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Abstract:
This paper provides a non-technical account of poverty measurement at the local, national, and global levels. The political and scientific bases for measurement are discussed, as are the main strengths and weaknesses of the usual methods for poverty measurement.

Poverty, politics, poverty lines, PPP exchange rates, health

Abstract:
In the early 1950s, Franco Modigliani and his student Richard Brumberg worked out a theory of spending based on the idea that people make intelligent choices about how much they want to spend at each age, limited only by the resources available over their lives. By building up and running down assets, working people can make provision for their retirement, and more generally, tailor their consumption patterns to their needs at different ages, independently of their incomes at each age. This simple theory leads to important and non-obvious predictions about the economy as a whole, that national saving depends on the rate of growth of national income, not its level, and that the level of wealth in the economy bears a simple relation to the length of the retirement span. These predictions, which were untestable in the 1950s, have received empirical support in later work by Modigliani and other researchers. While there have been many challenges to the theory of consumption through the years, most recently from a coalition of psychologists and economists, the life-cycle hypothesis remains an essential part of economists' thinking. Without it, we would have much less to say about many important issues, such as the private and public provision of social security, the effects of the stock market on the economy, the effects of demographic change on national saving, the role of saving in economic growth, and the determinants of national wealth.

Modigliani, saving, consumption, life-cycle

Abstract:
As recent discussions have made clear, the apparent lack of poverty reduction in the face of historically high rates of economic growth-both in the world as a whole and in specific countries (most notably India)-provides fuel for the argument that economic growth does little to reduce poverty. How confident can we be that the data actually support these inferences? At the international level, the regular revision of purchasing power parity exchange rates plays havoc with the poverty estimates, changing them in ways that have little or nothing to do with the actual experience of the poor. At the domestic level, the problems in measuring poverty are important not only for the world count but also for tracking income poverty within individual countries. Yet, in many countries, there are large and growing discrepancies between the survey data-the source of poverty counts-and the national accounts-the source of the measure of economic growth. Thus economic growth, as measured, has at best a weak relationship with poverty, as measured.

Abstract:
The World Bank prepares and publishes estimates of the number of poor people in the world. These numbers, particularly the count of people living below $1 a day, are widely quoted and used by the Bank, the press, and by political leaders around the world. They are the raw material in the debate on whether or not world growth reduces world poverty. This paper discusses how the poverty estimates are constructed, and asks whether they can bear the burden placed on them. One specific difficulty is the use of purchasing power parity (PPP) exchange rates, whose revision induces large changes in poverty estimates for the same countries in the same years. Another area of dispute is the discrepancy in many countries between national accounts statistics, which are used to compute growth rates, and survey estimates, which are used to compute poverty estimates. To a considerable extent, the failure of world poverty to fall in the face of world growth is a failure of household survey data to be consistent with national income data. The details of survey design are also important. In India, changing the reference period for reporting consumption removes around 200 million people, a sixth of the world total, if not from poverty, at least from the poverty counts.

poverty, purchasing-power-parity, surveys, national accounts

Abstract:
Purchasing power parity (PPP) exchange rates are extensively used by researchers and by policymakers. This paper proposes and implements a new methodology for calculating PPPs using information on unit values from household surveys. Although unit values are not identical to prices, they have compensating advantages. Large household surveys contain several million unit values, they are tied to actual transactions, and they are naturally linked to household characteristics such as income. In consequence, it is possible to calculate PPPs for different social groups, including PPPs for the poor. The paper calculates multilateral price indexes for the states and sectors of India, as well as PPPs for rural and urban Indonesia together with rural and urban India. PPPs for the poor are distinguished from general PPPs. The internal PPPs for India are not very different from previous estimates based on bilateral comparisons, but the estimated PPP between India and Indonesia is very different from the numbers calculated by either the Penn World Table or the World Bank. It implies that either India is much better-off, or Indonesia much poorer (or both) than is generally supposed.

PPP exchange rates, unit values, household surveys, poverty, India, Indonesia

Abstract:
Standard methods of poverty measurement assume that an individual is poor if he or she lives in a family whose income or consumption lies below an appropriate poverty line. Such methods can provide only limited insight into male and female poverty separately. Nevertheless, there are reasons why household resources are linked to the gender composition of the household; women's earnings are often lower than men's, families in some countries control their fertility through differential stopping rules, and women live longer than men. It is also possible to link family expenditure patterns to the gender composition of the household, something we illustrate using data from India and South Africa. Such a procedure provides useful information on who gets what, but cannot tell us how total resources are allocated between males and females. More can be gleaned from data on consumption by individual household members, and for many goods, collecting such information is good survey practice in any case. Even so, we suspect that it will be some time before such information can be used routinely to produce estimates of poverty by gender. A more promising approach is likely to come within a broader definition of poverty that includes health (and possibly education) as well as income. We discuss recent work on collecting self-reported measures of non-fatal health, and argue that such measures are already useful for assessing the relative health status of males and females. The evidence is consistent with non-elderly women generally having poorer health than non-elderly men. We emphasize the importance of simultaneously measuring poverty in multiple dimensions. The different components of wellbeing are correlated, and it is misleading to look at any one in isolation from the others.

