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China’s progress against poverty revisited

The widely held view that China has greatly reduced income poverty over the last 40 years does not accord with all the evidence. My new paper with Shaohua Chen, “Reconciling the Conflicting Narratives on Poverty in China,” tries to reconcile the conflicting findings.

The fact that strongly-relative measures provided in the graph above show rising poverty is easily understood, since such measures depend solely on relative distribution, and inequality in China has been rising until recently. (Strongly relative measures entail setting the poverty line as a constant proportion of the mean or median.)

More surprising, and revealing, is the story told by the official lines, which were revised twice since the original 1985 line. Our new paper shows that the official lines are neither absolute nor strongly relative. Rather, they are weakly relative, with a positive elasticity to the mean that is less than unity. Along with rising inequality, this feature slowed the pace of measured poverty reduction when compared to absolute measures.

Nonetheless, substantial progress against poverty is indicated, as we confirm using our independent, and higher, weakly-relative lines calibrated to cross-country data as in the graph above. Our alternative schedule of weakly-relative lines shows a marked reduction in poverty—falling from 88% to 23% over 1981-2014—though not as much as the absolute $1.90 lines.

Our implied weakly-relative line for 2014 accords well with independent estimates of the subjective poverty line for China, which is about three time the official poverty line.

Download the paper here

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