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Poverty and Shared Prosperity 2016: Taking on Inequality

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© 2016 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, in- terpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Note: The term “country,” used interchangeably with “economy,” does not imply political indepen- dence, but refers to any territory for which authorities report separate social or economic statistics. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2016. Poverty and Shared Prosperity 2016: Taking on Inequality. Washington, DC: World Bank. doi:10.1596/978-1-4648-0958-3. License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an offi- cial World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptations—If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are not endorsed by The World Bank. Third-party content—The World Bank does not necessarily own each component of the content contained within the work. The World Bank therefore does not warrant that the use of any third- party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights @worldbank.org. ISBN (paper): 978-1-4648-0958-3 ISBN (electronic): 978-1-4648-0979-8 DOI: 10.1596/978-1-4648-0958-3 Cover design: Patricia Hord Graphik Design Library of Congress Cataloging-in-Publication Data has been applied for. Contents Foreword ix Acknowledgments xi About the Core Team and the Contributors xiii Abbreviations xvii Overview 1 Notes 19 References 20 1 Poverty and Shared Prosperity: Setting the Stage 23 Concepts, measurement, and data 23 A special focus in 2016: taking on inequality 29 Notes 32 References 33 2 Global Poverty 35 Monitoring global poverty 35 A profile of the poor in the developing world 42 Annex 2A Historical global and regional poverty estimates 46 Annex 2B Technical note: global poverty measurement using 2013 data 47 Notes 50 References 51 3 Shared Prosperity 53 Shared prosperity: where we stand 53 The bottom 40 in relative terms: the shared prosperity premium 56 Incomes of the bottom 40 and the top 10: the Palma premium 57 Who are the bottom 40? 57 Is the poverty goal attainable at current levels of growth and shared prosperity? 59 Conclusions: continued progress, but no room for complacency 62 v Annex 3A Shared prosperity estimates based on the latest surveys, by country, circa 2008–13 64 Notes 66 References 67 4 Inequality 69 Inequality matters 69 Separating fact from myth: what is the evidence on inequality? 75 Concluding remarks 87 Annex 4A Data construction 89 Global inequality database 89 Database of within-country Gini indexes 89 Notes 91 References 95 5 Reductions in Inequality: A Country Perspective 101 Introduction 102 Brazil: multiple policies aligned to redress record inequality 103 Cambodia: new earning opportunities emerging from impressive growth 107 Mali: a vulnerable economy favored by the vagaries of agriculture 110 Peru: equalizing investment despite informality and low human capital 114 Tanzania: sharing prosperity in the midst of diversification 117 Concluding remarks: learning from country experiences 120 Notes 122 References 124 6 Reductions in Inequality: A Policy Perspective 129 Introduction 130 Early childhood development and nutrition 131 Health care and education 135 Conditional cash transfers 140 Rural infrastructure 145 Taxation 148 Concluding remarks 152 Notes 154 References 159 vi POVERTY AND SHARED PROSPERITY 2016 Boxes 1.1 The Welfare Aggregate: Income 4.2 Perceptions of Inequality in the versus Consumption 25 Middle East and North Africa 73 2.1 Measuring Global Poverty and 4.3 Absolute versus Relative Inequality 78 Purchasing Power Parities 37 4.4 Comparison of Levels and Trends in 2.2 Projecting Poverty Rates 43 