Abstract:
I consider two issues concerning how to monitor global poverty for the Millennium Development Goals, the selection of poverty lines, and the data sources for monitoring poverty over time. I discuss the choice of a single international line, converted using purchasing power parity exchange rates, versus the use of country-specific poverty lines. I note the difficulties in constructing purchasing power parity exchange rates but argue in favor of a single international line, converted at PPP rates, but which would be regularly updated using domestic price indexes. Re-basing, using updated PPP rates, would be done infrequently. For example, if the global poverty numbers were estimated annually, the PPP rates might be updated once a decade. In any case, it is important that the poverty estimates be calculated much more frequently than the PPP rates are revised. I discuss whether monitoring should be done using national accounts data on income or consumption, supplemented by distributional data so as to make inferences about poverty, or from household survey data. I argue that data from the national accounts are not suitable for measuring poverty and that their use requires assumptions that are unlikely to hold. In particular, monitoring poverty through the national accounts runs the risk of prejudging important issues that are properly the subject of measurement, not assumption, such as the extent to which aggregate growth benefits the poor. I argue that poverty should be directly measured using household survey data, and discuss what needs to be done to enable such monitoring to be placed on a sounder basis.

Poverty, measurement, national accounts, surveys, Millenium Development Goals

Abstract:
Disease has traveled with goods and people since the earliest times. Armed globalization spread disease, to the extent of eliminating entire populations. The geography of disease shaped patterns of colonization and industrialization throughout the now poor world. Many see related threats to public health from current globalization. Multilateral and bilateral trade agreements do not always adequately represent the interests of poor countries, the General Agreement on Trade in Services may restrict the freedom of signatories to shape their own health delivery systems, and it remains unclear whether current arrangements for intellectual property rights are in the interests of citizens of poor countries with HIV/AIDS. However, to the extent that globalization promotes economic growth, population health may benefit, and there has been substantial reductions in poverty and in international inequalities in life-expectancy over the last 50 years. Although there is a strong inverse relationship between the poverty and life-expectancy in levels, gains in life expectancy have been only weakly correlated with growth rates and, in the last decade, the HIV/AIDS epidemic has widened international inequalities in life expectancy. The rapid transmission of health knowledge and therapies from one rich country to another has led to a swift convergence of adult mortality rates among the rich of the world, particularly men. Globalization would do much for global health if transmission from rich to poor countries could be accelerated.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
Disease has traveled with goods and people since the earliest times. Armed globalization spread disease, to the extent of eliminating entire populations. The geography of disease shaped patterns of colonization and industrialization throughout the now poor world. Many see related threats to public health from current globalization. Multilateral and bilateral trade agreements do not always adequately represent the interests of poor countries, the General Agreement on Trade in Services may restrict the freedom of signatories to shape their own health delivery systems, and it remains unclear whether current arrangements for intellectual property rights are in the interests of citizens of poor countries with HIV/AIDS. However, to the extent that globalization promotes economic growth, population health may benefit, and there has been substantial reductions in poverty and in international inequalities in life-expectancy over the last 50 years. Although there is a strong inverse relationship between the poverty and life-expectancy in levels, gains in life expectancy have been only weakly correlated with growth rates and, in the last decade, the HIV/AIDS epidemic has widened international inequalities in life expectancy. The rapid transmission of health knowledge and therapies from one rich country to another has led to a swift convergence of adult mortality rates among the rich of the world, particularly men. Globalization would do much for global health if transmission from rich to poor countries could be accelerated.

Globalization, health, poverty, income, trade, disease

Abstract:
What happened to poverty in India in the 1990s has been fiercely debated, politically and statistically. The Indian debate has run parallel to, and is itself a large part of, the wider debate about globalization and poverty in the 1990s. The economic reforms of the early 1990s were followed by rates of economic growth that were high by Indian historical standards. The effects on poverty remain controversial, and the official numbers published by the Government of India, showing a reduction of poverty from 36 percent of the population in 1993-94 to 26 percent of the population in 1999-00, have been challenged both for showing too little and too much poverty reduction. The various claims have often been frankly political, but there are also many important statistical issues, and the Indian debate, of which this paper is a review, provides an excellent example of how politics and statistics interact in an important, largely domestic debate. Although there is no full consensus on what happened to Indian poverty in the 1990s, there is good evidence that the official estimates of poverty reduction are too optimistic, particularly for rural India. This overoptimism was amplified by statistical uncertainty that created space for some commentators to argue that poverty had been virtually eliminated in India in the wake of the economic reforms. Although this paper is concerned with the measurement of poverty in India, all of the issues - discrepancies between surveys and national accounts, the effects of questionnaire design, reporting periods, survey non-response, repairing imperfect data, the choice of poverty lines, and the interplay between statistics and politics - have wide resonance elsewhere.

