Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
A joint publication of the World Bank Group and the International Monetary Fund
2016 International Bank for Reconstruction and Development / The World Bank
1818 H Street NW, Washington, DC 20433
Telephone: 202-473-1000; Internet: www.worldbank.org
1 2 3 4 18 17 16 15
This work is a product of the staff of The World Bank and The International Monetary Fund with external
contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily
reflect the views of The World Bank and The International Monetary Fund, their respective Boards of
Executive Directors, or the governments they represent. The World Bank and The International Monetary
Fund do not guarantee the accuracy of the data included in this work. The boundaries, colors, denomina-
tions, and other information shown on any map in this work do not imply any judgment on the part of
The World Bank and The International Monetary Fund concerning the legal status of any territory or the
endorsement or acceptance of such boundaries.
Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges
and immunities of The World Bank and The International Monetary Fund, all of which are specifically
reserved.
This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://
creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution license, you are free
to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the follow-
ing conditions:
AttributionPlease cite the work as follows: World Bank Group. 2016. Global Monitoring Report
2015/2016: Development Goals in an Era of Demographic Change. Washington, DC: World Bank.
DOI: 10.1596/978-1-4648-0669-8. License: Creative Commons Attribution CC BY 3.0 IGO
TranslationsIf you create a translation of this work, please add the following disclaimer along with the
attribution: This translation was not created by The World Bank and should not be considered an official
World Bank translation. The World Bank shall not be liable for any content or error in this translation.
AdaptationsIf you create an adaptation of this work, please add the following disclaimer along with
the attribution: This is an adaptation of an original work by The World Bank. Views and opinions
expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are
not endorsed by The World Bank.
Third-party contentThe World Bank does not necessarily own each component of the content con-
tained within the work. The World Bank therefore does not warrant that the use of any third-party-owned
individual component or part contained in the work will not infringe on the rights of those third parties.
The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a compo-
nent of the work, it is your responsibility to determine whether permission is needed for that re-use and
to obtain permission from the copyright owner. Examples of components can include, but are not limited
to, tables, figures, or images.
All queries on rights and licenses should be addressed to the Publishing and Knowledge Division,
The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail:
pubrights@worldbank.org.
Cover image: The image on the cover is a segment of a painting by Sue Hoppe, an artist based in South
Africa. Titled Conflict Resolution, the painting explores the idea that people who seem irreversibly
divided and with little in common can unite if they focus on what they have in common instead of what
divides them. Hoppes work examines war, conflict, and the plight of children and women in Africa, but
is also inspired by nature and architecture. To learn more about Sue Hoppe and her work, visit www
.southafricanartists.com/home/SueHoppe. Used with permission; further permission required for reuse.
Cover design: Original design by Debra Naylor of Naylor Design. This edition designed by Bill Pragluski
of Critical Stages.
Contents
Foreword ix
Acknowledgments xi
Abbreviations and Acronyms xiii
Executive Summary xv
Overview 1
Part I. Monitoring global development progress 2
Development progress over the MDG period has been impressive 2
Despite solid development gains, significant work remains 4
Amid an uncertain outlook, stronger effort is needed to grow, invest, and insure 8
Evolving circumstances demand a new approachenter the SDGs 10
Part II. Development in an era of demographic change 12
Global demography is at a turning point 12
Demographic change may alter the trajectory of global development 14
Effective policies can leverage demographic change within countries 17
Opportunities exist to arbitrage demographic diversity across countries 19
References 22
Chapter 1 Ending Extreme Poverty and Sharing Prosperity: Progress and Policies 27
Extreme poverty: Updated numbers and remaining challenges 29
Assessing the incidence of poverty 29
Accounting for povertys depth and breadth 35
Aspiring to end poverty by 2030 43
Shared prosperity: Conceptual issues and recent trends 46
Revisiting the concept of shared prosperity 46
Assessing trends in shared prosperity 51
Ending extreme poverty and sharing prosperity: Policy agenda 61
Delineating policy approaches 61
Identifying key policy ingredients 67
Conclusion 77
Notes 78
References 80
Chapter 3 Global Macroeconomic Performance and Outlook: Prospects for Growth 117
Recent developments and short- and medium-term prospects 118
Update on recent macroeconomic policies 123
Quality of macroeconomic policies in low-income countries 126
Long-term convergence and growth trends 127
Conclusion 131
Notes 133
GLOBAL MONITORING REPORT 2015/2016 CONTENTS vii
Appendixes 227
A. Millennium Development Goals Report Card 229
B. The Role of Multilateral Development Banks: From MDGs to SDGs 247
C. Data sources 263
D. Methodology 279
Boxes
O.1 Drawing global poverty lines 5
1.1 Global poverty estimates based on 2011 PPP data: Methods and challenges 29
1.2 Why poverty in India could be even lower 34
1.3 Person-equivalent poverty: An intuitive headcount measure that controls for depth 36
1.4 Poverty in Latin America: Income-based versus consumption-based estimates 39
1.5 Multidimensional poverty measurement: E pluribus unum? 40
1.6 The Multidimensional Poverty Index: An example 41
1.7 Back to Basics: McNamaras prescient 1972 speech on shared prosperity 47
1.8 Who is in the B40? 64
1.9 Chiles growth-with-equity approach 73
2.1 The MDG process has played a generally positive role in supporting development 97
2.2 What is the relationship between the World Bank Groups goals and the SDGs? 99
2.3 What gets measured gets done: The importance of data 107
2.4 Mobilizing financing for development 108
3.1 The effects of demographic factors on potential output 132
4.1 Accuracy and uncertainty in population projections 138
4.2 The legacy of the HIV/AIDS pandemic on southern Africas age structure 143
4.3 The demographic transition model 151
4.4 The economic benefits of gender equality 153
4.5 Economic and demographic impact of child marriage 155
5.1 Changing concepts of dependency 166
5.2 Rapid urbanization presents a development challenge 173
5.3 Making the most out of demographic change 178
5.4 Funding the difference between consumption and production over the life cycle 183
5.5 Current demographic trends could lead to greater greenhouse gas emissions 185
6.1 The impact of demographic change on political economy 192
6.2 Pension system reform: The perspective of European countries 200
6.3 Migration and labor-market-policy reform in high-income countries 201
6.4 Environmental sustainability and demographics 203
6.5 Trade facilitation can help leverage demographic transition 207
Foreword
This is a pivotal year for global development. deep poverty. This years Global Monitor-
The Millennium Development Goals (MDGs) ing Report presents new and more intuitive
have guided countries and partners over the measures of poverty that allow us to mea-
last 15 years in improving the living condi- sure depth and help contribute to the policy
tions of the poor. We are now transitioning to dialogue and action agenda in this urgent
the Sustainable Development Goals (SDGs), area.
a new set of global targets that embrace eco- We have seen progress in achieving shared
nomic, social, and environmental priorities prosperity, with a majority of countries reg-
through 2030. istering solid income growth in the poorest
As we reflect on the hard-fought progress 40 percent of their income distributions. But
since the launch of the MDGs, we have an in many countries, the incomes of the bot-
opportunity to make important changes in tom 40 percent declined, including in half
how we approach development. We can cel- of the high-income countries. Ensuring that
ebrate that the MDGs mobilized the world income is shared more equitably should be
behind an ambitious agenda, that many coun- a priority for all countries.
tries have reduced poverty and illness, and Poverty reduction and shared prosperity
that more children today are in school than are held back by unequal progress on the
ever before. non-income dimensions of development,
Our mission, however, is far from complete. like access to essential services. We must
During the last quarter-century, more than 1 urgently address the widespread inequali-
billion people have lifted themselves out of ties of opportunity in education, health, and
extreme poverty. Yet, about one tenth of the other sectors.
global population still lives on less than $1.90
a daythe updated international poverty line. The thematic section of this report shows
Looking ahead, three critical challenges that advancing these critical challenges will
remain: take place against the background of major
demographic changes. The global population
A large percentage of the remaining poor is growing much slower in 2015 than at the
are deeply poor, with income levels far beginning of the MDG period in 2000. It is
below the poverty line. Policy action and also aging at record speed.
programs need to focus more directly on There is significant cross-country hetero-
the men, women, and children that live in geneity because while some countries still
maintain young and growing populations, making the best out of demographic change.
particularly those where global poverty is Whether people migrate for more opportu-
concentrated, others are aging, especially the nities in life or just a safer life, migration
high- and middle-income countries. Projec- together with fertility and mortalityis a
tions for global growth over the SDG period critical driver of demographic change. Along
trend down in line with the decrease in popu- with capital flows and trade, it is also a key
lation growth, but demographic change can channel through which mutual benefits can be
also be a contributor to growth and develop- realized in response to diverse demographic
ment if the right policies are adopted. trends across countries. Challenges must be
To advance development amid demo- managed, but international cooperation is key.
graphic change, we must place our policies With the right policies in place, demo-
and financing behind three strategic priorities: graphic change can contribute to the move-
grow economies in ways that are sustainable ment to end extreme poverty, boost shared
and create jobs; invest in peoples social and prosperity, and achieve the SDGs. This
economic potential; and insure against ever- years Global Monitoring Report will help
changing risks, which tend to disproportion- all countriesrich and poor aliketo navi-
ately impact the poor. These policies will be gate the challenges and to take advantage of
tailored to each countrys demographic profile. demographic change and advance on global
Moreover, the recent European refugee cri- development goals that will improve living
sis only further highlights the importance of standards around the world.
This report was prepared jointly by the staffs Rosalie Singson Dinglasan managed the desk-
of the World Bank Group and the Interna- top production of the report and handled
tional Monetary Fund (IMF), with contribu- administrative aspects, with additional sup-
tions from the following partner institutions: port from Maria Hazel Macadangdang.
the African Development Bank (AfDB), The lead author in the IMF was Lynge
the Asian Development Bank (ADB), the Nielsen, under the guidance of Tam Bayoumi,
European Bank for Reconstruction and Devel- Rupa Duttagupta, and Sean Nolan. The core
opment (EBRD), the Inter-American Develop- contributors from the IMF were: Sibabrata
ment Bank (IADB), and the Organisation for Das, Davide Furceri, Carla Intal, Vimal Tha-
Economic Co-operation and Development koor, John Wakeman-Linn, and Peichu Xie.
(OECD). Beyond these institutions, many aca- The report benefited from the following
demics and consultants also helped make this principal external contributors. The reports
report possible. The contributions of all are external advisors were James Foster (George
gratefully acknowledged. Washington University), Homi Kharas (Brook-
Philip Schellekens was lead author and ings Institution), Ronald Lee (University of
manager of the report, under the guidance of California, Berkeley), Andrew Mason (Uni-
Kaushik Basu (Senior Vice President and versity of Hawaii), and Warwick McKibbin
World Bank Chief Economist), Indermit Gill (Australian National University). Key contri-
(Director of Development Policy), and Ayhan butions from partner institutions were made
Kose (Director of Development Economics by: Debra Kertzman, Marie Christine Mon-
Prospects Group). The main authors and con- toya, and Manju Senapaty (ADB); Patricia N.
tributors from the World Bank Group were: Laverley, Luigi de Pierris, and Adeleke Salami
Syud Amer Ahmed, Vandana Chandra, (AfDB); Mandeep Bains and Jasmine Lief
Marcio Cruz, Allen Dennis, Christian Eigen- (EBRD); Erin Bautista, Tracy Betts, and Amy
Zucchi, Michele Gragnolati, Hans Lofgren, Marie Lewis (IADB) and Romina Boarini,
Maryla Maliszewska, Bryce Quillin, and Ken- Herv Boulhol, Jean-Christophe Dumont,
neth Simler. Key analytical and data support Lamia Kamal-Chaoui, Fabrice Murtin, Ana
was provided by Pinyi Chen, Huade Huo, Jin Llena Nozal and Shaun Reidy (OECD), who
Ho Kim, Csilla Lakatos, Fabian Mendez provided boxes on pensions reforms and
Ramos, Eugenia Moran-Suarez, Israel Osorio- migration and an update on the OECDs
Rodarte, and Kevin Kamto Sonke. Mark multi-dimensional living standard measure.
Felsenthal, Graeme Littler, Bruce Ross-Larson Additional contributions to boxes are fur-
and Dana Vorisek provided editorial support. thermore acknowledged from the following
people (all World Bank, except where men- Elena Bardasi, Antonella Bassani, Kathleen
tioned): Lucilla Bruni, Carmen de Paz, Andrew Beegle, Benu Bidani, Moussa Blimpo, Erik A.
