How has global poverty fallen

Read “How Poverty Fell” by Vincent Armentano, Paul Niehaus and Tom Vogl.

In this episode of VoxDevTalks, host Tim Phillips speaks with Tom Vogl to understand the unprecedented decline in extreme poverty since the 1980s. This research highlights not just the scale of global poverty reduction, but also the mechanisms and complexities behind it. Vogl outlines the findings from this rich, descriptive analysis across five countries that account for much of the global decline in poverty.

In the last 40 years, extreme poverty has declined drastically

The numbers tell a story few people fully appreciate. In 1981, 44% of the global population lived in extreme poverty. By 2019, that figure had dropped to just 9%.

“In the 80s, about 2 billion people were poor by the standards we use, and now it's more like 700 million.”

In terms of population-adjusted figures, about two and a half billion more people would be poor today if poverty rates had not declined, showing how dramatic the shift has been. Yet despite the progress, the story remains overlooked.

“We tend to focus on the work that's left to be done. There’s still a lot of suffering out there.”

The importance of descriptive work in economics

The researchers aimed to expand on the key descriptive statistics provided by Abhijit Banerjee and Esther Duflo’s paper “The Economic Lives of the Poor”, by carefully tracking how people moved out of poverty over time.

“Instead of asking what the lives of poor people look like from a static lens, [we] ask a more dynamic counterpart to the question, which is: what happened over the lives of the poor as they escaped poverty?”

The team gathered long-term panel and cross-sectional data from five countries: China, India, Indonesia, Mexico, and South Africa. These nations were chosen due to both data availability and their significant contributions to global poverty reduction.

“Three of those countries—that’s China, India, Indonesia—accounted for more than two thirds of global poverty decline.”

Poverty reduction has occurred mostly within generations, not just between them

A key finding of the study is that poverty reduction has mostly occurred within generations rather than across them. As Vogl explains, they compared poverty rates of people born in the same year—birth cohorts—over time, versus replacement of older, poorer generations with younger, less poor ones.

“Those patterns imply that almost all poverty decline accrued within cohorts, as opposed to between them. Things basically got better over time in a gradual way for everyone.”

This suggests that people’s lives improved incrementally rather than a generational overhaul being solely responsible for the change.

Escaping poverty is common—but so is slipping back

The study paints a nuanced picture of movement in and out of poverty. While many escape, many also fall back.

“In Indonesia... half of the households that were initially poor at the start of the panel escape poverty over the subsequent two decades, but a quarter of the initially non-poor fall into poverty.”

This churn challenges simplified narratives of a poverty trap.

“Instead, what we see is just a broad improvement in economic circumstances with a lot of individual volatility... that sounds a lot more like climbing a slippery slope than vaulting out of a trap.”

There is no single path out of poverty

One of the most striking findings of the paper is that there is no single, dominant path out of poverty. Structural transformation—moving out of agriculture or rural areas—is less definitive than once believed.

“We find that most households exiting poverty do so without changing their status along one of these margins. Also, the households entering poverty often change their activities in ways similar to households exiting. So, we think that these results are consistent with a world in which no one path out of poverty predominates. And, so there are numerous intricate paths out of poverty.”

This refines the traditional economic narrative and emphasises that household-level improvements are complex, multifaceted, and not tied to a single transformation.

Transfers act as a safety net, rather than a driver out of poverty

The role of government and social transfers in lifting people out of poverty is often discussed, but the findings suggest that transfers primarily function as insurance.

“These transfer programs are supposed to help people when they’re down on hard times, and they seem to be getting to people exactly when they have a dip into poverty.”

The impact of female labour force participation on poverty reduction

Female labour force participation emerges as another contributing factor to global poverty reduction.

“In all of the countries we study, when a woman starts working, her household becomes more likely to exit poverty... In fact, in Mexico and South Africa, when a woman stops working, it's associated with a big increase in poverty.”

However, the effect is modest at a population level due to the relatively small number of households experiencing transitions in women’s employment. Interestingly, China presents a reverse narrative, where poverty decline is associated with women leaving the labour force.

“We think that's consistent with a world in which rising income allows women to stop working.”

Laying the groundwork for future research on poverty

Although the study does not aim to draw causal conclusions, it lays a strong empirical foundation for more targeted research.

“We don’t see our analysis shedding light on causal questions. We think instead that we’re laying out some facts, and facts are important both for shaping causal inquiries and for understanding the results.”

As a descriptive analysis, the study offers invaluable context for future policy evaluation and development economics research.

The future of poverty reduction efforts

This conversation underscores that global poverty reduction is one of the most remarkable developments of the last few decades, yet remains poorly understood. Through methodical and descriptive analysis, this research highlights the complexity, variety, and continuity of change in people's lives.

“Our goal is to lay those facts out about how poverty decline happened in several important parts of the world in a way that's comparable across places.”