India, poverty, measurement, liberalization, growth

Abstract:
In spite of India's rapid economic growth, there has been a sustained decline in per capita calorie consumption during the last twenty-five years. While the decline has been largest among better-off households, it has taken place throughout the range of household per capita total expenditure. For both adults and children, anthropometric indicators of nutritional status in India are among the worst in the world. While these indicators have shown improvement over time, the rate of progress is slow relative to what might be expected based on international and historical experience. This paper presents the basic facts about growth, poverty and nutrition in India, it points to a number of puzzles, and it sketches a preliminary story that is consistent with the evidence. The reduction in calorie consumption cannot be attributed to declining real incomes, nor to any increase in the relative price of food. Our leading hypothesis, on which much work remains to be done, is that, as real incomes and wages have increased, leading to some nutritional improvement, there has been an offsetting reduction in calorie requirements due to declining levels of physical activity and possibly also to various improvements in the health environment. If correct, this analysis does not imply that Indians are currently adequately nourished; nothing could be further from the truth. Calorie intake has serious limitations as a nutritional intake; while calories are extremely important, there are too many sources of variation in calorie requirements for standard, invariant, calorie-norms to be usefully applied to large sections of the population. We conclude with a plea for better, and more regular, monitoring of nutritional status in India.

nutrition, calories, poverty, growth, anthropometrics, health, India

Abstract:
The Indian national sample surveys collect data on the unit values of a large number of foods which can be used to compute price index numbers that can be compared with the official national price indexes, the Consumer Price Index for Agricultural Labourers (CPIAL) for rural India, and the Consumer Price Index for Industrial Workers (CPIIW) for urban India. Over the five years from 1999-2000 to 2004-05, the food component of the CPIAL understated the rate of food price inflation. This overstatement is likely attributable to the use of long outdated weights (from 1983), and the resultant over-weighting of cereals, particularly coarse cereals, whose prices fell relative to other foods. The overall weight of food in the CPIAL is also too large, so that the growth in the general CPIAL was understated during this period when food prices fell relative to nonfood prices. Under conservative assumptions, I calculate that the 5 year growth in the reported CPIAL of 10.6 percent should have been 14.3 percent. Indian poverty lines are held constant in real terms and are updated using the food and non-food components of the official indices weighted by the food shares of households near the poverty line. Because these weights come from a 1973-4 survey, food is heavily over weighted for the contemporary poor, and the nominal poverty lines are understated, both because the CPIAL food index is understated, and because too much weight is assigned to food in a period when food prices have been falling relative to nonfood prices. As a result, and ignoring other problems with the counts (doubtful interstate and inter-sectoral price indexes and the growing discrepancy between surveys and national accounts), the official poverty counts for rural India in 2004-5 are too low; the official headcount ratio of 28.3 percent should be closer to 31 percent; at current rates of rural poverty reduction, this eliminates more than three years of progress. More generally, it is clear that the weights used for price indexes should be updated more frequently than is presently the case, something that could be straightforwardly done using India's regular system of household expenditure surveys.

price indexes, poverty, surveys, weights, India, food

Abstract:
I explore the connection between income inequality and health in both poor and rich countries. I discuss a range of mechanisms, including nonlinear income effects, credit restrictions, nutritional traps, public goods provision, and relative deprivation. I review the evidence on the effects of income inequality on the rate of decline of mortality over time, on geographical pattens of mortality, and on individual-level mortality. Much of the literature needs to be treated skeptically, if only because of the low quality of much of the data on income inequality. Although there are many puzzles that remain, I conclude that there is no direct link from income inequality to ill-health; individuals are no more likely to die if they live in more unequal places. The raw correlations that are sometimes found are likely the result of factors other than income inequality, some of which are intimately linked to broader notions of inequality and unfairness. That income inequality itself is not a health risk does not deny the importance for health of other inequalities, nor of the social environment. Whether income redistribution can improve population health does not depend on a direct effect of income inequality and remains an open question.

Abstract:
Mortality rates have fallen dramatically over time, starting in a few countries in the 18th century, and continuing to fall today. In just the past century, life expectancy has increased by over 30 years. At the same time, mortality rates remain much higher in poor countries, with a difference in life expectancy between rich and poor countries of also about 30 years. This difference persists despite the remarkable progress in health improvement in the last half century, at least until the HIV/AIDS pandemic. In both the time-series and the cross-section data, there is a strong correlation between income per capita and mortality rates, a correlation that also exists within countries, where richer, better-educated people live longer. We review the determinants of these patterns: over history, over countries, and across groups within countries. While there is no consensus about the causal mechanisms, we tentatively identify the application of scientific advance and technical progress (some of which is induced by income and facilitated by education) as the ultimate determinant of health. Such an explanation allows a consistent interpretation of the historical, cross-country, and within-country evidence. We downplay direct causal mechanisms running from income to health.

Abstract:
Household expenditure survey data cannot yield precise estimates of poverty or inequality for small areas for which no or few observations are available. Census data are more plentiful, but typically exclude income and expenditure data. Recent years have seen a widespread use of small-area "poverty maps" based on census data enriched by relationships estimated from household surveys that predict variables not covered by the census. These methods are used to estimate putatively precise estimates of poverty and inequality for areas as small as 20,000 households. In this paper we argue that to usefully match survey and census data in this way requires a degree of spatial homogeneity for which the method provides no basis, and which is unlikely to be satisfied in practice. The relationships that are used to bridge the surveys and censuses are not structural but are projections of missing variables on a subset of those variables that happen to be common to the survey and the census supplemented by local census means appended to the survey. As such, the coefficients of the projections will generally vary from area to area in response to variables that are not included in the analysis. Estimates of poverty and inequality that assume homogeneity will generally be inconsistent in the presence of spatial heterogeneity, and error variances calculated on the assumption of homogeneity will underestimate mean squared errors and overestimate the coverage of calculated confidence intervals. We use data from the 2000 census of Mexico to construct synthetic "household surveys" and to simulate the poverty mapping process using a robust method of estimation; our simulations show that while the poverty maps contain useful information, their nominal confidence intervals give a misleading idea of precision.

