Martin Ravallion, Georgetown University

"The Last Three Percent"

Abstract

There is a little-noticed but important difference between the World Bank’s original goal for poverty reduction and the subsequent UN Sustainable Development Goal (SDG). The Bank’s goal was a 3% poverty rate by 2030, while the SDG is to “eradicate” poverty by 2030. A simple linear projection of current progress against extreme poverty in the world does suggest that we are on track to attaining the UN’s goal. However, linear projection is deceptive if development does not reach the poorest as effectively. There are a priori reasons why the last few percent could be harder to reach with current development policies. Consistently with that hypothesis, the paper documents recent signs of a levelling off in progress for the poorest in East Asia—the star performer regionally over the longer term. This levelling off is also found on average for the 18 developing countries that have reduced their poverty rate from over 10% (around the current global rate) to under 3% during 1981-2017. Similarly, to East Asia, progress in reaching the poorest declined once the last 3% had been reached, though some countries did better than others. This suggests that “business as usual” (even by the standards of the relatively successful countries) will not suffice to eradicate extreme poverty.

Contact person: Casper Worm