Mason (University of Hawaii), Susan Bloom, Zeljko Bogetic, Carter J. Brandon,
McAdams, Emmanuel Milet (University of Bndicte de la Brire, Javier Bronfman
Geneva), Marco Scuriatti, Sara Troiano, and Horovitz, Maurizio Bussolo, Csar Caldern,
Quentin Wodon. The Global Poverty Working Shubham Chaudhuri, Luc Christiaensen,
Group provided data and analytical input on Fionna Douglas, Roberto Echandi, Sidney J.
extreme poverty and shared prosperity, with Edelmann, David Evans, Tim Evans, Cornelius
special thanks to: Raul Andres Castaneda Fleischhaker, Alan Fuchs, Emanuela Galasso,
Aguilar, Aziz Atamanov, Shaohua Chen, Minh Franck O. Gbaguidi, Frederico Gil Sander,
Cong Nguyen, Andrew Dabalen, Reno Caren Grown, Stephane Guimbert, Lucia
Dewina, Carolina Diaz-Bonilla, Francisco H. Hanmer, Phillip J. Hay, Yumeka Hirano,
G. Ferreira, Roy Katayama, Nandini Krish- Monika Huppi, Elena Ianchovichina, Malathi
nan, Leonardo Ramiro Lucchetti, Jose S. Jayawickrama, Dean M. Jolliffe, Andy
Montes, Rose Mungai, David Locke New- Kotikula, Nicole Klingen, Aart C. Kraay,
house, Monica Yanez Pagans, Ana L. Revenga, Megumi Kubota, Thomas Laursen, Kihoon
Prem Sangraula, Liliana D. Sousa, Hiroki Lee, Xue Li, Peter Kusek, Samira Lindner,
Uematsu, Joo Pedro Wagner De Azevedo, Audrey Liounis, Gladys Lopez-Acevedo, Luis-
Christina Wieser, and Nobuo Yoshida. Data Felipe Lopez-Calva, Leonardo Lucchetti,
support on the Maquette for Millennium Mattia Makovec, Bill Maloney, Eliana R.
Development Goal Simulations (MAMS) for Matulevich, Cristina Meja, Steisianasari
Brazil and Japan was provided by Martin Mileiva, Rinku Murgai, Raj Nallari, Ambar
Cicowiez (CEDLAS-Universidad Nacional de Narayan, Mario Negre, Antonio Nucifora,
La Plata). Dennis Botman (IMF), Sebastien Philip OKeefe, Eko Pambudi, Samuel Pienk-
Dessus, Cornelius Fleischhaker, Edith Kikoni, nagura, Alberto Portugal, Sonia Plaza, Espen
Lars Moller, Antonio Nucifora, Sergei I. B. Prydz, Martin Rama, Dilip Ratha, Michele
Shatalov, and Quentin Wodon also provided Ruta, Imam Setiawan, Sudhir Shetty, Joana
data and feedback for the MAMS work, while Silva, Carlos Silva-Jauregui, Hoon S. Soh,
Saniya Ansar, Leora Klapper, David Reher Sebastian Stolorz, Lynne Sherburne-Benz,
(Universidad Complutense de Madrid), and Xiaolun Sun, Marvin Taylor-Dormond, Hans
Robert Schmidt (University of Richmond) Timmer, Augusto de la Torre, Matthew Wai
contributed data and feedback on other ana- Poi, Jan Walliser, Bagus A. Wirapati, Liang Yu,
lytical aspects and simulations. The MDG Qinghua Zhao.
report card and other related contributions The World Banks Publishing and Knowl-
were prepared by Mahyar Eshragh-Tabary, edge Unit managed editorial services, design,
Neil Fantom, Juan Feng, Masako Hiraga, production, and printing of the report, with
Haruna Kashiwase, Buyant Khaltarkhuu, Susan Graham and Kia Penso as the produc-
Hiroko Maeda, Umar Serajuddin, Rubena tion editing team. Others who assisted with
Sukaj, Emi Suzuki and Dereje Wolde. the reports publication included Denise
Guidance from the Executive Directors of Bergeron, Aziz Gkdemir, Patricia Katayama,
the World Bank and the IMF and their staff Nancy Lammers, and Stephen McGroarty.
during discussions of the draft report is grate- Marta Gottron copy-edited the report. The
fully acknowledged. The report also benefited reports dissemination and outreach were
from many useful comments and suggestions coordinated by Phillip J. Hay, working with
from World Bank and IMF management and Mark Felsenthal, Vamsee K. Kanchi, and
staff in the course of preparation and review. Mikael E. Reventar. Graeme Littler and Kath-
Specific thanks in this respect go to: Ahmad erine Rollins provided web support.
Ahsan, Jorge A. de Thompson R. Araujo,
Abbreviations and Acronyms
With 2015 marking the transition from the poverty have become more pressing issues in
Millennium to the Sustainable Development many countries, including in those where the
Goals, the international community can cele- bottom 40 percent saw their incomes decline.
brate many development successes since 2000. Even in a world of single-digit extreme pov-
Despite the global financial crisis, economic erty, non-income disparities, such as limited
growth was generally strong and robust. access to quality education and health services,
About 1 billion people rose out of extreme pose a bottleneck to sustained poverty reduc-
poverty. Most developing countries saw solid tion and shared prosperity. Wider environ-
income growth for the bottom 40 percent of mental sustainability concerns are a major
their income distribution. Millions of children challenge throughout the world, in regard to
who were unlikely to survive their fifth birth- climate change and its impact on the natural
day passed beyond these critical years and resources upon which many of the poorest
went on to school in ever greater numbers. depend, such as water. In sum, while develop-
The incidence of preventable diseases such as ment progress was impressive, it has been
AIDS, malaria, and tuberculosis is falling. The uneven and a large unfinished agenda remains.
share of those with access to clean water and Three key challenges stand out: the depth
better sanitation has risen. Overall, the Mil- of remaining poverty, the unevenness in shared
lennium Development Goals played an impor- prosperity, and the persistent disparities in
tant role in galvanizing the global development non-income dimensions of development. First,
community, and that experience will help the policy discourse needs to focus more
drive progress toward achievement of the Sus- directly on the poorest among the poor. While
tainable Development Goals by 2030. pockets of ultra-poverty exist around the
Despite solid development gains, progress world, Sub-Saharan Africa is home to most
has been uneven, and significant work remains. of the deeply poor. To make depth a more
With an estimated 900 million people in 2012 central element in policy formulation, easy-to-
living on less than $1.90 a daythe updated communicate measures are neededand this
international poverty lineand a projected report attempts a step in this direction with
700 million in 2015, extreme poverty remains person-equivalent measures of poverty. Sec-
unacceptably high. It has also become more ond, the eradication of poverty in all of its
concentrated in Sub-Saharan Africa and South forms requires steady growth of the incomes
Asia. Addressing moderate poverty and miti- of the bottom 40 percent. Yet, economic
gating the vulnerability of falling back into growtha key driver of shared prosperity
may not be as buoyant as it was before the is stabilizing at a plateau of 2 billion. Yet,
global financial crisis. Third, unequal progress underneath these global trends lies consider-
in non-income dimensions of development able diversity in the direction and pace of
requires addressing widespread inequality of demographic change. Regional and subre-
opportunity, which transmits poverty across gional patterns vary across and within coun-
generations and erodes the pace and sustain- tries. To frame the impact of diverse
ability of progress for the bottom 40. To meet demographic trends on development across
these challenges, three ingredients are core to countries, this report lays out a new typology
the policy agenda: sustaining broad-based of demographic change, applied to the latest
growth, investing in human development, and 2015 UN population statistics.
insuring the poor and vulnerable against The diversity of demographic change at the
emerging risks. country level presents unique opportunities
In view of these challenges, the Sustainable and challenges to the worlds centers of global
Development Goals aim to scale up impact in poverty and engines of global growth. More
a changing world through a more integrated than 90 percent of poverty is concentrated in
approach to development. Recognizing the pre- and early-dividend countries with swell-
interconnections between development objec- ing working-age populations that lag in key
tives, the SDGs embrace an ambitious and human development indicators and continue
holistic vision to foster inclusive and sustain- to register rapid population growth. In these
able development with scaled-up impact. countries, the demographic transition to lower
Shared by all countries, they recognize that fertility creates a golden opportunity to raise
collective action is required. Global chal- living standards. Over 85 percent of global
lengesresilient financial systems, common economic activity and 78 percent of global
resources, climate changerequire interna- growth over the last 15 years can be attributed
tionally coordinated solutions. Meeting SDG to late- and post-dividend countries, which
investment needs will depend on shifting from have much-lower fertility rates and some of the
billions in official development assistance to highest shares of the elderly in the world. In
trillions in investments of all kinds, unlock- these countries, population aging may weaken
ing, leveraging, and catalyzing public and pri- growth prospects. To be sure, demographic
vate resources. The SDGs will need to be change is not inherently good or bad and pres-
pursued in a changing world, with new oppor- ents opportunities and challenges everywhere.
tunities and challenges brought by evolving In each case, policies can make a critical differ-
megatrends, including climate change, contin- ence in how demographic change affects prog-
ued globalization, rapid urbanization, and, as ress toward the development goals.
discussed in the special theme of this report, Navigating the dynamic implications of
demographic change. demographic change will require sound poli-
Profound changes in global demography cies informed by a long-run perspective and
have the potential to alter the trajectory of tailored to a nations demographic context. To
global development over the SDG period. eradicate persistent poverty, the centers of
Global demography is at a turning point: the global poverty need to accelerate their demo-
worlds population is growing more slowly graphic transition, invest in their young and
and is aging at an unprecedented rate. These still-growing populations, and lay the founda-
trends reflect past development successes tions for sustained growth. Among other pol-
womens empowerment, improved education, icy initiatives, these goals require better
better child, maternal and reproductive health, education and health services, as well as greater
and increased longevity. The working-age empowerment of women. Facing weakening
share of the population peaked in 2012 and is economic dynamism, the lower-fertility, richer
now on the decline. Aging means that popula- countries that make up the current engines of
tion increases are reflected in larger numbers global growth need to address headwinds aris-
of older people. The global count of children ing from shrinking labor forces. They also
GLOBAL MONITORING REPORT 2015/2016 EXECUTIVE SUMMARY xvii
need to adapt their policies and institutions to immigration; younger countries can produce
foster healthy and productive aging. Selected labor-intensive products. But challenges need
policy priorities include mobilizing savings for to be managed and international cooperation
productive investment in human and physical is key.
capital, as well as strengthening welfare sys- With effective policies, this era of intense
temspensions, health care, and long-term demographic change may herald a period of
carewhile ensuring fiscal sustainability and sustained development progress. Global
protection for the elderly and vulnerable. demography is changing and has the potential
Policy opportunities also exist to arbitrage to alter the trajectory of global development
demographic diversity across countries. The profoundly. To speed up progress, countries
extent of demographic diversity across coun- need to step up efforts to sustain broad-based
tries is starker than ever, with large and inevi- growth, invest in people, and insure the poor
table impacts on the global economy. Returns and vulnerable against ever-changing risks.
on capital and labor are affected. Comparative However, they must undertake these measures
advantages in trade are altered. Given these by taking into account demographic change.
implications, flows of capital, labor and goods Where possible, this requires capturing and
and services will be affected and, together, they harnessing demographic dividends. Elsewhere,
can help respond to growing demographic it requires adaptation. Everywhere, it calls for
imbalances globally. Mutual benefits can be turning demographic change into one of the
realized: capital can flow to rising consumer most consequential development opportuni-
markets; older countries can benefit from legal ties of our times.
MONITORING GLOBAL DEVELOPMENT PROGRESS: A SNAPSHOT
Projections show that the global poverty While income poverty fell rapidly during the
rate may have fallen to single digits in 2015. MDG-era, a large unfinished agenda remains
Yet, the number of poor remains high. for the SDGs with respect to non-income goals.
2,000 1,959 40 Extreme income poverty 71 27
Global number of poor (millions)
37.1 1,751
35 Prevalence of undernourishment 35 52
With extreme poverty concentrating in Prosperity needs to be better shared with the
Sub-Saharan Africa, more focus is needed bottom 40 percent of the income distribution,
on the poorest among the poor. especially in high-income countries.
60 40
Share of global poverty (%)
50
Number of countries
30
17
40
3
20 5
30
20 10 22 19
4
17
10 7
0
0 Low-income Lower-middle- Upper-middle- High-income
1990 1999 2011 2012 2015a countries income income countries
countries countries
South Asia East Asia and Pacific Positive income growth for the bottom 40%
Rest of the world Sub-Saharan Africa Negative income growth for the bottom 40%
Note: Based on the $1.90 poverty line and 2011 PPP.
a. Forecast.
With less buoyant growth expected at the We need to invest in people and protect them
start of the SDG period, increased effort is from risk with adequate human development
needed to sustain broad-based growth. policies and social protection.
5 Bottom
4 40 percent
median country (% change)
GDP per capita growth,
3
2
123 countries
1
0
1
2
3
4
5
0 20 40 60 80 100
2001 2005 2010 2015 2020
Income status at each percentile, 2011
Projected
Emerging market Low-income Advanced Extremely poor Moderately poor
countries developing countries economies Vulnerable Middle class and rich
Note: Based on the $1.25 poverty line and 2005 PPP. Extreme poverty (< $1.25 a day),
moderate poverty ($1.25$4), vulnerability ($4$10), middle class and rich (> $10).
Sources: PovcalNet (2015), World Bank Global Database for Shared Prosperity, World Economic Outlook.
DEVELOPMENT IN AN ERA OF DEMOGRAPHIC CHANGE: A SNAPSHOT
Global demographic change is intense: the Underneath global trends lies stark diversity,
working-age share peaked, the population with countries facing different opportunities
grows much slower and ages at record speed. to capture demographic dividends.