small area statistics, poverty, inequality, heterogeneity, survey methods

Abstract:
There is currently much debate about the effectiveness of foreign aid and about what kind of projects can engender economic development. There is skepticism about the ability of econometric analysis to resolve these issues, or of development agencies to learn from their own experience. In response, there is movement in development economics towards the use of randomized controlled trials (RCTs) to accumulate credible knowledge of what works, without over-reliance on questionable theory or statistical methods. When RCTs are not possible, this movement advocates quasi-randomization through instrumental variable (IV) techniques or natural experiments. I argue that many of these applications are unlikely to recover quantities that are useful for policy or understanding: two key issues are the misunderstanding of exogeneity, and the handling of heterogeneity. I illustrate from the literature on aid and growth. Actual randomization faces similar problems as quasi-randomization, notwithstanding rhetoric to the contrary. I argue that experiments have no special ability to produce more credible knowledge than other methods, and that actual experiments are frequently subject to practical problems that undermine any claims to statistical or epistemic superiority. I illustrate using prominent experiments in development. As with IV methods, RCT-based evaluation of projects is unlikely to lead to scientific progress in the understanding of economic development. I welcome recent trends in development experimentation away from the evaluation of projects and towards the evaluation of theoretical mechanisms.

Abstract:
During 2006, the Gallup Organization conducted a World Poll that used an identical questionnaire for national samples of adults from 132 countries. I analyze the data on life satisfaction (happiness) and on health satisfaction and look at their relationships with national income, age, and life-expectancy. Average happiness is strongly related to per capita national income; each doubling of income is associated with a near one point increase in life satisfaction on a scale from 0 to 10. Unlike most previous findings, the effect holds across the range of international incomes; if anything, it is slightly stronger among rich countries. Conditional on national income, recent economic growth makes people unhappier, improvements in life-expectancy make them happier, but life-expectancy itself has little effect. Age has an internationally inconsistent relationship with happiness. National income moderates the effects of aging on self-reported health, and the decline in health satisfaction and rise in disability with age are much stronger in poor countries than in rich countries. In line with earlier findings, people in much of Eastern Europe and in the countries of the former Soviet Union are particularly unhappy and particularly dissatisfied with their health, and older people in those countries are much less satisfied with their lives and with their health than are younger people. HIV prevalence in Africa has little effect on Africans' life or health satisfaction; the fraction of Kenyans who are satisfied with their personal health is the same as the fraction of Britons and higher than the fraction of Americans. The US ranks 81st out of 115 countries in the fraction of people who have confidence in their healthcare system, and has a lower score than countries such as India, Iran, Malawi, or Sierra Leone. While the strong relationship between life-satisfaction and income gives some credence to the measures, as do the low levels of life and health satisfaction in Eastern Europe and the countries of the former Soviet Union, the lack of correlations between life and health satisfaction and health measures shows that happiness (or self-reported health) measures cannot be regarded as useful summary indicators of human welfare in international comparisons.

Abstract:
I explore the relationship between the distribution of adult heights and the distribution of income. It has previously been argued (a) that average adult height may depend negatively on income inequality; (b) that some measure of inequality in adult heights is informative about inequality in income; and (c) that differences in heights between groups are informative about the allocation of resources between the groups. I argue on theoretical grounds that, except in very special cases, height inequality is unlikely to indicate income inequality, but that (a) and (c) are plausible and worth serious investigation. I use data from the third round of India's National Fertility and Health survey to explore these issues. The most important findings concern sexual dimorphism in heights between adult Indian men and women. Consistent with improvements in material living conditions and in the epidemiological environment, both men and women are becoming taller over time, but the rate of increase is three times faster for men than for women, which is strongly suggestive of increasing relative discrimination against women in nutrition or healthcare. Sexual dimorphism is more marked in places where there is a high ratio of missing women which is consistent both with spatial differences in discrimination and with accounts in evolutionary biology of sexual dimorphism. I find no consistent relationship between either average heights or the inequality in heights and inequality in consumption.

height, health, income, inequality, dimorphism, India

Abstract:
People in poor countries live shorter lives than people in rich countries so that, if we scale income by some index of health, there is more inequality in the world than if we consider income alone. Such international inequalities in life expectancy decreased for many years after 1945, and the strong correlation between income and life-expectancy might lead us to hope that economic growth will improve people's health as well as their material living conditions. I argue that the apparent convergence in life expectancies is not as beneficial as might appear, and that, while economic growth is the key to poverty reduction, there is no evidence that it will deliver automatic health improvements in the absence of appropriate conditions. The strong negative correlation between economic growth on the one hand and the proportionate rate of decline of infant and child mortality on the other vanishes altogether if we look at the relationship between growth and the absolute rate of decline in infant and child mortality. In effect, the correlation is between the level of infant mortality and the growth of real incomes, most likely reflecting the importance of factors such as education and the quality of institutions that affect both health and growth.

