One of the main objectives of the 2005 ICP global round was to compute poverty-specific PPPs to estimate poverty incidences, with the objective of monitoring progress towards meeting the Millennium Development Goals. Serious statistical questions of accuracy and reliability had to be weighed in assessing alternative approaches for poverty PPPs.
The research in this area focused on: (1) identifying a suitable classification of expenditure categories for purposes of cross-country poverty comparisons, and estimating expenditure weights breakdown for countries that do not have reliable and timely household expenditure data with national survey coverage, (2) establishing correspondence between the detailed expenditure estimates from household surveys and the standard 90 plus consumption classifications of the ICP and (3) developing an aggregation methodology for poverty PPP calculation.
A Poverty Advisory Group (PAG) was formed to help address pending issues in this area. The PAG consisted of eminent scholars and experts, including Professors Angus Deaton (Princeton University), Erwin Diewert (University of British Columbia), Alan Heston (University of Pennsylvania) and Prasada Rao (University of Queensland). The group worked in close consultation with senior World Bank research managers to coordinate its efforts with the Banks poverty measurement and monitoring program.
The research in this area started in 2003 with three case studies covering two countries each in Africa, Asia, and Latin America and one country in the CIS region. The pilot results proved very useful in charting the future direction of the work. The project then moved from research phase to an implementation phase. The work on poverty PPP was managed and funded separately without adding any burden to the regular ICP initiative.