Poverty Centre INTERNATIONAL Working Paper number 25 July 2006 CHINESE POVERTY ASSESSING THE IMPACT OF ALTERNATIVE ASSUMPTIONS Sanjay G Reddy Dept of Economics Barnard College Columbia University and Camelia Minoiu Dept of Economics and Institute for Social and Economic Research and Policy Columbia University Working Paper United Nations Development Programme Copyright 2006 United Nations Development Programme International Poverty Centre International Poverty Centre SBS Ed BNDES 10o andar 70076 900 Brasilia DF Brazil povertycentre undp povertycentre org www undp org povertycentre Telephone 55 61 2105 5000 Fax 55 61 2105 5001 Rights and Permissions All rights reserved The text and data in this publication may be reproduced as long as the source is cited Reproductions for commercial purposes are forbidden The International Poverty Centre s Working Papers disseminates the findings of work in progress to encourage the exchange of ideas about development issues The papers are signed by the authors and should be cited and referred to accordingly 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 Poverty Centre or the United Nations Development Programme its Administrator Directors or the countries they represent Working Papers are available online at http www undp org povertycentre and subscriptions might be requested by email to povertycentre undp povertycentre org Print ISSN 1812 108X CHINESE POVERTY ASSESSING THE IM PACT OF ALTERNATIVE ASSU M PTIONS Sanjay G Reddy and Cam elia Minoiu AB STRACT This W orking Paper investigates how estim ates of the extent and trend of consum ption poverty in China between 1990 and 2001 vary as a result of alternative plausible assum ptions concerning the poverty line and estim ated levels ofconsum ption The exercise is m otivated by the existence ofconsiderable uncertainty about the appropriate poverty lines to apply and the level and distribution of resources in China Our m ethodology focuses on the following sources of variation alternative purchasing power parity conversion factors used to convert an international poverty line alternative estim ates of the level and distribution of private incom es alternative estim ates of the propensity to consum e of lower incom e groups and alternative consum er price indices It is widely believed that substantial poverty reduction took place in China in the 1990s and we find this conclusion to be robust to the choice of assum ptions Moreover there is no evidence that the rate of poverty reduction declined over tim e China s record of reducing consum ption poverty has been dram atic H owever estim ates of the extent of Chinese poverty in any year are greatly influenced by the assum ptions m ade The choice am ong these estim ates is likely to have large im plications for the perceived extent and trend ofworld poverty Keywords Consum ption poverty China Sensitivity analysis JEL Classification I32 D31 This W orking Paper has been m ade possible by support from the Bureau of Developm ent Policy and the International Poverty Center of the U nited N ations Developm ent Program m e W e want to thank Terry McKinley Director of the International Poverty Centre for facilitating this support and for his com m ents on the paper W e would like especially to thank Shaohua Chen Yan Fang Azizur Rahm an Khan Albert Park Martin Ravallion and Li Shi for their assistance with queries Carl Riskin and sem inar participants at Colum bia U niversity for their helpful com m ents and Prabhjot Kaur for her research assistance U pdates ofthis paper can be found on www colum bia edu sr793 china pdf Dept ofEconom ics Barnard College Colum bia U niversity Em ail sr793 colum bia edu Tel 212 854 3790 Fax 212 854 8947 Dept ofEconom ics and Institute for Social and Econom ic Research and Policy Colum bia U niversity Em ail cm 2036 colum bia edu 2 International Poverty Centre W orking Paper n 25 1 INTROD U CTION The extent and trend ofpoverty in China play a crucial role in determ ining the extent and trend ofpoverty in the world 1 H owever there is substantial uncertainty concerning Chinese poverty despite recent studies on the topic Som e ofthese uncertainties are data related for exam ple nationally representative household surveys are not publicly available for China and poverty analysis m ust be undertaken on tabulated data that is disaggregated by rural and urban area see e g Chen and Ravallion 2001a 2001b 2004 2005 and Chen and Yang 2001 while others relate to m ethodology for exam ple there is no official national poverty line for China This W orking Paper contributes to the literature by presenting the first set of nationalconsum ption poverty estim ates for China covering a series ofrecent years and based on alternative plausible assum ptions concerning poverty lines and other param eters In this W orking Paper we present consum ption poverty estim ates for China for selected years between 1990 and 2001 based on alternative choices ofpoverty lines and assum ptions concerning the consum ption profile i e the distribution ofabsolute consum ption levels in each year From the outset it should be noted that our aim is not to present a new set ofpoint estim ates ofpoverty for China and to claim these to be authoritative That task is presently beyond the capabilities ofnon official researchers due to data lim itations Rather the aim of the paper is to present a set ofpoverty estim ates based on alternative plausible assum ptions concerning poverty lines and average consum ption levels As a result we are able to com e to the conclusion that the estim ated trend ofpoverty reduction in China in the 1990s is strong regardless ofthe assum ptions m ade The alternative assum ptions that we consider reflect judgm ents that have been m ade in other contributions to the literature In contrast to this study other existing studies focus on only one set ofpossible assum ptions For exam ple Chen and Ravallion 2005 and Sala i Martin 2002a 2002b 2006 produce estim ates ofhousehold incom e rather than consum ption poverty W hile Chen and Ravallion 2005 use survey based average incom es for incom e quantiles Sala i Martin 2002a 2002b 2006 takes the view that the national accounts provide a m ore appropriate estim ate ofaverage household incom e Furtherm ore these studies also including e g Chen and W ang 2001 use either a national consum er
View Full Document
Unlocking...