Abstract:
No abstract is available for this paper.

Abstract:

Abstract:
What is inequality in health? Are economists' standard tools for measuring income inequality relevant or useful for measuring it? Does income protect health and does income inequality endanger it? I discuss two different concepts of health inequality and relate each of them to the literature on the inequality in income. I propose a model in which each individual's health is related to his or her status within a reference group as measured by income relative to the group mean. Income inequality, whether within groups or between them, has no effect on average health. Even so, the slope of the relationship between health and income, the gradient,' depends on the ratio of between- to within-group inequality. The model is extended to allow income inequality to play a direct role in determining health status. Empirical evidence on cross-country income inequality and life-expectancy within the OECD, and on time series for the U.S., Britain, and Japan, provides little support for the idea that inequality is a health hazard at the national level. Birth cohorts in the US between 1981 and 1993 show no relationship between mortality and income inequality. However, there is a well-defined health gradient in these data, and its slope increases with cohort income inequality.

Abstract:
We investigate age-specific mortality in Britain and the United States since 1950. Neither trends in income nor in income inequality provide plausible explanations. Britain and the US had different patterns of income growth but similar patterns of mortality decline. Patterns of income inequality were similar in both countries, but adult and elderly mortality rates declined most rapidly during the period when inequality increased. Changes in the rate of mortality decline in the US led changes in Britain by about four years, most notably for infant and older adult mortality where there have been significant technical improvements in treatment. British mortality is lower, but the schedules cross at around age 65. This pattern was established before Medicare, and most likely comes from rationing by age in Britain. Merged income, income inequality, and mortality data on an age/year (or cohort/year) basis show no evidence that income has any effect on mortality in Britain. Education is protective, but less so than in the US. Understanding the effect of income on mortality presents many puzzles, between countries, and between analyses at different levels of aggregation. Our results suggest an important role for medical technology in determining the rate of mortality decline since 1950.

Abstract:
This paper presents a descriptive account of health and economic status in India and South Africa - countries in very different positions in the international hierarchy of life expectancy and income. The paper emphasizes the lack of any simple and reliable relationship between health and wealth between and within our sites in rural Rajasthan, in a shack township outside of Cape Town, and in a rural South African site that, until 1994, was part of a Bantustan. Income levels across our sites are roughly in the ratio of 4:2:1, with urban South Africa richest and rural Rajasthan poorest, while ownership of durable goods, often used as a short-cut measure or check of living standards, are in the ratio of 3:2:1. These differences in economic status are reflected in respondents' own reports of financial status. People know that they are poor, but appear to adapt their expectations to local conditions, at least to some extent. The South Africans are taller and heavier than the Indians - although their children are no taller at the same age. South African self-assessed physical and mental health is no better, and South Africans are more likely to report that they have to miss meals for lack of money. In spite of differences in incomes across the three sites, South Africans and Indians report a very similar list of symptoms of ill-health. Although they have much lower incomes, urban women in South Africa have fully caught up with black American women in the prevalence of obesity, and are catching up in terms of hypertension. These women have the misfortune to be experiencing many of the diseases of affluence without experiencing affluence itself.

health, income, height, BMI, wellbeing, international health comparisons

Abstract:
People whose family income was less than $5,000 in 1980 could expect to live about 25 percent fewer years than people whose family income was greater than $50,000. We explore this finding using both individual data and a panel of aggregate birth cohorts observed from 1975 to 1995. We assume that health status is determined by social status, defined as income relative to the mean income of a reference group. When reference groups are not observed, health is a function of income whose slope (the gradient) depends on the ratio of within to between-group inequality. We derive results on how this relationship changes at different levels of aggregation. Our results on individuals show that income reduces the risk of death, and does so even controlling for education. Only some of the effect of income can plausibly be attributed to the reduction in earnings of those about to die. The panel of cohorts also shows a strongly protective effect of income, but there is evidence that cyclical increases in income may raise mortality, even when the long-run effects of income are in the opposite direction. There is no evidence that recent increases in inequality raised mortality beyond what it would otherwise have been.

Abstract:
This paper is concerned with the theory of saving when consumers are not permitted to borrow, and with the ability of such a theory to account for some of the stylized facts of saving behavior. When consumers are relatively impatient, and when labor income is independently and identically distributed over time, assets act like a buffer stock, protecting consumption against bad draws of income. The precautionary demand for saving interacts with the borrowing constraints to provide a motive for holding assets. If the income process is positively autocorrelated, but stationary, assets are still used to buffer consumption, but do so less effectively, and at a greater cost in terms of foregone consumption. In the limit, when labor income is a random walk, it is optimal for impatient liquidity constrained consumers simply to consume their incomes. As a consequence, a liquidity constrained representative agent cannot generate aggregate U.S. saving behavior if that agent receives aggregate labor income. Either there is no saving, when income is a random walk, or saving is contracyclical over the business cycle, when income changes are positively autocorrelated. However, in reality, microeconomic income processes do not resemble their average, and it is possible to construct a model of microeconomic saving under liquidity constraints which, at the aggregate level, reproduces many of the stylized facts in the actual data. While it is clear that many households are not liquidity constrained, and do not behave as described here, the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life-cycle models.

