you expect to see an increase in consumption if their income is still below $1.25/day? It capped the income, and then somehow expected increased consumption? If I had to guess, the increase in the consumption floor is simply from those increasing their income but still below the $1.25/day (moving from say, $0.80/day to $1/day). The paper acknowledges a decrease in the number of people living below $1.25.. so I think it would be wrong to say no progress has been made in reducing poverty. As far as the paper's point about the consumption floor not increasing at the same rate as average consumption.. I think you could make that argument using income as well.. So I think the paper simply confuses the issue.