Is African poverty falling faster than we think?

A new paper by Pinkovskiy and Sala-i-Martin says yes: African poverty and inequality are falling fast, it’s happening all over, and the continent’s on track to halve poverty by 2015.

Not so fast, says uber-poverty economist Martin Ravallion.

readers of their paper may be surprised to hear that there is any uncertainty about the trend decline since the mid-1990s; their main graph has 30 annual data points since 1995. But these are not real data points in any obvious sense; rather they are synthetic (model-based) extrapolations based on national accounts and growth forecasts.

We have national household surveys for all but 10 of the 48 countries in SSA since 1995. However, for only 18 countries do we have more than one survey since 1995; for 30 countries, there are is at most one survey since 1995.

Pinkovskiy and Sala-i-Martin are doing the best that can be done with bad data: they use the scant surveys to get the shape of the income distribution, but discard what the surveys tell us about income levels. They calculate levels and poverty rates by tying the distribution to national income data.

I like the Sala-i-Martin method as a rough approximation, but some of the problems with the method are outlined in a paper of Ravallion’s with Shahoua Chen.

Another caution: Africa is halving poverty using only the more optimistic data, the Penn World Tables. Chatting with Michael Clemens, he points out that World Bank data show poverty falling, but by far less. Arvind Subramanian critiques the Penn series here.

I think there are two short stories here. First, poverty has fallen a lot in Africa, and that’s good news. Maybe it’ll halve by 2015, maybe later. But there is happy news from the South. No one disagrees there.

Second, never, ever take data from low income countries too seriously. Doesn’t it strike you as odd that the World Development Indicators have annual infant mortality data for most countries in Africa for most years? It  should. Most of that data is interpolated, and the rest is (as often as not) close to made up. It’s not just the human development indicators. You wouldn’t want to be inside the sausage factory that is the GDP calculation in Chad.