70 3 3.0
65
2.0
2
1.5
60
1.0
1
55 0.5
0.0
50 0 0.5
1950 1970 1990 2010 2030 2050 Pre-dividend Early-dividend Late-dividend Post-dividend
Share of working age population (left axis) countries countries countries countries
Population growth rate (right axis) 19802015 201550
Pre- and early-dividend countries need to Late- and post-dividend countries need
spark demographic transition, invest in to sustain productivity growth amidst
human development and create jobs for the demographic headwinds, and adapt institutions
youth bulge. and policies to rapid population aging.
10 30
Fertility rate (births per woman), 2015
25
8
20
6
15
4
10
2
5
0 0
45 55 65 75 85
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Life expectancy (years), 2015
Pre-dividend countries Early-dividend countries Pre-dividend countries Early-dividend countries
Late-dividend countries Post-dividend countries Late-dividend countries Post-dividend countries
Demographic fault lines separate centers of Freer flows of capital, trade and, especially,
global poverty needing further development people present an increasingly compelling
and engines of global growth facing rapid global opportunity to arbitrage demographic
aging. diversity across countries.
60 140
Migrant stock by destination
120
50
in 2013 (millions)
100
40 80
Percent
60
30
40
20 20
10 0
To pre- To early- To late- To post-
0 dividend dividend dividend dividend
Pre-dividend Early-dividend Late-dividend Post-dividend countries countries countries countries
countries countries countries countries From post-dividend countries From early-dividend countries
Share of global GDP growth Share of global poverty From late-dividend countries From pre-dividend countries
The world is at a global development cross- prosperity, and the persistent disparities in
roads, as 2015 marks the end of the 15-year non-income dimensions of development. The
window for achieving the Millennium MDGs were helpful in galvanizing global
Development Goals (MDGs) and the begin- development progressan experience that
ning of the Sustainable Development Goals will help drive the achievement of the SDGs
(SDGs). The world met the MDG target of by 2030.
halving the global poverty rate in 2010, ve The world is also at a crossroads for global
years ahead of schedule. The latest data sug- demographic trends. Global population
gest that extreme poverty has continued its growth is slowing: the share of the working-
decades-long descent. Still, poverty remains age population (1564 years) peaked in 2012
unacceptably high, with an estimated 900 at 66 percent and is now falling, while the
million people in 2012 living on less than total number of children (ages below 15 years)
$1.90 a daythe new international poverty will remain at a plateau of around 2 billion
line; the projected number for 2015 under the into the next decades. These trends reflect
new line is 700 million people. Poverty also is past successes in developmentwomens
becoming increasingly concentrated in Sub- empowerment, improved education, better
Saharan Africa, where its depth and breadth reproductive health services, and increased
remain an overriding challenge. The MDGs longevity. But the direction and pace of
were successful in reducing income poverty, demographic change vary starkly across
but they were less successful in ameliorating countries, with sizable disparities between
non-income deprivations, such as access to the centers of global poverty (marked by high
quality education or to basic health services. fertility) and the engines of global growth
Few countries have combined growth with (marked by rapid aging). The latter comprise
reducing the level of environmental exter- almost all high-income and most middle-
nalities and carbon emissions. Yet, increasing income economies. In many cases, they have
land degradation, overshing, deforestation, completely eliminated extreme income pov-
extreme weather events, and urban air pollu- erty, but they continue to face challenges in
tion endanger recent progress. Looking for- sharing the benets of increased prosperity,
ward, three challenges stand out: the depth of particularly if aging weakens their economic
remaining poverty, the unevenness in shared dynamism. The former include lower-income
1
2 OVERVIEW GLOBAL MONITORING REPORT 2015/2016
One of the most remarkable achievements lift millions of people out of poverty (fig-
during the MDG era was the significant ures O.1c and O.1d). As the number of poor
decline in the share of the extremely poor declined, the average shortfall of income
in the global population. The first MDG below the poverty line improved as well from
targetcutting the extreme poverty rate to 13.1 percent in 1990 to 3.7 by 2012.
half its 1990 level by 2015was met five Based on the updated poverty line of
years ahead of schedule. Poverty was on the $1.90 a day, the estimate for 2012 puts the
decline before the MDG period, but progress number of extremely poor people at about
was fastest in the 2000s (gures O.1a, O.1b). 900 million, or 12.7 percent of global popu-
Particularly notable are the substantial reduc- lation (table O.1). Global poverty estimates
tions in poverty in East Asia and the Pacic have been updated to reect a re-estimated
and South Asia, where the rapid growth international poverty line of $1.90 a day, new
and development of China and India helped 2011-based purchasing power parity (PPP)
a. The global poverty rate declined considerably b. Extreme poverty is less than half its 1990 level
25 1,500
20
14.1 983 897
15 12.7 1,000
702
9.6
10
500
5
0 0
1990 1999 2011 2012 2015a 1990 1999 2011 2012 2015a
c. The number of extremely poor declined everywhere, d. The poverty rate remains high in Sub-Saharan Africab
including most recently in Sub-Saharan Africa
70
2,000
60
Number of poor people (millions)
50
Poverty rate (%)
1,500
40
30
1,000
20
10
500 0
East Asia Europe Latin South Sub- World
and the and America Asia Saharan
0 Pacific Central and the Africa
1990 1999 2011 2012 2015a Asia Caribbean
World Top 3 regions East Asia and Pacific 1990 1999 2011 2012 2015b
South Asia Sub-Saharan Africa Rest of the world
TABLE O.1 Global poverty is assessed with the re-estimated poverty line
Historical Headline Projection
Global Monitoring Report 2015/2016 unveils poverty understanding of poverty levels in some countries or
data based on a new $1.90 international poverty line, the relative ranking of poverty across countries.
using 2011 purchasing power parity (PPP). To be com- Including this years revision, there have been four
parable, the global poverty estimates are based on a major changes to the World Bank Groups estimate
common poverty line across all countries. As with the of the international poverty line, reecting different
previous line of $1.25 a day, in 2005 prices, the new methodologies and PPP indexes. The revisions to PPP
line is calculated by averaging the national poverty indexes in 1985, 1993, and 2005 corresponded to
lines of the 15 poorest developing countries. It repre- poverty lines of $1.01, $1.08, and $1.25, respectively.
sents a very low threshold standard of living which is Different methods have been followed to estimate
believed to correspond to the minimum costs of basic these lines. Beginning with the $1.25 line, the pov-
needs. Changes in this value over time thus reect the erty line was calculated by taking the average of the
increasing cost of obtaining these basic needs. 15 poorest countries (Chad, Ethiopia, The Gambia,
A key driver behind the raising of the international Ghana, Guinea-Bissau, Malawi, Mali, Mozambique,
poverty line to $1.90 is the release of the 2011 PPP Nepal, Niger, Rwanda, Sierra Leone, Tajikistan, Tan-
index. Cross-country comparisons of poverty rates zania, and Uganda).a This same practice was followed
require PPP indexes, produced by the International for the $1.90 revision.
Comparison Program. New rounds of PPP indexes
estimate the cost of living across countries and pro- a. The list of the 15 poorest countries used to estimate
the $1.25 poverty line based on the 2005 PPP, as described
vide price data for countries not covered by previous
in Ravallion, Chen, and Sangraula (2009), does not nec-
rounds. Introducing new PPPs typically require the essarily represent the current 15 poorest countries in the
re-estimation of the international poverty line and world. Some of the countries originally included in this list
can involve, in some cases, signicant changes in our may have made signicant progress.
FIGURE O.2 Experiences on shared prosperity dier: While the majority of countries have seen solid growth in
B40 incomes, many countries have not
Annualized B40 income growth (bars with no black outline) and average population income growth (shown with a black outline) for a ve-year period,
circa 200712 (%)
Philippines
South
sia
Lao PDR
Rwanda
and
Indone
nam
Ugan
Ma
Africa
Tanz
Thail
gro
dia
ur it
na
Viet
ne
bo
da
ania
Chi
Ma
ania
nte
Ca m
Ma
ur i
Mo
a
tvi
tiu
Ni
li
ia
La
n
g
y
Se
to
eri
ar
Es
ia
ng
ne
a
Et
an
Hu
ga
hi
M hu
l
op
ala Lit ia
ia
w rb
Ma To i Se nia
da go me
ga
sc Ar ia
ar an
Ne Alb ia
pa ven ubl
ic
Bh l Slo Rep
uta y z
n Kyr
g blic
Pak epu
is tan ch R
Cze
10%
Indi ania
a Rom
Sri L ria
anka 5% B a
u lg
Bangla
desh Croatia
Tunisia 0%
Poland
Iran, Islamic 5%
Rep. Georgia
Jordan Ukraine
Iraq Turkey
Bolivia Moldova
Peru Slova
k Rep
ublic
y Russ
U rugua ian F
eder
Kaz ation
guay akh
Para Bel
stan
il
Braz aru
s
Gre
t ina ece
en Ire
Arg bia lan
lom Ice d
Co do
r lan
ua Ita d
Ec ma ly
na Cy
Pa ile pr
Ch lic us
Lu
b
xe
pu
Po
ca
Re
Ri
bo
r tu
Un
n
o
sta
a
ur
xic
ga
ic
ite
Sp
g
Co
in
Me
l
do
De
dK
ain
m
la
Do
a
Uni
ma
nm
ing
alv
s
ia
ura
Neth
ate
ted
S
Franc
tral
ark
do
way
d
El
Belgium
nd
Austria
a
Finland
Germany
Sweden
m
erlan
Israel
Gu
Canad
Aus
erla
Sta
Ho
Nor
t
nds
es
Switz
share of Sub-Saharan Africa reects slower The policy discourse needs to focus more
poverty reduction there amid rapid popula- fully on the poorest among the poor. Poverty
tion growth: in 2012 the regions poverty headcount statistics present distorted views
rate stood at 42.7 percent, which is only 14.1 of the spatial distribution of poverty and the
points lower than in 1990 (gure O.1d). pace of progress over time. Two countries
GLOBAL MONITORING REPORT 2015/2016 OVERVIEW 7
could record the same poverty headcount With extreme poverty on the decline glob-
rate, where in one country poverty is shallow ally, a second key challenge is the uneven-
and in the other it is very deep. Similarly, a ness in shared prosperity for the B40. The
country may be successful in lifting its poor- B40 may include many possible populations.
est citizensthe poorest of the poorfrom Among developing regions, the income of the
abject poverty to a level just below the pov- richest person among the B40 makes that
erty line. Such improvement would not show person either extremely or moderately poor,
up in a poverty headcount measure. Measures particularly in Sub-Saharan Africa and parts
that account for depth, such as the poverty of East Asia, or vulnerable, primarily in Latin
gap (shortfall from the poverty line), are not America and the Caribbean and parts of
as simple to grasp as headcount measures. To Europe and Central Asia (Map O.1). In coun-
make depth a more central element of pol- tries where reducing poverty and vulnerability
icy formulation, easy-to-communicate mea- is key, the shared prosperity focus on the B40
sures are neededand this report attempts a thus enhances that focus. Among richer coun-
step in this direction with the new person- tries, the B40 may encompass the relatively
equivalent approach. It nds that, in person- poor. Promoting healthy B40 income growth
equivalent terms (a benchmark poor person represents an ongoing challenge, as well as an
with a typical income shortfall), the pov- opportunity to make the development process
erty headcount ratio in Sub-Saharan Africa more inclusive and socially sustainable.
for 2012 rises from 42.7 to 46.7 percent, In many countries, stepped-up effort is
whereas that for South Asia falls from 18.8 to needed to sustainably build shared prosper-
10.6 percent. ity. The latest comparable household data
MAP O.1 The income of the richest person in the bottom 40 percent differs greatly across countries
IBRD 41778
AUGUST 2015
social aspects. Environmental sustainabil- Economic growth may not transmit into
ity concerns, particularly regarding natural poverty reduction as easily as in the past.
resources, environmental health, and ecosys- First, with global poverty at 37.1 percent
tem sustainability, need to enter more fully in 1990, many poor people were just below
into economic decision making. the poverty line, leading to a large percent-
age point reduction in poverty for a given
(distribution-neutral) increase in household
Amid an uncertain outlook, stronger
income growth. Now that the headline rate is
effort is needed to grow, invest, and
12.7 percent (latest most reliable estimate for
insure
2012), the same distribution-neutral increase
Sustained economic growth has been the in GDP is unlikely to produce as much poverty
key building block of poverty reduction and reduction since comparatively more people
shared prosperity during the MDG era. After will be situated in the lower end of the income
the launch of the MDGs in 2000 until the distribution. Second, the deepest pockets of
global financial crisis in 2009, developing poverty may be less readily reached through
economies grew on average by 6.6 percent growth as many of the remaining poor live in
a year, compared with just over 2 percent a narrowly diversied natural-resource-based
year in advanced economies. Even during the economies and fragile and conflict-affected
depth of the nancial crisis and its immediate states. Poverty is less responsive to growth
aftermath, developing economies grew by 5.5 in such economies because the availability
percent, while advanced economies stalled. of jobsthe main channel through which
Moreover, this strong economic expansion growth uplifts the pooris more limited.
was accompanied by greater income conver- Capital-intensive, natural-resource sectors
gence. The global Gini coefcienta mea- may generate growth but are likely to have
sure of inequality in income distribution weaker linkages to job creation.
