Estimating poverty: A state-of-the-art of methods

Abstract

In the report "Poverty and Shared Prosperity 2018: Piecing Together the Poverty Puzzle", the World Bank points out that "as the world gets richer and progress is made in the battle against extreme poverty, we must not forget that many around the world still live in deprivation, unable to meet their basic needs, even if their income is higher than the International Poverty Line". This statement establishes two challenges: 1) understanding the complexity of poverty as a multidimensional phenomenon, and, 2) choosing an adequate measure mechanism, which increases data accuracy of poverty, obtaining the closest representation of living conditions of poor people. Nowadays, the compilation of poverty data is a high-cost task for governments due the need of a great amount of financial and human resources. This limitation makes it almost impossible to rely on immediate updated information. This article compiles the evolution of poverty measurement methods and alternatives to gather poverty data that can reduce the costs and time required to update such information.