Chinese Poverty: Assessing the Impact of Alternative Assumptions

Abstract:     
This paper investigates how estimates of the extent and trend of consumption poverty in China between 1990 and 2004 vary as a result of alternative plausible assumptions concerning the poverty line and estimated levels of consumption. Our methodology focuses on the following sources of variation: purchasing power exchange rates (used to convert an international poverty line), alternative levels and distributions of private incomes, alternative estimates of the propensity to consume of different income groups, and alternative spatial and temporal price indices. We report national, urban and rural poverty estimates corresponding to distinct assumptions. It is widely believed that substantial poverty reduction took place in China in the 1990s, and we find this conclusion to be largely robust to the choice of assumptions, although estimates of the extent of Chinese poverty, and therefore of world poverty, in any year are greatly influenced by this choice.

Keywords: consumption poverty, China, sensitivity analysis, urban poverty, rural poverty, world poverty

JEL Classifications: I32, D31

Working Paper Series