declined. The global per capita distribution Given the unfinished agenda and the
of income exhibited greater global income uncertain outlook, additional efforts are
convergence during 200015, in part thanks needed to promote broad-based growth,
to rapid income growth in major economies investment in people, and insurance against
like China and India. risks. These three priorities require a strategy
Economic growth is expected to be less that promotes competitive economies and
buoyant in the period ahead. Global growth stable business environments, thus ensur-
is expected to trend down somewhat in ing broad-based growth and income-earning
201630 relative to the MDG period. This opportunities to benefit the poor and the
slowing may reect weaker levels of invest- B40. Investment in human development is
ment and the gradually diminishing growth needed to tackle non-income deprivations and
dividends from information and communi- inequalities of opportunity so that these same
cation technology. Moreover, demographic groups can gain the capacity to benet from
trends in major advanced and emerging and contribute to economic growth and pros-
markets could be a drag on economy-wide perity (Fryer and Levitt 2004; Paxson and
growtheven if they also present signicant Schady 2007). And robust insurance mecha-
opportunities to raise living standards. Lower nisms are required so that peoplealthough
growth prospects threaten the income conver- not necessarily jobs, rms, or industriesare
gence of developing and high-income econo- protected against evolving risks for individu-
mies. Developing economies require strong als, nations, and the world, all in the spirit of
growth to support the hard-won gains of the nurturing a competitive economy and foster-
MDG era. Looking ahead, a number of risks ing an inclusive society.
remain as geopolitical tensions, the tightening An environment that fosters sustainable
of nancial conditions, and lower commodity growththe first big priorityis complex.
prices present sources of uncertainty. Among economies that have sustained growth
10 OVERVIEW GLOBAL MONITORING REPORT 2015/2016
FIGURE O.3 Five characteristics have been key among countries that reduce inequalities of opportunity are
that sustained rapid growth crucial for enabling poorer households to
invest in their human potential. As techno-
Effective
logical change increasingly affects the struc-
leadership and governance Macroeconomic stability ture of economies, worker skills must evolve.
so markets work Robust insurance mechanismsthe third
priorityare needed to protect the extremely
poor from destitution and the vulnerable
Future orientation against evolving risks, including climate
to meet investment needs change. These mechanisms can help families
avoid irreversible losses and prevent them
from having to make decisions with costly
long-run implications. Noncontributory
Outward orientation Market orientation
to leverage and discipline to guide structural change social assistance programs for the chronic or
extremely poor protect them from destitution
Source: GMR team adaptation from Commission on Growth and Development 2008. and promote investments in their childrens
human capital. Social insurance programs
prevent people from falling back into pov-
for extended periods, ve characteristics are erty, whether from individual illness, tempo-
key (gure O.3): effective leadership and gov- rary unemployment, or localized droughts.
ernance; macroeconomic stability so markets Generally, the poor in developing countries
work; a market orientation to guide structural are disproportionally affected by shocks.
change; an outward orientation to achieve One reason is that the poor have lower access
scale and impose discipline; and a future ori- to resources and savings to absorb the impact
entation to boost savings and meet investment of shocks, whether they come from climate
needs (Commission on Growth and Develop- change or political, economic, or finan-
ment 2008). Sustained growth can bite deep cial instability. Climate change may have a
into poverty and contribute to shared pros- greater impact on the poor relative to other
perity, but for that to happen it must create types of shocks because the poor tend to
jobs (Gill and Revenga forthcoming). Growth be more dependent on agriculture and have
is most effective in reaching low-income peo- more perilous access to water. Insurance
ple when it leads to productive employment. mechanisms are needed to help countries
Policy makers must be mindful of the impacts cope with systemic shocks.
of job creation and income growth on the
extreme poor and the B40. That will require
Evolving circumstances demand a new
attention not only to the pace of economic
approachenter the SDGs
growth but also to its pattern.
To leverage human resources to their full- Several megatrends are playing a critical
est potentialthe second priorityfocused role in framing what will be feasible through
investment is needed in human development. 2030. These include the unprecedented
The capacity of households to promote their increase in global connectedness, including
well-being depends on the assets they control, the cross-border movements of trade, ser-
the returns on these assets, and how inten- vices, capital, and people; the shift of the
sively the assets can be used. Human capital global economic center of gravity toward the
assets have both intrinsic value (contributing East; the pace of technological change and
to a persons well-being) and instrumental adoption; the move toward urbanization; the
value (raising a persons capability to earn evolution of demographic trends; the general
income). The unequal distribution of assets failure of countries to secure long-term envi-
may prevent poorer households from bor- ronmental sustainability; and the impact of
rowing to accumulate human capital, thus human activity on climate change. Trade,
perpetuating poverty and inequality. Policies nance, communications, and migration are
GLOBAL MONITORING REPORT 2015/2016 OVERVIEW 11
FIGURE O.4 Communication and trade are increasing global economic integration
a. Global trade and finance are now more integrated b. Internet and mobile phone use is skyrocketing
120
80
60
60
40
40
20
20
0 0
1980 1984 1988 1992 1996 2000 2004 2008 2012
4
4
1
7
00
2
05
65
75
85
Internet
20
19
19
19
95
Mobile phone
19
Source: Kose and Ozturk 2014. Source: World Development Indicators, World Bank.
Note: Trade integration reflects ratio of total imports and exports to
global GDP. Financial integration is the ratio of total financial in-flows and
out-flows (including bank loans, direct investment, bonds, and equities)
to global GDP.
all expanding rapidly, bringing the world up impact. The SDGs recognize that collec-
closer together and increasing economic inte- tive action is needed to address global chal-
gration (gure O.4). lenges such as the need for more resilient
These megatrends may help or hinder international nancial systems, the sharing of
efforts to reach the development goals. On the transboundary resources, and, most urgently,
positive side, the shift in the global economic slowing and coping with climate change.
center of gravity to developing countries cre- Meeting the SDG investment needs requires
ates opportunities. The deepening of global a shift from billions in official develop-
trade and investment connections could help ment assistance to trillions in investments
reverse slipping potential growth in some to unlock, leverage, and catalyze domestic
countries, and technological change is also public resources and private capital flows.
proving to be a driver of productivity growth. The SDGs need to be pursued in a changing
On the other hand, increased connectedness world, with new opportunities and challenges
permits the rapid spreading of economic crises brought by evolving global megatrends that
in one country to the rest of the world. Urban- shape development prospects. A central chal-
ization is associated with economic growth, lenge in this respect is demographic change.
but it can also give rise to urban slums and The SDGs recognize the interconnections
environmental damage. Lower fertility rates between development objectives. There are
reflect improved health and labor market important interactions between development
opportunities for women, yet falling shares goals, and they cannot be effectively pursued
of the working-age population can produce separately from each other. For example,
headwinds to growth and put the scal sus- progress on health goals depends on invest-
tainability of many public services at risk. ments in infrastructure that provides access
Cognizant of these trends, the SDGs rep- to safe water and improved sanitation. Simi-
resent a greater level of ambition and a more larly, limiting carbon monoxide (CO2) emis-
holistic vision of sustainable development. sions to slow global warming requires the
By shifting focus to quality, the SDGs seek modernization of energy supplies. Hence,
to address the un nished agenda and scale the SDGs explicitly articulate goals that are
12 OVERVIEW GLOBAL MONITORING REPORT 2015/2016
integrated and indivisible and balance the infrastructure gaps without imperiling public
three dimensions of sustainable development: debt sustainability; increasing access to IMF
the economic, social, and environmental concessional resources to provide countries
(UN 2015). The breadth of the SDGs has with a wider safety net should they encounter
raised questions about whether the scale of balance of payments pressures; and strength-
the agenda will dilute focus, especially when ening the effectiveness of the Funds engage-
some development exigencies are likely to ment with countries in post-conflict and
be more pressing than others at the country fragile situations. The IMF is also deepening
level. Still, the SDGs are not simply a menu its focus on aspects of economic, social, and
of development objectives, and policy mak- gender inclusion and environmental protec-
ers and other stakeholders are called upon to tion, which are core SDG objectives.
pursue the goals as an integrated whole.
The World Bank Group (WBG) supports
the 2030 agenda for sustainable development.
Part II: Development in an
In 2013, the WBG established clear goals to
era of demographic change
guide its own work: to end extreme poverty
Global demography is at a turning point
globally by 2030, promote shared prosperity
in every country, and to do so in ways that The world population is growing more slowly
sustainably secure the future of the planet and aging at unprecedented speed. While the
and its resources, promote social inclusion, global population has tripled since the post-
and limit the economic burdens that future war baby boom era (gure O.5a), popula-
generations inherit. These goals, conceptu- tion growth is now slowing markedly (gure
ally and in practice, are fully aligned with the O.5b). After increasing for ve decades, the
SDGs: end poverty, promote prosperity, and proportion of people ages 15 to 64the typi-
improve peoples well-being while protecting cal working-age populationreached a peak
the environment. The WBG is committed to in 2012 and is now starting to fall (figure
partnering closely with its client governments O.5c). The rise in the share of dependents is
and its development partners to further the driven mainly by an increase in the share of
2030 agenda. Building on and learning from elderly (gure O.5d). These global trends
the experience of the MDGs, the WBG will slower population growth and population
help to secure nancing; help to deliver devel- aginghave been shaped by a steady decline
opment solutions at the country, regional, in fertility rates and a rapid improvement in
and global levels; and work with partners to life expectancy. In the 1950s total fertility
help convene, connect, and coordinate. rates were more than 5 births per woman,
The International Monetary Fund (IMF) but since then they have steadily declined to
actively participated in the debate on the 2.45 births per woman in 2015. A further
new global development agenda and it is decline is projected through 2050. In paral-
strongly committed, within the scope of its lel, average life expectancy at birth has risen
mandate, to support the SDGs. The IMF will from 47 years in 1950 to 72 years in 2015,
help member countries achieve the SDGs by while infant mortality has declined. The
providing advice on strengthening macro- coming decades are expected to see further
economic policies, technical assistance on improvements in life expectancy, although at
building capacity, and resources to boost eco- a slower pace than in the past.
nomic resilience against adverse shocks. New Global population dynamics are driven
IMF initiatives in support of member coun- mainly by the demographic transition in
tries development efforts include enhanc- developing countries. Falling mortality rates
ing support for countries building domestic and still-high fertility led to a child bulge
capacity in tax policy and administration; in developing countries in the 1960s and
expanding assistance, through a package of 1970s, while population growth slowed in
tools, for countries seeking to address large high-income countries. In most developing
GLOBAL MONITORING REPORT 2015/2016 OVERVIEW 13
FIGURE O.5 Global demography is at a turning point: Slower growth, unprecedented aging
a. The global population has tripled since the 1950s b. An unprecedented period of global
and is expected to reach over 9 billion by 2050 population growth has ended
10 2.5
8 2.0
7
6 1.5
5
4 1.0
3
2 0.5
1
0 0
1950 1970 1990 2010 2030 2050 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
c. The working-age share of the global population d. The aged share of the global population
is estimated to have peaked in 2012 is rising, while the child share is falling
70 40
Share of global population, ages 1564 (%)
35
Share of global population (%)
65 30
25
60 20
15
55 10
50 0
1950 1970 1990 2010 2030 2050 1950 1970 1990 2010 2030 2050
Children ages 014 Adults ages 65+
e. Total fertility rates have declined, though less so f. Half of global population growth between 2015 and
in Sub-Saharan Africa 2050 will be in Sub-Saharan Africa
Share of global population growth (%)
7 60
Number of births per woman
6 50
5 40
4
30
3
20
2
10
1
0 0
High- East Asia Europe Latin Middle South Sub- High- East Asia Europe Latin Middle South Sub-
income and and America East and Asia Saharan income and and America East and Asia Saharan
countries Pacific Central and the North Africa countries Pacific Central and the North Africa
Asia Caribbean Africa Asia Caribbean Africa
1950 2015 2050 19502015 201550
FIGURE O.6 Most of the global population lives Early-dividend countries are mostly
in early- and late-dividend countries lower-middle-income countries further
along the fertility transition. Fertility rates
45 have fallen below four births per woman
Share of global population, 2015 (%)
Demographic characteristics
Pre-dividend
Early-dividend
Late-dividend
Post-dividend
This map was produced by the Map Design Unit of The World Bank.
The boundaries, colors, denominations and any other information
shown on this map do not imply, on the part of The World Bank
No data
GSDPM
Map Design Unit
Group, any judgment on the legal status of any territory, or any
endorsement or acceptance of such boundaries.
AUGUST 2015
Percent
The development characteristics among 30
8
poverty (gure O.8). In pre-dividend coun-
7
tries, almost half the population lives below
6
the poverty line. Although early-dividend
5
countries have a much lower poverty rate,
4
they still account for half of the global poor,
3
largely because this group includes Bangla-
2
desh and India. Many pre-dividend countries
1
have managed to reduce poverty headcount
0
rates, but rapid population growth has lim-
45 55 65 75 85 ited the reduction in the number of the poor.
Life expectancy (years) While poverty is dominated by pre- and
Pre-dividend countries Early-dividend countries early-dividend countries, it should not be
Late-dividend countries Post-dividend countries ignored in late-dividend countries like China,
which accounts for a tenth of global poverty.
