Martin Ravallion (1952-2022)

  I first encountered Martin Ravallion's work in the last year of my bachelor's degree (“Poverty comparisons" by Martin Ravallion). The most interesting part of his study is that he deals with the fundamental questions. Martin Ravallion has made a significant contribution in growth-poverty-inequality by both raising fundamental questions and attempting to find answers to them. These basic questions include who are poor, how to identify them, can we measure the poverty, what is difference between poor in rich countries and poor in poor countries? how this poverty interacts with inequality, how growth affects these two?

Who are Poor?

Poverty in simple word can be said to be there in a society when people don’t have a minimum material level of well-being according to society’s standards.  Considering the notion of poverty, Ravallion raised three fundamental questions:

1. How do we assess individual well-being or "welfare"? 

2. At what level of measured well-being do we say that a person is not poor? 

3. How do we aggregate individual indicators of well-being into a measure of poverty? 

The first two questions are referred to as the identification issue, which deals with who is poor and how poor they are, and the last question is the aggregate problem, which deals with how much poverty exists. Household surveys provide critical information that may assist answer these concerns. These surveys' data may help us determine how many households fall short of the minimal level. Ravallion was not in favour of consumption-based measurement of poverty as household composition (number of children, adults, females, etc.) may greatly impact consumption. To comprehend who is poor, one must first establish a "basis line," often known as the poverty line. This represents the bare minimum that a person must meet in order to be free of poverty. The minimal level of consumption of specific commodities (including food) is necessary, but the fundamental question is whether this line is constant and uniform for everyone or varies for individual or group of individuals. 

Dual Poverty line:

Ravallion contends that the poverty line exists, but it varies. Poverty lines are broadly classified as absolute (poverty line which fixed in terms of the living standards indicator and fixed for all poverty comparisons) and relative (relative to something in most cases relative to the mean national income). Ravallion made three essential points:

1. The relative poverty line (i.e. relative to mean income) tends to increase with respective to the growth but that increase is higher for high income countries and low for poor countries. The relative poverty line makes sense for rich countries

2. As increase in relative poverty line is low for poor countries, the absolute poverty line makes sense for poor countries. 

3. Ravallion proposes dual poverty line one can be fixed which can reflect the level of ultra-poverty and second can be like relative poverty line which reflect the changes in overall standards of living.

This idea of having dual poverty line further strengthened the concept of different dimensions of poverty measurement. Recently multi-dimensional poverty indices are being developed and used. Ravallion raises two important questions:

1. Does single index sufficient to measure and understand the poverty?

2. Are weights used in aggregation of multiple indicators to form one index appropriate?

His position was that a series of numerous indices of multi-dimensional poverty should be utilised instead of a single multi-dimensional poverty index, and that weights should not be 'analytical,' but instead be derived from the choices made by poor people.

Poor in poor and rich countries and Middle class in developing countries:

Ravallion proposes interesting way to identify the middle-income class. Middle class in developing countries are those who are not a poor according to developing countries’ standard, but they are still poor by the standards of the rich countries. Over the period of time, the new entrant in this middle class ‘near to’ poverty defined by the given standards and hence these new members of middle class are vulnerable to any negative change in the economy.  In same global income distribution, there is much discussion on global inequality and citizen-premium individual can have by taking birth in rich countries. The literature on global inequality measure by household surveys of different countries by adjusting for prices suggests that the global inequality is declining. Ravallion criticizes these measurements as these measurements ignores the intrinsic value of national average income. The national average income does have intrinsic value (can be negative as countries with higher average national income tends to grow slowly and as relative income hypothesis says individual welfare is relative. It can be positive due to ‘citizenship premium’ and also because of better insurance facilitation and risk sharing in high income countries) and ignoring this intrinsic value can results into a mismeasurement of global inequality. He incorporates the intrinsic value of national average and suggests that global inequality is in fact higher although it is declining after 1990s. 

Growth-inequality-poverty

One of important contribution by Martin Ravallion is providing the theoretical and statistical tool to understand the relationship between growth-inequality-poverty. The growth incident curve (GIC) discussed by Ravallion and Chen (2003) is one of the powerful tool to understand the impact of growth on poor. GIC is a graphical representation of the annual growth of income or consumption for every percentile of distribution. While giving the mathematical form to the GIC, Ravallion suggests that the pro-poor growth is distributional correction of ordinary growth rate. Pro-poor growth rate is equal to ordinary growth rate when growth is distributional neutral and when distribution is in favour of poor then pro-poor growth rate is higher than ordinary growth rate. And when distribution goes against poor then pro-poor growth rate is lower than ordinary growth rate. While discussing India and China’s growth rate, he suggests that as distribution goes against the poor, in both countries pro-poor growth rate is smaller than ordinary growth rate although pro-poor growth rate of China is higher than India’s pro-poor growth rate. Therefore, the impact of growth on absolute poverty is negative but the impact on relative poverty is not clear due to distributional changes. Further he argues that the impact of growth on poverty eradication depends on the initial level of inequality. The rate of poverty reduction is equality correction of growth rate (In mathematical term, rate of poverty reduction depends on 1- inequality index and growth rate). Higher the inequality, lower the poverty reduction effect of the growth. This notion is stronger criticism to the neo-classical views on the inequality which argue that inequality should not be the objective of the policies. But Ravallion suggests that inequality impedes growth process via different channels including credit market failure (inequality -> few people grab the growth promoting opportunity, poor can’t -> decline in marginal product -> output loss from market failure high for poor -> Higher the number of poor, higher the loss -> Decline in growth rate), macroeconomic instability etc. 

Contribution of Martin Ravallion in a poverty literature is fundamental in sense that it raises the fundamental questions and gives the foundation to address them. And this foundation given by Martin Ravallion (1952-2022) continues to have an impact on welfare economic policy.

References

Ravallion, M. (1992). Poverty comparisons: A guide to concepts and methods. The World Bank.

Ravallion, M. (1998). Poverty lines in theory and practice (Vol. 133). World Bank Publications.

Ravallion, M. (1997). Can high-inequality developing countries escape absolute poverty?. Economics letters, 56(1), 51-57.

Ravallion, M. (2001). Growth, inequality and poverty: looking beyond averages. World development, 29(11), 1803-1815.

Ravallion, M. (2003). The debate on globalization, poverty and inequality: why measurement matters. International affairs, 79(4), 739-753.

Ravallion, M., & Chen, S. (2003). Measuring pro-poor growth. Economics letters, 78(1), 93-99.

Ravallion, M. (2004). Pro-poor growth: a primer. Available at SSRN 610283.

Ravallion, M. (2010). The developing world’s bulging (but vulnerable) middle class. World development, 38(4), 445-454.

Ravallion, M. (2010). Do poorer countries have less capacity for redistribution?. Journal of Globalization and Development, 1(2).

Ravallion, M. (2011). On multidimensional indices of poverty. The Journal of Economic Inequality, 9(2), 235-248.

Ravallion, M. (2012). Why don't we see poverty convergence?. American Economic Review, 102(1), 504-23.

Ravallion, M. (2019). Global inequality when unequal countries create unequal people. European Economic Review, 111, 85-97.