Abstract:
PPP-based national accounts have become an important part of the database for macroeconomists, development economists, and economic historians. Frequently used global data come from the Penn World Table (PWT) and the World Bank’s World Development Indicators; a substantial fraction of the world is also covered in the PPP accounts produced by the OECD and the European Union. This paper provides an overview of how these data are constructed, and discusses both the theory and the practical problems of implementing it. All of these data are underpinned by the International Comparison Program (ICP), which collects data on prices worldwide. The most recent round of the ICP was for 2005 with final results published in early 2008; version 7.0 of the Penn World Table will soon incorporate these results. The 2005 ICP, like earlier rounds, involved substantial revisions to previous data, most notably revising downwards the size of the Chinese (40 percent smaller) and Indian (36 percent) economies. We discuss the reasons for the revisions, and assess their plausibility. We focus on four important areas: how to handle international differences in quality, the treatment of urban and rural areas of large countries such as China, India, and Brazil, how to estimate prices for government services, health, and education, and the effects of the regional structure of the ICP. All of these affect the interpretation of previous data, as well as the current revisions. We discuss previous revisions of the PWT, and their effects on various kinds of econometric analysis. The paper concludes with health warnings that should be kept in mind when using these data, which are not always suitable for the purposes to which they are put. Some international comparisons are close to impossible, even in theory, and in others, the practical difficulties make comparison exceedingly hazardous.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
Self-reported health status (SRHS) is an imperfect measure of non-fatal health, but allows examination of how health status varies over the life course. Although women have lower mortality than men, they report worse health status up to age 65. The SRHS of both men and women deteriorates with age. There are strong gradients, so that at age 20, men in the bottom quartile already report worse health than do men in the top quartile at age 50. In the bottom quartile of income, SRHS declines more rapidly with age, but only until retirement age. These facts motivate a study of the role of work, particularly manual work, in health decline with age. The Grossman capital-stock model of health assumes a technology in which money and time can effect complete health repair. As a result, declines in health status are driven, not by the rate of deterioration of the health stock, but by the rate of increase of the rate of deterioration. We argue that such a technology is implausible, and we show that people in manual occupations have worse SRHS and more rapidly declining SRHS, even with a comprehensive set of controls for income and education. We also find that much of the differences in SRHS across the income distribution is driven by health-related absence from the labor-force, which is a mechanism running from health to income, not the reverse.

Abstract:
I present a model of mortality and income that integrates the 'gradient,' the negative relationship between income and mortality, with the Wilkinson hypothesis, that income inequality poses a risk to health. Individual health is negatively affected by relative deprivation within a reference group, defined as the ratio to group mean income of the total 'weight' of incomes of group members better-off than the individual. I argue that such a model is consistent with what we know about the way in which social status affects health, based on both animal and human models. The theory predicts: (a) within reference groups, which may be as large as whole populations, mortality declines with income, but at a decreasing rate; the mortality to income relationship is monotone decreasing and convex. (b) If the upper tail of the income distribution is Pareto then, among the rich, there will be a negative liriear relationship between the logarithm of the probability of death and the logarithm of income, whose slope is larger the larger is Pareto's constant, itself often interpreted as a measure of equality. (c) A mean-preserving increase in the spread of incomes raises the risk of mortality for everyone. Between reference groups (e.g. states or countries) mortality is independent of the level of average income, but depends on the gini coefficient of income inequality, as does actual aggregate mortality across US states. Individual data from the National Longitudinal Mortality Study show that the relative deprivation theory provides a good account of the mortality gradient within states, but actually fails to account for interstate correlation between mortality and income inequality. Further analysis of the aggregate data shows that the effect of income inequality is not robust to the inclusion of other controls, particularly the fraction of blacks in the population. The fraction black is positively associated with white (male) mortality in both the individual and aggregate data and, once the fraction black is controlled for, there is no effect of income inequality on either male or female mortality. No explanation is offered for why white mortality should be higher in states with a higher proportion of blacks in the population.

Abstract:
In this essay, I review Robert Fogel's The Escape from Hunger and Premature Death, 1700-2100 which is concerned with the past, present, and future of human health. Fogel's work places great emphasis on nutrition, not only for the history of health, but for explaining aspects of current health, not only in comparing poor and rich countries, but in thinking about rich countries now and in the future. I discuss Fogel's analysis alongside alternative interpretations that place greater emphasis on the historical role of public health, and on the current and future role of improvements in medical technology.

Abstract:
The extent to which growth reduces global poverty has been disputed for 30 years. Although there is better data than ever before, controversies are not resolved. A major problem is that consumption measured from household surveys, which is used to measure poverty, grows less rapidly than consumption measured in national accounts, in the world as a whole, and in large countries, particularly India, China, and the US. In consequence, measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries. One plausible cause is that richer households are less likely to participate in surveys. But growth in the national accounts is also upwardly biased, and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys. So it is possible for consumption of the poor to grow less rapidly than national consumption, without any increase in measured inequality. Current statistical procedures in poor countries understate the rate of global poverty reduction, and overstate growth in the world.