Source: World Bank calculations based on data from UN 2015.
Note: The total fertility rate is the average number of births a woman in a
Late-dividend countries are experiencing
given country has, assuming she lives to the end of her reproductive life. demographic change at a much faster pace
GLOBAL MONITORING REPORT 2015/2016 OVERVIEW 17
than many post-dividend countries, poten- FIGURE O.9 Aging countries accounted for most of global growth
tially resulting in headwinds to economic during 200014
growth. In the 1950s, late-dividend countries
had double the fertility rates of post-dividend 60
TABLE O.2 Policy priorities that leverage demographic change at the country level
Country type Policy priorities Recommendations
Pre-dividend Sparking demographic transition Improve maternal and child health by strengthening provision of basic
Improving human development outcomes to health care services.
reduce fertility rates Expand education without letting girls fall behind.
Empower women and give them access to comprehensive family
planning services.
Early-dividend Accelerating job creation Invest in human capital, including vocational and technical training.
Creating productive jobs for the growing share Enhance labor market mobility.
of the population in working age to reap the rst
Reduce barriers to female labor force participation.
demographic dividend
Strengthen conditions conducive to savings and job creation (public
services underpinning private sector activity, contract enforcement;
nancial inclusion; protection of labor rights).
Late-dividend Sustaining productivity growth Continue mobilization of savings for productive investment.
Creating conditions necessary to reap the Ensure that public policies encourage labor force participation of
second demographic dividend and beginning both sexes.
to prepare for aging
Design cost-eective and sustainable systems for welfare and human
development that address current needs (including health, child
care, education, and support to the vulnerable elderly) and that can
be adapted to meet the needs that emerge as aging proceeds.
Post-dividend Adapting to aging Complete reforms of welfare systemsincluding pensions, health care,
Maintaining and improving welfare in the and long-term carethat ensure scal sustainability and, as part
context of a declining working-age share and a of integrated approaches, protection of the vulnerable, elderly and
growing old-age share others, and encouragement of work among those who are able.
Raise labor force participation and productivity (including incentives
for participation targeted at women and older cohort; and lifelong
learning for all).
Pursue policies that encourage higher birth rates by making it easier
for men and women to combine child rearing and participation in
the labor market.
Source: GMR team elaboration.
the first demographic dividend and lay the education, particularly for girls; and empow-
groundwork for the second dividend. In late- ering women in the household, in the labor
dividend countries, where fertility rates are force, and in the economy more generally
low and the working-age population share is (Bloom et al. 2009; Soares and Falco 2008;
high (but shrinking), the key challenge is to World Bank 2015a). Given their potential to
sustain productivity growth by mobilizing reduce total fertility rates and reduce child
savings for productive investment, while also mortality, these three policy areas can be
preparing for aging. Finally, in post-dividend considered interactive accelerators that
countries the overriding policy priority is to spark demographic transition, in addition to
adapt to aging through efforts to maintain being important development goals in their
welfare and accommodate changing demands own right. Concluding the unnished MDG
for services while at the same time encourag- agenda related to these policies should be con-
ing a rise in fertility rates toward the replace- sidered one of the priorities for pre-dividend
ment level. countries.
Policy action focused on human develop- To maximize demographic dividends,
ment may help pre-dividend countries prog- early-dividend countries need to focus on
ress to the next stage in the demographic interventions that help absorb new workers
transition. These policies include improv- into productive jobs. The rst demographic
ing maternal and child health; expanding dividend arises only to the extent an economy
GLOBAL MONITORING REPORT 2015/2016 OVERVIEW 19
is able to create productive jobs for the grow- work arrangements, lifelong learning pro-
ing working-age population. In addition, grams, and improved incentives in the social
early-dividend countries need to lay the protection systems to continue working in
foundation for the second demographic divi- old age (Bussolo, Koettl, and Sinnott 2015).
dend. There is a need to accelerate job cre- In addition, adjustments to fiscal and
ation, by ensuring that both the supply side social protection systems will generally be
(particularly human capital development) necessary to address the challenges posed by
and the demand side (job-intensive eco- demographic changes in aging countries (par-
nomic growth) of job creation are sufcient ticularly those in the late- and post-dividend
to absorb the labor force across income lev- stages). Given the growing need for spending
els (Fox and Sohnesen 2012; Lee and Mason on the aged, tax increases may not be a viable
2006; Troiano 2015; World Bank 2013b). option, in view of likely price distortions and
These policies would also include the removal disincentives. Governments should strive to
of barriers to female labor force participa- enhance the efciency and cost-effectiveness
tion, given persistent gender gaps in the labor of overall and aging-related spending. Pen-
market. sion reforms need to ensure a minimum level
Late-dividend countries face the challenge of protection for the vulnerable elderly. Low-
of sustaining the rst demographic dividend ering coverage and adequacy of pension sys-
into the more durable second demographic tems may raise vulnerability among current
dividend. How much of the second dividend and future elderly generations, whose private
these countries can realize will depend on the savings are limited. Pension systems, health
accumulation of physical and human capital. care, and long-term care will have to be put
Capital accumulation is, in turn, affected by on scally sustainable paths without neglect-
policies. For example, late-dividend countries ing the social safety nets that all those ser-
need to implement sound nancial sector pol- vices represent (Bussolo, Koettl, and Sinnott
icies to help mobilize private savings in sup- 2015; World Bank 2015b). In particular, pop-
port of investments. Given projected declines ulation aging will naturally bring about an
in the share of the population that is of work- increase in pension and health expenditure.
ing age, a more capital-intensive development
path is often needed to support growth. Poli-
Opportunities exist to arbitrage
cies that encourage the geographic expansion
demographic diversity across countries
of the nancial sector and broaden access to
banks and other intermediating institutions In pursuing their domestic agendas, countries
may help channel savings to investments in can also arbitrage and in the process lever-
small and medium enterprises, as well as age demographic change at the global level
underserved regions. through cross-border capital ows, interna-
In post-dividend countries, the challenge tional migration, and global trade. Differences
is to maintain and improve living standards in the demographic dynamics at the coun-
in the face of shrinking labor supply and ris- try level are producing important spillovers
ing proportions of the elderly. The decline in across countries, contributing to changes in
the working-age population share could be comparative advantages underpinning trade,
partly offset by family-friendly measures that and in the returns earned by labor and capi-
facilitate a rebound in fertility rates to near tal. These changes require the implementation
replacement levels. Raising the labor force of policies to support enhanced trade in goods
participation and employment prospects of and services as well as greater factor mobility.
older people will become increasingly press- This would encourage labor-intensive produc-
ing as population aging progresses. A more tion to shift from aging countries to younger
inclusive labor market requires adequate societies or migration from countries with
incentives to sustain human capital invest- growing working-age populations to coun-
ment through the life cycle, more flexible tries where the number of workers is falling,
20 OVERVIEW GLOBAL MONITORING REPORT 2015/2016
TABLE O.3 Policy priorities that leverage the differences in demographic change across countries
Area of focus Policy priorities Recommendations
International Promoting foreign provision of education services Ease visa requirements for the free ow of international students
trade to boost educational opportunities in countries and academics; address qualication recognition issues; reduce
with a high share of youths, or to facilitate limits on foreign ownership; and increase transparency of
lifelong learning for aging countries government education regulations
Using foreign providers to meet demand for health Address restrictions aecting the physical presence of foreign
services in aging countries suppliers, foreign equity ceilings, or barriers on the movement of
Supporting comparative advantage in producing health care professionals across borders
labor-intensive products in labor-abundant Streamline customs, border and transit procedures; improve
countries logistics and transport services and extend physical
infrastructure; tackle remaining tari and nontari barriers on
goods trade
Migration Promoting legal migration ows to counteract the Formulate clear migration policies; enforce minimum wage laws;
decline in working-age populations in aging provide adequate information to migrants about their rights
countries and to mitigate labor market pressures and obligations; facilitate their contribution to and benets from
in labor-abundant countries social protection schemes and public services; sanction potential
Reducing the burden of brain drain in sending abuses by rms.
countries Develop comprehensive and targeted policies to retain, attract
talent; encourage return migration.
International Attracting international capital ows to young, Create favorable investment climate; strengthen macroeconomic
nance labor-abundant countries stability, the nancial sector, and governance.
Addressing challenges posed by large and volatile Undertake measures to relax investment barriers at the domestic,
capital ows to developing countries regional, and global level.
Supporting opportunities for capital-abundant Introduce macroeconomic policies to address risks from volatile
countries to increase returns and diversify capital inows, supervision, regulation, strong institutions.
investment portfolios Provide investment guarantees or technical assistance.
Source: GMR team elaboration.
FIGURE O.10 Early-dividend countries are more migration, and capital ows to ensure smooth
specialized in labor-intensive exports adjustment to demographic change.
In coming decades, global trade flows
100 High-skilled services are projected to continue shifting toward
Low-skilled services countries earlier in their demographic tran-
Share of exports by sector, 2015 (%)
High-skilled
80
manufacturing
sition, possibly yielding substantial benets
Low-skilled for poorer countries. Differences in demo-
manufacturing graphic change may lead to comparative
60
Natural resources advantages that influence trade patterns.
Agriculture Countries with slower population growth
40 tend to become more capital-abundant over
time, while countries with faster population
20 growth become more labor-abundant (gure
O.10). Trade can reduce poverty through
faster growth, more economic diversifica-
0
Pre- Early- Late- Post- tion, and greater macroeconomic stability.
dividend dividend dividend dividend It can also facilitate through knowledge
countries countries countries countries embodied in goods and services production,
Source: World Bank calculations. boosting productivity and growth. Knowl-
edge transfers from trade in health and edu-
thereby delivering non-tradable services such cation products and services, for instance,
as elderly care (table O.3). International have contributed significantly to develop-
cooperationin addition to domestic mea- ment, while medical imports are associated
suresis needed on trade facilitation, legal with lower mortality rates.
GLOBAL MONITORING REPORT 2015/2016 OVERVIEW 21
Trade policy measures can be powerful FIGURE O.11 Post-dividend countries tend to
tools in enabling countries to adapt to the receive the most migrants
opportunities and challenges in demographic
140
the impetus for international capital flows. demography in mind as countries pursue
Facilitation of such ows would allow young, broad-based growth, invest in human devel-
labor-abundant countries to attract much- opment, and insure against evolving risks.
needed capital. In the initial stages of the Each countrys demographic context mat-
demographic transition, investment demand ters greatly in setting priorities in these three
exceeds savings, stimulating current account areas, de ning the opportunities and chal-
deficits. The opposite tends to be true for lenges for ending poverty and sharing pros-
countries in later stages of demographic perity. The centers of global poverty need
transition. Capital flows could generate an to spark the transition to lower fertility and
increase in labor productivity and wages, accelerate development by taking advantage
contributing to faster growth in young, labor- of demographic shifts and absorbing youth
abundant countries. For sending countries, bulges in the labor market. The engines of
increasing investment in young economies can global growth need to address headwinds
provide opportunities to raise capital returns to growth and adapt institutions and poli-
and diversify investment portfolios, especially cies to aging populations. Because the cen-
if labor-abundant countries create favorable ters of global poverty continue to face sig-
investment climates, ensure macroeconomic nicant poverty reduction challenges and the
stability, deepen their nancial sectors, and engines of global growth are weakening, all
strengthen governance (World Bank 2013a). countries must grasp the opportunities stem-
Improving institutional quality and devel- ming from cross-border capital ows, inter-
oping the nancial sector will attract capital national migration, and global trade. With
ows to pre- and early-dividend countries. such strategies in place, the world stands a
Countries early in their demographic transi- better chance of successfully ending extreme
tion can promote foreign direct investment poverty by 2030 and lifting the well-being of
by reducing the economic, political, and lower-income people throughout the world.
legal risks facing investors. Host countries
can relax investment barriers, such as caps
on foreign ownership and requirements for
References
joint ventures. Home countries can facili- Borgy, V., X. Chojnicki, G. Le Garrec, and C.
tate outows through investment guarantees Schwellnus. 2010. Macroeconomic Conse-
and technical assistance. At the global level, quences of Global Endogenous Migration:
reforms are needed to allow countries to take A General Equilibrium Analysis. Annals of
full advantage of international investment Economics and Statistics 97/98: 1339.
agreements, including by reforming invest- Bloom, D. E., D. Canning, G. Fink, and J. E. Fin-
ment dispute settlements. Macroeconomic lay. 2009. Fertility, Female Labor Force Par-
policies need to address risks from volatile ticipation, and the Demographic Dividend.
capital inows in tandem with sound nan- Journal of Economic Growth 14 (2): 79101.
cial supervision and regulation. Minimum Brauer M., G. Freedman, J. Frostad, A. van
levels of nancial and institutional develop- Donkelaar, R. V. Martin, F. Dentener, R. van
ment are needed to reduce the riskiness of Dingenen, K. Estep, H. Amini, J. S. Apte, K.
nancial liberalization (Sahay et al. 2015). Balakrishnan, L. Barregard, D. Broday, V.
