Chinese Poverty: Assessing the Impact of Alternative Assumptions
Author(s)
Reddy, Sanjay
Abstract
This paper investigates how estimates of the extent and trend of consumption poverty in China between 1990 and 2001 vary as a result of alternative plausible assumptions concerning the poverty line and estimated levels of consumption. The exercise is motivated by the existence of considerable uncertainty about the appropriate poverty lines to apply and the level and distribution of resources in China. Our methodology focuses on the following sources of variation: alternative purchasing power parity conversion factors (used to convert an international poverty line), alternative estimates of the level and distribution of private incomes, alternative estimates of the propensity to consume of lower income groups, and alternative consumer price indices. It is widely believed that substantial poverty reduction has taken place in China in the 1990s, and we find this conclusion to be robust to the choice of assumptions. However, estimates of the extent of Chinese poverty in any year are greatly influenced by the assumptions made. The choice among these estimates is likely to have significant implications for the perceived extent and trend of world poverty. China’s record of reducing consumption poverty is dramatic. It is unclear, however, whether this achievement has been comparable across regions and whether there have been corresponding national improvements in other aspects of human well-being.