Abstract:
This paper examines the consequences of social security reform for the inequality of consumption across individuals. The idea is that inequality is at least in part the result of individual risk in earnings or asset returns, the effects of which accumulate over time to increase inequality within groups of people as they age. Institutions such as social security, that share risk across individuals, will moderate the transmission of individual risk into inequality. We examine how different social security systems, with different degrees of risk sharing, affect consumption inequality. We do so within the framework of the permanent income hypothesis, and also using richer models of consumption that incorporate precautionary saving motives and borrowing restrictions. Our results indicate that systems in which there is less sharing of earnings risk such as systems of individual accounts produce higher consumption inequality both before and after retirement. However, differences across individuals in the rate of return on assets (including social security assets held in individual accounts) produce only modest additional effects on inequality.

Abstract:
No abstract is available for this paper.

Abstract:
For thirty years, it has been accepted that consumption is smooth because permanent income is smoother than measured income. This paper considers the evidence for the contrary position, that permanent income is in fact less smooth than measured income, so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory. Quarterly first differences of labor income in the United States are well described by an AR(1) with a positive autoregressive parameter. Innovations to such a process are "more than permanent;" there is no deterministic trend to which the series must eventually return, and good or bad fortune in one period can be expected to be at least partially repeated in the next. Changes to permanent income should therefore be greater than the innovations to measured income, and changes in consumption should be more variable than innovations to measured income. In fact, changes in consumption are much less variable than are income innovations. We consider two possible explanations for this paradox, first, that innovations to labor income are in reality much less persistent than appears from an AR(l), and second, that consumers have more information than do econometricians, so that only a fraction of the estimated innovations are actually unexpected by consumers. The univariate time series results are less than decisive, but the balance of the evidence, whether from fitting ARMA models or from examining the spectral density, is more favorable to the view that innovations are persistent than to the opposite view, that there is slow reversion to trend. The information question is taken up within a bivariate model of income and savings that can accommodate the feedback from saving to income that is predicted by the permanent income theory if consumers have superior information. Nevertheless, our results are the same; changes in consumption are typically smaller than those warranted by the change in permanent income. We show that our finding of "excess smoothness" is consistent with the earlier findings of "excess sensitivity" of consumption to income. Our analysis is conducted within a "logarithmic" version of the permanent income hypothesis, a formulation that recognizes that rates of growth of income and saving ratios have greater claim to stationarity than do changes in income and saving flows.

Abstract:
A number of studies have found that mortality rates are positively correlated with income inequality across the cities and states of the US. We argue that this correlation is confounded by the effects of racial composition. Across states and MSAs, the fraction of the population that is black is positively correlated with average white incomes, and negatively correlated with average black incomes. Between-group income inequality is therefore higher where the fraction black is higher, as is income inequality in general. Conditional on the fraction black, neither city nor state mortality rates are correlated with income inequality. Mortality rates are higher where the fraction black is higher, not only because of the mechanical effect of higher black mortality rates and lower black incomes, but because white mortality rates are higher in places where the fraction black is higher. This result is present within census regions, and for all age groups and both sexes (except for boys aged 1-9). It is robust to conditioning on income, education, and (in the MSA results) on state fixed effects, and cannot plausibly be attributed to variations in the local provision of health care.

Abstract:
We examine the social pension in South Africa, where large cash sums -- about twice the median per capita income of African households -- are paid to people qualified by age but irrespective of previous contributions. We present the history of the scheme and use a 1993 nationally representative survey to investigate the redistributive consequences of the transfers, documenting who receives the pensions, their levels of living, and those of their families. We also look at behavioral effects, particularly the effects of the cash receipts on the allocation of income to food, schooling, transfers, and savings. Two methodological issues run through our analysis. The first is the danger of interpreting simple correlations and regressions without adequate consideration of likely biases. The second is the problem of measuring the effects of a program that is determined by individual or household characteristics. We examine both in the context of the South African pension. Our results are consistent with the view that pension income is spent in much the same way as other income, and that a rand is a rand, regardless of its source.

Abstract:
Poverty counts are counts of individuals in poverty but are calculated from household or family data on income or expenditure. The transition from one to the other requires assumptions about intrahousehold allocation, about differences in needs across different people, and about the extent of economies of scale. The number of elderly in poverty, or the number of children in poverty, is sensitive to these assumptions and to differences in living arrangements across age groups. We explore the sensitivity of poverty counts to variations in assumptions about child costs and economies of scale using data from the United States and from six large Indian states. Because living arrangements of the elderly are so different in the United States and India, the use of the latter forces us to think about household structure and poverty in the United States. We argue that the official poverty counts in the United States are compromised by unrealistically high costs of children and by unrealistically high economies of scale. We provide a discussion of how economies of scale and child costs can be estimated from the data, using identifying assumptions that label private goods and adult goods, and we make calculations based on the 1990 Consumer Expenditure Survey. We obtain plausible estimates of child costs, together with a number of interesting but hard-to-explain anomalies when we try to estimate economies of scale.

Abstract:
In the analysis of tax reform, when equity is traded off against efficiency, the measurement of the latter requires us to know how tax- induced price changes affect quantities supplied and demanded. In this paper, we present various econometric procedures for estimating how taxes affect demand. We examine advantages and disadvantages of parametric methods of tax reform analysis and suggest that the nonparametric `average derivate estimator' is a useful alternative. We apply both parametric and nonparametric methods to analyze possible price reform for foods in rural Pakistan, and discuss the issues that remain to be dealt with in empirical welfare analyses.