International regulatory coordination can Feigin, S. Ghosh, P. K. Hopke, L. Knibbs, Y.
bring bilateral and multilateral benefits, Kokubo, Y. Liu, S. Ma, L. Morawska, J. S.
including by strengthening and institution- Texcalac Sangrador, G. Shaddick, R. T. Bur-
alizing swap lines that provide liquidity for nett, H. R. Anderson, T. Vos, M. H. Forouza-
non-key currencies. nfar, A. Cohen. 2015. Ambient Air Pollution
Exposure Estimation for the Global Burden of
* * * Disease 2013. Paper submitted for publica-
Strategies to sustainably end povert y tion, Institute for Health Metrics and Evalua-
and build shared prosperity need to keep tion, University of Washington, Seattle.
GLOBAL MONITORING REPORT 2015/2016 OVERVIEW 23
Bussolo, M., J. Koettl, and E. Sinnott. 2015. Division of Labor. Journal of Political Econ-
Golden Aging: Prospects for Healthy, Active, omy 116 (6): 1058104.
and Prosperous Aging in Europe and Central Troiano, S. 2015. Population Dynamics and the
Asia. Washington, DC: World Bank. Implications for Economic Growth, Poverty
Commission on Growth and Development. 2008. and InequalityWhat Is Relevant for South-
The Growth Report. Strategies for Sustained ern Africa. World Bank, Washington, DC.
Growth and Inclusive Development. Wash- Tyers R., and Q. Shi. 2007. Demographic
ington, DC: World Bank. Change and Policy Responses: Implications for
Fox, L., and T. P. Sohnesen. 2012. Household the Global Economy. World Economy 30 (4):
Enterprises in Sub-Saharan Africa: Why They 53766.
Matter for Growth, Jobs, and Livelihoods. UN (United Nations). 2013. Trends in Interna-
Policy Research Working Paper 6184. World tional Migrant Stock: Migrants by Destina-
Bank, Washington, DC. tion and Origin. United Nations database,
Fryer R. G., and S. D. Levitt. 2004. Understand- POP/DB/MIG/Stock/Rev.2013, Department of
ing the Black-White Test Score Gap in the First Economic and Social Affairs.
Two Years of School. Review of Economics . 2015. Transforming our World: The
and Statistics 86 (2): 44764. 2030 Agenda for Sustainable Development.
Gill, I., and A. Revenga. Forthcoming. Grow, United Nations, New York.
Invest, InsureA Plan to End Poverty. Wash- UNCTAD (United Nations Conference on Trade
ington, DC: World Bank. and Development). 2015. World Investment
Kenny, C., and S. Dykstra. 2013. The Global Report 2015: Reforming International Invest-
Partnership for Development: A Review of ment Governance. Geneva: United Nations.
MDG 8 and Proposals for the Post-2015 Devel- Walmsley, T. L., A. Winters, and S. A. Ahmed.
opment Agenda. Policy Paper 026, Center for 2011. The Impact of the Movement of
Global Development, Washington (July). Labour: Results from a Model of Bilateral
Kose, A. M., and E. O. Ozturk. 2014. A World Migration Flows. Global Economy Journal
of Change: Taking Stock of the Past Half Cen- 11 (4).
tury. Finance and Development 51(3):611. World Bank. 2006. Global Economic Prospects
Lee, R., and A. Mason. 2006. What Is the 2006: Economic Implications of Remittances
Demographic Dividend? Finance and Devel- and Migration. Washington, DC: World Bank.
opment 43 (3). . 2013a. Capital for the Future: Saving
OECD (Organisation for Economic Co-operation and Investment in an Interdependent World.
and Development). 2013. International Migra- Global Development Horizons. Washington,
tion Outlook 2013. Paris: OECD Publishing. DC: World Bank.
Paxson C., and N. Schady. 2007. Cognitive . 2013b. World Development Report:
Development among Young Children in Ecua- Jobs. Washington, DC: World Bank.
dor: The Roles of Wealth, Health, and Par- . 2015a. From Potential to Reality: What
enting. Journal of Human Resources 42 (1): Will It Take to Harness a Demographic Divi-
4984. dend in Africa? Washington, DC: World Bank.
Sahay, R., M. C ihk, P. NDiaye, A. Barajas, S. . 2015b. Live Long and Prosper: Aging in
Mitra, A. Kyobe, Y. N. Mooi, and S. Reza East Asia and the Paci c. Washington, DC:
Yousefi. 2015. Financial Inclusion: Can It World Bank.
Meet Multiple Macroeconomic Goals? IMF WTO (World Trade Organization). 2012. World
Staff Discussion Note, International Monetary Trade Report 2012: Trade and Public Poli-
Fund, Washington, DC. cies: A Closer Look at Non-Tariff Measures
Soares, Rodrigo R., and B. L. S. Falco. 2008. in the 21st Century. Geneva: World Trade
The Demographic Transition and the Sexual Organization.
Part I
Monitoring Global
Development Progress
Development progress over the past 15 years has been impressive. Most developing countries
grew at a sustained strong pace during the Millennium Development Goal (MDG) monitoring
period, notwithstanding the negative impact from the 2009 global nancial crisis. Together with
strong per capita growth, income dierences between countries were reduced, and about 1 bil-
lion people exited extreme poverty. The latest available data suggest that extreme poverty con-
tinued its descent and a majority of countries saw solid income growth for the bottom 40 percent
of the income distribution. Progress was also observed in other dimensions. Millions of children
who were unlikely to survive to their fth birthday have passed beyond these critical years and
gone on to school in ever greater proportions. The incidence of preventable diseases such as
HIV/AIDS, malaria, and tuberculosis is falling, and the share of people with access to clean water
and better sanitation has risen markedly. A few countries have succeeded in growing while
simultaneously reducing the level of environmental externalities and carbon emissionsa virtu-
ous state of green growth.
Despite such development gains, signicant work remains. MDG outcomes have been marked
by signicant heterogeneity in dimensions, across regions, and between urban and rural areas,
resulting in unevenness in poverty reduction and shared prosperity. Extreme poverty remains
unacceptably high and geographically concentrated in areas where both the depth and breadth
of poverty are grave. Many countriesespecially high-income onessaw bottom 40 incomes
decline in recent years, likely due to the recent crisis, while the bottom 40 persistently lag in their
access to quality social services, such as education and health, due to inequality of opportunity.
Sustainability concerns have risen, endangering recent progress. For example, in most coun-
tries, land degradation, overshing, deforestation, and extreme weather events are increasingly
impacting rural livelihoods and spurring migration, while urban air pollution has emerged as a
leading cause of ill health in developing countries.
At the same time, new opportunities and challenges are emerging in connection with chang-
ing prospects for growth and evolving global megatrends. For many countries, the near-to-
medium-term outlook suggests weakened economic dynamism. Moreover, global demographic
trendsexplored in part IIcould weigh down on longer-term growth prospects. In rural areas
where resource dependence is high and opportunities for economic diversication are limited,
burgeoning cities oer both opportunities and create accelerating economic, social, and envi-
ronmental challenges. Further globalization can bring new opportunities to connect with global
centers of dynamism, as can the ever-quickening pace of technological innovation and adoption.
But a more connected world also means that crises can transmit more easily to poorer coun-
tries, while fragility and insecurity can be passed to richer countries. Climate change is bringing
warmer and more extreme weather, requiring urgent mitigation and adaptation eorts. A rising
frequency of humanitarian crises stemming from pandemics, natural disasters, war, conict, and
rising extremism may reverse development gains.
Building on the MDGs, the Sustainable Development Goals (SDGs) will scale up impact to
address the unnished development agenda in a changing world. The SDGs represent a greater
level of ambition and a more holistic vision of sustainable development in a number of ways.
They incorporate a greater focus on quality rather than quantity and more explicitly recognize the
inter-connectedness of development challenges and hence the need for integrated multisectoral
approaches. They emphasize the need to protect the planet and leave no one behind. They are
meant to be shared by all countries, rich and poor, recognizing the collective action needed to
address global challenges, such as more resilient international nancial systems, shared trans-
boundary resources, and most urgently, the central challenge facing the world todayclimate
change. Meeting the investment needs of the SDGs, the global community will need to move the
discussion from billions in ocial development assistance to trillions in investments of all kinds
and unlock, leverage, and catalyze both domestic public resources and private capital ows.
Part I of this report explores these themes in the following sequence:
Chapter 1 examines the progress made on sustainable poverty reduction and shared prosper-
ity, as well as the policies that are needed to make further progress.
Chapter 2 reviews the development successes during the MDG period and examines the
unnished agenda left for the SDGs.
Chapter 3 assesses the macroeconomic performance over the MDG period, provides the near-
and medium-term outlook, and looks into the future toward 2030.
1
Ending Extreme Poverty and
Sharing Prosperity:
Progress and Policies
The world faces urgent and complex challenges to sustainably end extreme poverty and share
prosperity. The latest data suggest that extreme poverty is continuing its three-decade-long
descent. Yet it remains unacceptably high, deep, and concentrated in some regions, with the
poor experiencing not only income shortfalls but also deprivations in multiple non-income
dimensions. Many countries have seen solid progress in shared prosperity over the past decade
as measured by income growth in the bottom 40 percent of the income distribution. This
progress has been uneven, however, with pronounced disparities in non-income indicators
between the bottom 40 and the top 60 percent. Only a few countries have succeeded in grow-
ing while simultaneously reducing the level of environmental externalities in their economies,
and environmental trends in the majority of countries are not sustainable. To sustainably end
extreme poverty and share prosperity, additional policy efforts will be needed to cope with
uncertainties about the pace of economic growth and its incidence, as well as contextual fac-
tors such as the difficulties of reaching the remaining poor. Key priorities will be to deliver sus-
tainable broad-based economic growth, invest in the human development potential of people,
and insure the poor and vulnerable against evolving risks.
To guide its work toward a world free of indicators: a reduction in the global head-
poverty, the World Bank Group in 2013 count ratio of extreme poverty (the share of
established two clear goals: end extreme the population whose income is below the
poverty by 2030, and promote shared pros- international poverty line) to 3 percent by
perity. Along with the requirement to pur- 2030, and the promotion of income growth
sue these goals sustainablyeconomically, in the bottom 40 (B40) percent of the income
environmentally, and sociallythe two goals distribution in each country.1
are comprehensive in nature. They are fully This chapter updates the assessment of
aligned to support the Sustainable Develop- progress toward these two goals in a sustain-
ment Goals (SDGs) set by the United Nations able manner. The poverty goal is examined
to replace the Millennium Development through three lenses: the evolution of income
Goals (see chapter 2). To evaluate progress, poverty based on the new international pov-
the two goals are measured by two overall erty line that has been re-estimated at $1.90
27
28 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
BOX 1.1 Global poverty estimates based on 2011 PPP data: Methods and challenges
World Bank estimates of global extreme poverty rely The fi rst issue faced in using the 2011 PPP data
on many different data sourcesamong them are is that the global extreme poverty line needs to be
the price data that measure differences in the cost of expressed in 2011 PPP values rather than in 2005
purchasing a bundle of goods across countries. This PPP values. World Bank (2015c) describes the various
measure of purchasing power parity (PPP) is used to approaches that have been used in the past to estimate
ensure that the global poverty line reflects the same a value for the global poverty line, and, in all cases, the
real standard of living across countries. In 2014 the aim has been to estimate a value that reflects how the
International Comparison Program released PPP data poorest countries in the world define minimum, basic
from 2011, the first global update since the 2005 needs. The earlier approach that resulted in the $1.25
round. New PPP data have implications for both the global poverty line was based on taking the average
value of the global poverty line and the estimated value of national poverty lines from 15 of the poorest
number of people below this line in each country. The economies in the world (Chad, Ethiopia, The Gam-
poverty estimates released in this Report are based on bia, Ghana, Guinea-Bissau, Malawi, Mali, Mozam-
the new 2011 PPP data following an approach that bique, Nepal, Niger, Rwanda, Sierra Leone, Tajiki-
emphasizes comparability with previous global pov- stan, Tanzania, and Uganda). a These 15 national
erty estimates. poverty lines come from a sample of 74 national
(box continues next page)
30 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
BOX 1.1 Global poverty estimates based on 2011 PPP data: Methods and challenges
(continued)
poverty lines, and the lines were converted into 2005 comparing the rate of change in PPP factors (PPP =
PPP dollars. The new $1.90 poverty line is based on PPP 2011 / PPP 2005 ) relative to the rate of change in
the same 15 national poverty lines previously used, domestic consumer price indexes (CPI = CPI 2011 /
except these lines are now converted from local cur- CPI 2005 ) for each country. If these two ratios deviate
rency into U.S. dollars using the new 2011 PPP data. significantly for a particular country, the 2011 PPP
The average value of these lines in 2011 rounds to poverty estimates will likely differ significantly from
$1.90, which is the new extreme poverty line for the extrapolated 2005 PPP estimate for 2011.