Income and Consumption Inequality 79 3.1 The Bottom 40 versus the Poor 59 4.5 Comparing Trends in Inequality: 3.2 Simulating Poverty Trajectories 61 Household Surveys and 4.1 Cross-Country Studies of the Effect Administrative Records 80 of Inequality on Growth 71 6.1 Tax Reform and Fiscal Consolidation 150 Figures O.1 Distribution of the Extreme Poor, 2.3 Regional and World Trends, Number the Nonpoor, the Bottom 40, of the Extreme Poor, 1990–2013 38 and the Top 60, 2013 2 2.4 Regional and World Trends, O.2 World and Regional Trends, Poverty Extreme Poverty Headcount Ratio, Headcount Ratio, 1990–2013 5 1990–2013 39 O.3 Trends in the Global Poverty 2.5 Poverty Headcount Ratios and Headcount Ratio and the Number Number of the Poor, by Country of the Global Poor, 1990–2013 5 Income, 2013 40 O.4 Where Are the Global Poor Living? 2.6 Poverty Headcount Ratios, Top 10 The Global Poor, by Region, 2013 6 Countries, 2013 41 O.5 Profile of the Poor, by Characteristics 2.7 Number of the Poor, Top 10 and Region, 2013 6 Countries, 2013 41 O.6 Age Profile of the Poor, 2013 7 2.8 Trends in the Poverty Gap and the O.7 Shared Prosperity, 83 Countries, Global Headcount Ratio, 1990–2013 42 2008–13 8 2.9 Profile of the Poor, by Characteristics O.8 Boosting Shared Prosperity and and Region, 2013 44 Ending Poverty, 10-Year Scenario, 2.10 Profile of the Extreme and Moderate 2013–30 9 Poor, by Selected Characteristics, O.9 Global Inequality, 1820–2010 9 2013 44 O.10 Global Inequality, 1988–2013 10 2.11 Age Profile of the Poor, 2013 45 O.11 Average Within-Country Inequality, 3.1 Shared Prosperity, 83 Countries, 1988–2013 10 2008–13 55 O.12 Trends in the Average National Gini, 3.2 The Bottom 40, Brazil, India, by Region, 1988–2013 11 and the United States, Circa 2013 58 O.13 The National Income Share of the B3.1.1 Distribution of the Extreme Poor, Richest 1 Percent, Selected Economies 12 the Nonpoor, the Bottom 40, O.14 Available Country Poverty Estimates, and the Top 60, 2013 59 Number, by Region and Year 19 3.3 Income Group Composition, the 1.1 Available Country Poverty Estimates, Bottom 40, Selected Countries, by Region and Year 28 Circa 2013 60 1.2 Availability of Poverty Data, by All 3.4 Boosting Shared Prosperity and Possible 10-Year Periods, 1990–2013 28 Ending Poverty, 2013–30 62 1.3 Double and Triple Dips in Growth, 4.1 Growth of the Bottom 40 versus Selected Economies, 2006–15 30 Growth at the Mean, 2008–13 72 2.1 The Global Poverty Headcount Ratio B4.2.1 Actual versus Anticipated Feelings of and the Number of the Extreme Poor, Well-Being, Middle East and North 1990–2013 36 Africa 74 2.2 Where Are the Global Poor Living? 4.2 The Top 1 Percent Income Share, The Global Poor, by Region, 2013 37 Selected Economies 76 CONTENTS vii 4.3 Global Income Inequality, 5.6 Contributions of Growth and 1820–2010 76 Redistribution Effects to Poverty 4.4 Long-Run Changes in the Gini Reduction, Cambodia, 2008–12 108 Index, Selected Developing 5.7 Trends in the Gini Index, Mali, Countries, 1980–2014 77 2001–10 111 B4.3.1 Comparing Absolute and Relative 5.8 Growth Incidence Curve, Mali, Gains across the Distribution 78 2001–10 112 B4.4.1 Levels of Income and Consumption, 5.9 Contributions of Growth and Gini Indexes, 2013 79 Redistribution Effects to Poverty B4.4.2 Trends in Income and Consumption, Reduction, Mali, 2006–09 112 Gini Indexes, Circa 2008–13 79 5.10 Trends in the Gini Index, Peru, B4.5.1 Comparison of Top Incomes and the 2004–14 115 Gini Index, Brazil, 2006–12 80 5.11 Growth Incidence Curve, Peru, 4.5 Global Inequality, 1988–2013 81 2004–14 115 4.6 Average Within-Country Inequality, 5.12 Contributions of Growth and 1988–2013 83 Redistribution Effects to Poverty 4.7 Trends in the
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