Abstract:
We investigate the childhood determinants of adult height in populations, focusing on the respective roles of income and of disease. We develop a model of selection and scarring, in which the early life burden of nutrition and disease is not only responsible for mortality in childhood but also leaves a residue of long-term health risks for survivors, risks that express themselves in adult height, as well as in late-life disease. Across a range of European countries and the United States, we find a strong inverse relationship between postneonatal (one month to one year) mortality, interpreted as a measure of the disease and nutritional burden in childhood, and the mean height of those children as adults. In pooled birth-cohort data over 30 years for the United States and eleven European countries, postneonatal mortality in the year of birth accounts for more than 60 percent of the combined cross-country and cross-cohort variation in adult heights. The estimated effects are smaller but remain significant once we allow for country and birth-cohort effects. In the poorest and highest mortality countries of the world, there is evidence that child mortality is positively associated with adult height. That selection should dominate scarring at high mortality levels, and scarring dominate selection at low mortality levels, is consistent with the model for reasonable values of its parameters.

Abstract:
We use data from the Gallup World Poll and from the Demographic and Health Surveys to investigate how subjective wellbeing (SWB) is affected by mortality in sub-Saharan Africa, including mortality from HIV/AIDS. The Gallup data provide direct evidence on Africans' own emotional and evaluative responses to high levels of infection and of mortality. By comparing the effect of mortality on SWB with the effect of income on SWB, we can attach monetary values to mortality to illuminate the often controversial question of how to value life in Africa. Large fractions of the respondents in the World Poll report the mortality of an immediate family member in the last twelve months, with malaria typically more important than AIDS, and deaths of women in childbirth more important than deaths from AIDS in many countries. A life evaluation measure (Cantril's ladder of life) is relatively insensitive to the deaths of immediate family, which suggests a low value of life. There are much larger effects on experiential measures, such as sadness and depression, which suggest much larger values of life. It is not clear whether either of these results is correct, yet our results demonstrate that experiential and evaluative measures are not the same thing, and that they cannot be used interchangeably as measures of happiness in welfare economics.

Abstract:
According to the Gallup-Healthways Well-Being Index daily poll of the US population, taller people live better lives, at least on average. They evaluate their lives more favorably, and they are more likely to report a range of positive emotions such as enjoyment and happiness. They are also less likely to report a range of negative experiences, like sadness, and physical pain, though they are more likely to experience stress and anger, and if they are women, to worry. These findings cannot be attributed to different demographic or ethnic characteristics of taller people, but are almost entirely explained by the positive association between height and both income and education, both of which are positively linked to better lives.

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Abstract:
Durkheim’s famous study of suicide is a precursor of a large contemporary literature that investigates the links between religion and health. The topic is particularly germane for the health of women and of the elderly, who are much more likely to be religious. In this paper, I use data from the Gallup World Poll to study the within and between country relationships between religiosity, age, and gender, as well as the effects of religiosity on a range of health measures and health-related behaviors. The main contribution of the current study comes from the coverage and richness of the data, which allow me to use nationally representative samples to study the correlates of religion within and between more than 140 countries using more than 300,000 observations. It is almost universally true that the elderly and women are more religious, and I find evidence in favor of a genuine aging effect, not simply a cohort effect associated with secularization. As in previous studies, it is not clear why women are so much more religious than men. In most countries, religious people report better health; they say they have more energy, that their health is better, and that they experience less pain. Their social lives and personal behaviors are also healthier; they are more likely to be married, to have supportive friends, they are more likely to report being treated with respect, they have greater confidence in the healthcare and medical system and they are less likely to smoke. But these effects do not all hold in all countries, and they tend to be stronger for men than for women.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
We investigate nutrition and expenditure in rural Maharashtra in India. We estimate that the elasticity of calorie consumption with respect to total expenditure is 0.3=9C0.5, a range that is in accord with conventional wisdom. The elasticity declines only slowly with levels of living and is far from the value of zero suggested by a recent revisionist literature. In these Indian data, the calories necessary for a day's activity cost less than 5 percent of the daily wage, which makes it implausible that income is constrained by nutrition rather than the other way around.

Abstract:
Household scale economies are plausibly attributed to shared household public goods that make larger households better off at the same level of per capita resources. Larger households should therefore have higher per capita consumption of private goods, such as food, provided that they do not substitute too much toward the effectively cheaper public goods. The evidence shows exactly the opposite. Data from rich and poor countries indicate that, at constant per capita total expenditure, the per capita demand for food decreases with household size and that it does so most in the poorest countries, where substitution should be the least.

Abstract:
By buying cheap and selling dear, risk-neutral commodity speculators can smooth commodity prices and induce serial dependence in price even when none would exist under a simple process of supply and demand. Commodity prices are variable and strongly positively correlated from one year to the next. The variability is often explained by supply factors, and the autocorrelation by the activities of speculators. We show that this explanation is not consistent with the evidence. Speculation can substantially increase autocorrelation for prices that are weakly autocorrelated in its absence, but not to the high levels that are observed in the data.