global counts.b Because further investigation is needed for some
Although no new PPP data were collected for countries, the poverty update for these countries will
developing countries between 2005 and 2011, many continue to be based on extrapolations of 2005 PPP
global indicators have nonetheless been reported data. When examining all countries that participated
annually in PPP terms throughout this period. One in both the 2005 and 2011 International Comparison
method for handling the interim years, used by the Program, the standard deviation of the ratio CPI/
World Development Indicators, is to estimate extrap- PPP is 0.3 and its simple average is 1.47. This aver-
olated PPP conversion factors by the relative rates age indicates that the change in price levels used for
of inflation between the United States and the local measuring inflation was typically greater than the
country. Global poverty estimates do not directly change in PPP prices, which is also linked to the rel-
use the extrapolated PPP estimates but follow an atively large increase in the global poverty line. The
approach that is conceptually equivalent to using set of countries in PovcalNet for which this ratio is
the extrapolations. Specifically, the current value of more than two standard deviations from the mean
consumption in local currency is brought back or was examined.c For the purposes of global poverty
forward to the relevant PPP benchmark year (such as estimation, large deviations in this ratio are inter-
2005 or 2011) by the national consumer price index preted as evidence that the price data (both CPI and
(CPI), and then the benchmark year PPP conversion PPP) require further investigation before the estimates
factor is applied to obtain the PPP U.S. dollar value are updated. Therefore, for these countries (Bangla-
of consumption. The poor are then identified as those desh, Cabo Verde, the Arab Republic of Egypt, Iraq,
whose consumption (or income for some countries) in Jordan, and the Republic of Yemen), the 2012 global
PPP U.S. dollars is less than the global extreme pov- poverty estimates are based not on the 2011 PPP data,
erty line ($1.90 in 2011 PPP U.S. dollars). but rather on the $1.25 poverty line and the extrapo-
An implication of the extrapolation approach is lated 2005 PPP data. Countries where the ratio is more
that one can estimate poverty based on either new than one standard deviation from the mean were sub-
PPP data or the extrapolated old PPP data for any sequently examined on a case-by-case basis. For two
given year. For example, when the 2005 PPP data of them (Cambodia and the Lao Peoples Democratic
were released, Chen and Ravallion (2010) used the Republic), the exploratory analysis indicated that the
new 2005 data to reestimate the global poverty line poverty estimates based on 2005 PPPs are more consis-
and headcount and observed significant changes in tent with regional patterns than those suggested by the
the poverty line and average value of consumption 2011 PPPs. Therefore, the 2012 poverty estimates for
(relative to expectations based on the extrapolated Bangladesh, Cabo Verde, Cambodia, Jordan, and Lao
PPP adjustment factors from the 1993 PPPs). Because PDR are based on the extrapolated 2005 PPP data and
of changes in the poverty line and the new PPP data, not the new 2011 PPP data.
Chen and Ravallions analysis indicated that past esti- A further complicating issue concerns estimating
mates of global poverty needed to be adjusted upward poverty for the Middle East and North Africa region.
by 500 million persons. With the latest release of the In particular, Iraq, the Syrian Arab Republic, and
global poverty estimates, an explicit rule was imposed the Republic of Yemen are countries in protracted
to reduce the scope for large differences between the conflict whose poverty estimates will unlikely reflect
new poverty estimates based on the 2011 PPP data the true current state of poverty in these countries.
and the expected poverty estimates based on the
extrapolated 2005 PPP data. This rule was based on (box continues next page)
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 31
BOX 1.1 Global poverty estimates based on 2011 PPP data: Methods and challenges
(continued)
The measure of well-being in Egypt is expected to be erty lines retained the prior official poverty line for
substantially revised in the near future in a way that urban areas but recommended a higher rural poverty
will affect the poverty estimate, and it was decided to line based on corrections for biases in past price defla-
wait until release of the revised measure to report on tors. These new poverty lines imply nearly half the
poverty there. Algerias latest available household sur- cost-of-living difference (22 percent in 2011) between
vey data (1995) are too old to produce reliable poverty urban and rural areas, as compared with the old pov-
estimates. Therefore, country-level poverty estimates erty lines. Estimates for India in this Report have been
for Algeria, Egypt, Iraq, Syria, and the Republic of updated to reflect the lower urban-rural gap implicit
Yemen are omitted. Consequently, for this region, in the new lines.
poverty estimates are reported only for Djibouti, the
Islamic Republic of Iran, Jordan, Morocco, Tuni-
sia, and West Bank and Gaza. Given that these six a. The list of the 15 poorest countries used to estimate
account for only a small share of the regions popula- the $1.25 poverty line based on the 2005 PPP, as described
in Ravallion, Chen, and Sangraula (2009), does not nec-
tion, and that poorer countries in the region are not
essarily represent the current 15 poorest countries in the
included, regional poverty estimates for the Middle
world. Some of the countries originally included in this list
East and North Africa are not reported in table 1.1.d may have made significant progress.
While PPPs are used to adjust for price differences b. See Ravallion, Chen, and Sangraula (2009) for details
between countries in the International Comparison on the sample of 74 countries and how the 15 were selected.
Program base years, spatial price adjustments are used See Jolliffe and Prydz (2015) for more discussion on meth-
within some countries. Specifically, for China, India, odology for updating the global poverty line. Their line dif-
and Indonesia, adjustments are made to reflect cost- fers somewhat from $1.90 because of recent revisions to CPI
of-living differences between rural and urban areas. data, but the methodology is the same.
For these three countries, the global poverty line is c. See PovcalNet (iresearch.worldbank.org/povcalnet),
the World Banks online tool for global poverty estimation.
converted to local currency units and then unpacked
d. Despite being excluded from country-level estima-
into implicit urban and rural poverty lines that are
tion, these countries are included for the purpose of global
derived to be consistent with the urban-rural differen- poverty rate estimation. In this case, poverty estimates are
tial in the national poverty lines and the sectoral split calculated using 2005 PPP data and the $1.25 poverty line
of the International Comparison Program sample. In for the Arab Republic of Egypt, Iraq, and the Republic of
the case of India, an Expert Group constituted by the Yemen and using the 2011 PPPs and $1.90 poverty line for
Government of India (2009) to examine Indias pov- Algeria and the Syrian Arab Republic.
methodology and challenges relating to the While broadly similar to the old estimate for
transition from 2005 to 2011 PPPs. 2011 based on 2005 PPP data, this estimate
is some 28 million people lower. Comparison
Global poverty continued its decades-long of the 2011 and 2012 data reveals a (modest)
descent decline in the number of poor in Sub-Saharan
The latest headline estimate for 2012 based Africa, potentially heralding an era of contin-
on the new data suggests that close to ued reduction not just in the share of the poor
900 million people (12.7 percent of global but also in their absolute number.
population) lived in extreme poverty (table The recent decline of global poverty
1.1; figures 1.1a and 1.1b). Compared with occurs against a backdrop of a decades-long
2011the year when PPPs were updated descent. Comparisons with the data available
this number represents continued poverty for 1990 and 1999 confirm that the world
reduction, because the headcount estimate for has made rapid strides in poverty reduction
2011, using 2011 PPP data, was 983.3 million since 1990 (see table 1.1). The proportion of
people (14.1 percent of global population). global population living on less than $1.90
32 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
TABLE 1.1 Global poverty is assessed with the re-estimated poverty line
Historical Headline Projection
a day in 2012 was about a third of what it that the data collection and processing for a
was in 1990.4 This finding confirms that the nationally representative household survey,
first Millennium Development Goal target on which poverty estimates are based, usu-
cutting the extreme poverty rate to half of ally take two to three years, the 2012 num-
its 1990 levelwas met well before its 2015 ber remains the most reliable recent headline
target date. From a broader historical per- poverty estimate.
spective, the global poverty rate has fallen
by approximately 1 percentage point a year Global poverty remains high and
since 1990, with rapid poverty reduction in concentrated
China and India playing a central role in this Poverty levels remain unacceptably high and
outcome. are particularly concentrated in Sub-Saharan
Tentative projections for global poverty Africa and South Asia. For several decades,
in 2015 suggest that the global headcount three regions have accounted for some 95 per-
may have reached 700 million, leading to a cent of global poverty: East Asia and Pacific,
poverty rate of 9.6 percent. Compared with South Asia, and Sub-Saharan Africa. The lat-
the headline estimate of 2012, poverty may est 2012 estimates confirm this high degree of
thus have declined by close to 200 million concentration (figure 1.1c, 1.1d). Yet the com-
people (some 80 million of whom were in position of global poverty across these three
South Asia, about 65 million in East Asia regions has shifted over the years. The share
and Pacific, and more than 40 million in Sub- of Sub-Saharan Africa in global poverty has
Saharan Africa). The projections extrapolate risen to 43 percent alongside a slower pace of
poverty estimates based on growth scenar- poverty reduction in this region amid rapid
ios and distributional assumptions. Given population growth. The poverty rate fell only
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 33
40 37.1 2,500
25 1,500
20
14.1 983 897
15 12.7 1,000
702
9.6
10
500
5
0 0
1990 1999 2011 2012 2015a 1990 1999 2011 2012 2015a
c. Global poverty is concentrated in three regions, d. The number of extremely poor declined everywhere,
with Sub-Saharan Africas share rising including most recently in Sub-Saharan Africa
100 2,000
90
Share of global poverty (%)
40 60
30 40
20
20
10
0 0
East Asia Europe Latin South Sub- World
De ar
am p.
Ta a
Ba ania
ia
a
sia
a
ri
di
in
qu
es
op
e
sc
ge
ne
Ch
.R
In
nz
hi
Ni
do
m
Et
Co ada
ng
o,
Asia Caribbean
M
ng
from 56.8 to 42.7 percent between 1990 and Even though the rate of extreme poverty is
2012 (figure 1.1e). South Asia achieved more much higher in low-income countries, most of
rapid poverty reduction over the past 30 the global poor live in lower-middle-income
years, even though it is still home to about a countries. The poverty rate in low-income
third of the worlds poor. countries averaged 43 percent in 2012,
Despite significant geographic concentra- compared with 19 percent in lower-middle-
tion, the poverty rate varies widely across income countries. Yet lower-middle-income
the 10 countries with the greatest number of countries are home to about half of the global
poor people. The estimates for 2012 indicate poor; another third live in low-income coun-
that these 10 countries account for almost 70 tries (figure 1.2a). Part of the reason is that
percent of global poverty. Yet their poverty four countries with the largest populations
rates (as of the latest household survey, that were once classified as low-income but have
is, not necessarily 2012) vary from 6.5 per- moved into the lower-middle-income cat-
cent in China to 81.8 percent in Madagascar egory: China (reclassified in 1999), India (in
(figure 1.1f). India was home to the larg- 2007), and Indonesia and Nigeria (in 2011).5
est number of poor in 2012, but its poverty The combined share of the worlds poor
rate is one of the lowest among those coun- living in natural resourcebased (NRB) and
tries with the largest number of poor. A new fragile and conflict-affected countries in
methodology applied to household surveys in 2011 was about 50 percent. About 37 per-
India suggests that its poverty rate could be cent of the global poor lived in NRB econo-
even lower (box 1.2). mies, defined as countries where the share of
Poverty measures for India are based on the house- 1-year recall for low-frequency nonfood consumption
hold expenditure surveys done as part of the National items) was recommended as a more accurate reflec-
Sample Surveys (NSS). Since the survey began in the tion of consumption expenditures, following experi-
1950s, it has used 30-day recall for consumption of mental rounds to examine nonsampling errors.a As
both food and nonfood items to measure expendi- a result of the shorter recall period for food items,
tures. These so-called uniform reference period MMRP-based consumption expenditures in both
(URP) consumption aggregates collected in every rural and urban areas are 1012 percent larger than
consumption survey (except 1999/2000) provide the URP-based aggregates. These higher expenditures,
longest consistent series for measuring poverty in combined with a high population density around the
India. Historically, these have been the basis of the poverty line, translate to a significantly lower poverty
World Banks poverty estimates for India at the inter- rate of 12.4 percent for 2011/12.
national poverty line. The MMRP, which is available from 2009/10
Since 2015 is the target year for the Millennium onward, is expected to be the consumption aggregate
Development Goals, the assessment of changes in of choice for monitoring poverty in the future. This
poverty over time is best based on the URP method, years MMRP-based estimate of 12.4 percent will set
which was used to set the baseline poverty rates for the baseline for future India and global poverty esti-
India in 1990. As reported in this Global Monitoring mates, one consequence of which will be a break in
Report, for 2011/12, Indias poverty rate using URP- the global series.
based consumption was 21.2 percent.
The National Sample Survey Organization intro-
a. MMRP is a modified version of the mixed reference
duced a new consumption series based on a modified period, which has used two recall periods, 30 days for
mixed reference period (MMRP) in the 2009/10 sur- some items and 365 days for others; the NSS consumption
vey. The MMRP series (which modified the 30-day surveys have used these two recall periods since the early
recall to a 7-day recall for some food items and to a 1990s.
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 35
FIGURE 1.2 Global poverty is concentrated in lower-middle-income countries and countries dependent on natural
resources as well as fragile and conflict-affected states (FCS)
a. Low-income countries are the poorest, but lower- b. A large share of the global poor reside in natural resourcebased
middle-income countries account for the most poor economies and fragile and conflict-affected states
100 (share of global poverty in 2011, %)
Natural resourcebased
Share of global poverty (%)
49%
40
Natural resource Broad-based
dependent economies
20 economies
39%
0
Low-income Lower-middle Upper-middle
countries income income Broad-based economies
countries countries and fragile and conflict-
1990 2012 affected states 1%
Sources: PovcalNet 2015; WITS 2014; and World Bank 2014 classification of fragile and conflict-affected states.
