WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

Fanny Dellinger

A new and simple approach on how to forecast and replicate poverty trends based on the growth elasticity of poverty (GEP) and the inequality elasticity of poverty (IEP) is developed. I use an analytically derived elasticity and combine it with data from household surveys, i.e. mean income, inequality and growth rates are all taken from household survey data. The novelty of the approach is twofold: The income distribution is approximated by the Fisk distribution and instead of National Accounting System (NAS) data only household survey data is used. I perform an illustrative ‘test’ of the model by replicating past poverty trends based on the survey data, and I find that the model generally performs well, except for highly unequal middle income countries. I then apply the model to forecast future poverty trends and to assess whether the first target of the Sustainable Development Goals, i.e. to eliminate poverty until 2030, can be reached in the different world regions. My results show that in East Asia, the target will most likely be reached. Also in Latin America and South Asia, poverty is projected to be very low by 2030. It will be very difficult to reach the target in Sub-Saharan Africa.