Note: Panel a is based on the World Bank income classification for the respective years using only countries for which household surveys are available. Panel b is based on the World
Bank 2014 classification of fragile and conflict-affected states. In natural-resource-based economies, natural-resource exports account for more than 30 percent of total merchandise
exports in 2011 (those with less than 30 percent are termed broad-based economies).
NRB exports such as coffee, wood, cop- to poverty gap measures, but their numeri-
per, and petroleum products was 30 per- cal values have intuitive meanings as head-
cent or higher, and at least 12 percent of counts that control for the conditions of the
the global poor lived in countries clas- poor. Traditional headcounts can mislead
sified by the World Bank as fragile and when conditions of the poor change signifi-
conflict-affected states.6 Almost all fragile cantly. Person-equivalent headcounts bench-
and conflict-affected countries were also mark the initial conditions of the poor; this
NRB economies. benchmark is then used as a measuring rod
to count the number of standardized poor
or person-equivalents (Castleman, Foster,
Accounting for povertys depth and
and Smith 2015). A person who is twice as
breadth
deeply poor as the standardized poor person
Are all extremely poor populations the same? is counted as two person-equivalents. Con-
No, conditions can vary significantly across versely, a person who is half as deeply poor
extremely poor populations. The poor do not would be counted as half a person-equivalent.
experience poverty as an either-or concept The poverty headcount is then simply the sum
but as a continuum of intensities ranging of all person-equivalents.
from bad to far worse. This section captures As did the traditional poverty rate, the
these different intensities of poverty by look- person-equivalent poverty rate fell signifi-
ing into its depth and breadth. cantly between 1990 and 2012, and much of
this decline occurred during the 2000s (fig-
Controlling for depth offers new ure 1.3a). Benchmarked against the global
perspectives average depth of poverty in 1990, the person-
A new variety of poverty measuresperson- equivalent headcount declined by more than
equivalent headcountstallies the number the traditional poverty headcount as the aver-
of poor while controlling for depth (box age depth of poverty also fell over this period
1.3). The new measures are closely related (figure 1.3b). While the global numbers are
36 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
BOX 1.3 Person-equivalent poverty: An intuitive headcount measure that controls for
depth
The traditional poverty headcount ratio is insensitive dismissed from the policy discourse as too unintui-
to the large variation in living standards among those tive to have traction. The traditional headcount ratio
living below the poverty line (Sen 1976). The head- is easy to understand but is insensitive to the depth
count ratio can present distorted views of the spatial of poverty. The poverty gap ratio is sensitive to the
distribution of poverty and the extent of progress on depth of poverty but is more difficult to understand.
reducing poverty. Two countries could record the Accordingly, the poverty gap ratio has not been a
same poverty headcount rate, where in one country central element of poverty policy formulation, even
poverty is shallow and in the other it is very deep, though measures of the depth of poverty have quite
well below the poverty line. Similarly, a country may clearly helped shape policies in especially rich coun-
be successful in lifting its poorest citizensthe poor- tries (the U.S. food stamp program being one such
est of the poorfrom abject poverty to a level just example, where the benefit level is linked to income).
below the poverty line. Such improvement would not The person-equivalent approach remedies this
show up in a poverty headcount measure. problem, while retaining all the desirable features
Accounting for depth of poverty ensures that of the poverty gap measures. The person-equivalent
poverty reduction efforts are targeted to those most approach has the core simplicity of a headcount and
deprived. With the global population around 9 billion yet accounts for the varying conditions of the poor.
by 2030, achievement of the global poverty target of The approach developed by Castleman, Foster, and
3 percent would leave an estimated 270 million peo- Smith (2015) can be compared to measuring full-time
ple impoverishedincluding some of the most deeply equivalent jobs relative to the standard of the 40-hour
deprived and difficult to reach. Just as worrying, workweek: those working 20 hours are counted as 0.5
relying solely on headcount measures may encour- of a full-time equivalent, whereas those working 60
age policy makers to ignore the poorest of the poor hours would count as 1.5 full-time equivalents. Thus,
and concentrate efforts on the richest of the poor to if in the benchmark year the average depth of poverty
meet poverty targets (Bourguignon and Fields 1990). is 40 cents, then a person with a shortfall of 20 cents
A focus is therefore needed not only on helping people relative to the poverty line is considered half a person-
to lift themselves out of poverty but also on the depth equivalent; conversely, a poor person with a gap of
of deprivation of those left behind. 60 cents is one-and-a-half person-equivalents. The
The poverty gap ratio is a widely available mea- person-equivalent headcount measure is obtained by
sure that captures depth. The ratio measures the adding all the person-equivalents across a population.
extent to which individuals fall below the poverty line An appealing feature of the person-equivalent
as a proportion of the poverty line. Aside from being headcount is that it attributes higher weights to the
regularly provided and updated, this ratio has desir- deeply poor and thus redistributes poverty toward
able properties, such as focus (poverty is independent areas where poverty is at its deepest. If a deeply poor
of the incomes of the nonpoor), monotonicity (other person were to escape poverty, the impact on the
things equal, a decrease in a poor persons income person-equivalent headcount would be larger than
increases the overall poverty level), and decompos- if a marginally poor person did. The same change
ability (overall poverty is linked to subgroup poverty would likewise have a bigger impact on the poverty
levels). gap index (also known as P1 or FGT1) than it would
However, for many, the poverty gap measure lacks on the conventional poverty headcount ratio (or P0 in
the simplicity of a headcount and as a result is often the FGT class).
by design the same in the benchmark year, population. By 2012, the global person-
by 2012 there were 743 million person- equivalent poverty rate was 10.5 percent,
equivalent headcounts, some 17.1 percent some 2.2 percentage points lower than the
less than the traditional headcount of 896.7 traditional poverty rate.
million. The same pattern holds for the pov- As indicated by the depth elasticity, the
erty ratethe headcount as a ratio of total world registered different degrees of progress
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 37
FIGURE 1.3 Person-equivalent poverty headcount measures offer supplementary perspectives on the patterns and trends
of global poverty across countries
20 1,000 897
743
12.7
10.5
10 500
0 0
1990 1999 2012 1990 1999 2012
Traditional poverty rate Traditional headcount
Person-equivalent poverty rate Person-equivalent headcount
c. The depth elasticity of poverty reduction d. The person-equivalent poverty rate is significantly lower
varies considerably across regions, 19902012 for South Asia and higher for Sub-Saharan Africa in 2012
1.6 60
Responsiveness of person-
46.7
1.2 42.7
poverty rate
1.0 40
0.8
0.6 18.8
20
0.4 10.6
0.2 7.2 4.2 5.6 7.5
2.1 1.6
0 0
East Asia Europe Latin South Sub- World East Asia Europe Latin South Sub-
and and America Asia Saharan and and America Asia Saharan
Pacific Central and the Africa Pacific Central and the Africa
Asia Caribbean Asia Caribbeana
Traditional poverty rate
Person-equivalent poverty rate
e. Through this lens, the distribution of the number f. The share in global poverty rises for Sub-Saharan Africa
of poor varies more across regions in 2012 but declines for South Asia in 2012
600 60 57.3
Share of global poverty (%)
Number of poor people,
500
425 43.4
400 389 40 34.5
(millions)
309
300
23.5
200 174 20 16.4
147
11.5
100 85 6.1
34 45 1.1 1.0 3.8
10 8
0 0
East Asia Europe Latin South Sub- East Asia Europe Latin South Sub-
and and America Asia Saharan and and America Asia Saharan
Pacific Central and the Africa Pacific Central and the Africa
Asia Caribbeana Asia Caribbeana
Poverty incidence and depth measured by income While the issue also affects traditional headcount
data are susceptible to upward bias compared with ratios, the person-equivalent headcount ratios may
consumption data. First, income differs from con- be especially affected. Because they rely on the same
sumption at a conceptual level, since income can be primary data, person-equivalent incidence mea-
saved and consumption can be fi nanced by borrow- sures tend to be lower when based on consumption
ing. Second, income surveys often exclude household datajust like traditional incidence measures. How-
production, and households are sometimes reluctant ever, because person-equivalent indicators take into
to disclose income information to survey enumera- account the depth of poverty, and poverty is typically
tors. Third, in developing countries, formal employ- deeper when using income-based measures, person-
ment tends to be less common than in high-income equivalent incidence measures may well amplify
countries, with households facing multiple and chang- the difference. The example of Mexico is again
ing source of income (ODonnell et al. 2008; Raval- instructive (figure B1.4.1b). If Mexicos person-
lion 2003; Szkely et al. 2000). equivalent rate were calculated based on income, it
Given the reliance in Latin America on income sur- would be well above the traditional headcount ratio
veys, poverty numbers in this region are likely to be because the average gap among the poor is higher
biased upward compared with the consumption alter- than the global average benchmark gap. However,
native, as the case of Mexico confi rms. To examine if consumption data were used, Mexicos person-
this discrepancy in consumption- and income-based equivalent headcount ratio would be much lower
poverty measures, Mexicos case is useful because than the traditional headcount ratio given that the
the same survey collects both types of data. As fig- average gap is much lower than the global bench-
ure B1.4.1a suggests, the use of income data raises the mark gap.
headcount ratio and the poverty gap and results in a
more persistent pattern of poverty.
FIGURE B1.4.1 Poverty measures can be sensitive to the source of data collection
a. Income-based results paint a less positive b. This affects person-equivalent measures more
picture of poverty reduction than traditional headcount measures
8 5
Headcount ratio in Mexico, 2012 (%)
4.1
Headcount ratio and poverty
4
6
gaps in Mexico (%)
3.3
3
4
2
2 1.0
1 0.7
0 0
2000 2002 2004 2006 2008 2010 2012 Income-based Consumption-based
headcount ratio headcount ratio
Income-based headcount ratio
Income-based poverty gap Traditional Person-equivalent
Consumption-based headcount ratio
Consumption-based poverty gap
While poverty is widely accepted as a multidimen- also lack an identifiable poor population and a single
sional phenomenon, there is no universal consensus headline figure that can be easily communicated and
on whether and how to aggregate multiple dimensions compared with income-based measures (Alkire and
of poverty into a single welfare measure. A simple Foster 2011; Stiglitz, Sen, and Fitoussi 2009).
way to categorize the various approaches is by aggre- The salient feature of multidimensional poverty is
gating multiple measures into a single, scalar index the interdependence between dimensions. The dash-
or by laying out individual measures of each dimen- board approach tends to overlook this interdepen-
sion to obtain a dashboard of separate vectors. The dence by examining deprivations separately. Other
dashboard approach provides detailed information methodological approaches that capture interdepen-
on the magnitudes of the constituent indicators and dencysuch as the simple Venn of overlap of depri-
can readily draw on different data sources and dif- vations across dimensions, multivariate stochastic
ferent types of data. To the extent that dashboards dominance analysis, and the analysis of copula func-
avoid aggregation, they also avoid the difficult ques- tionsmay therefore complement the dashboard
tion of whether aggregation is best done in the space approach. Scalar multidimensional indexes allow
of attainments weighted by prices, or depriva- for a complete ordering, with the ability to rank two
tions based on weights set by an analyst (Ravallion years, countries, or regions, but need to deal with the
2010, 2011; World Bank 2015a).a Yet dashboards are increased complexity at the identification and aggre-
unable to establish hierarchies among various dimen- gation steps.
sions of poverty. Nor can dashboards reflect the joint
distribution of various deprivations and thus measure Note: E pluribus unum is Latin for out of many, one.
the prevalence of individuals affected by deprivations a. Establishing weights is fundamentally difficult; for
in multiple dimensions at the same time. Dashboards related discussions, see Alkire, Foster, et al. 2015.
The Multidimensional Poverty Index (MPI) is an proportion of indicators in which they are deprived.
adjusted headcount indicator that measures the inci- The adjusted headcount ratio is obtained by the prod-
dence and breadth of those who are deprived in multi- uct of the multidimensional headcount ratio and the
ple dimensions (table B1.6). The approach begins average intensity of poverty.
with a specification of the dimensions and indicators The metric provides a complement to poverty mea-
upon which poverty will be based. The MPI identifies sures based on income and traditional dashboards in
3 dimensions: health, education, and standard of liv- monitoring and directing policies toward the poor. It
ing. These dimensions are measured using 10 indica- directly measures the nature and magnitude of over-
tors: child mortality and nutrition (for health); years lapping deprivations in health, education, and living
of schooling and school attendance (for education); standards at the household level. With the adjusted
and cooking fuel, toilet, water, electricity, floor, and headcount ratio, overall poverty is directly linked to
assets (for living standards). Each dimension and each the poverty levels of population subgroups, a decom-
indicator within a dimension is equally weighted. position property it shares with traditional monetary
For each of the indicators a deprivation cutoff is poverty indexes. This permits the construction of
set: For example, for years of schooling, deprivation poverty profi les and can help in locating the poor.
amounts to no household member having completed The multidimensional poverty measure can also be
five years of schooling, whereas for electricity, depri- broken down into a dashboard of indicators, one for
vation means having no access to electricity. A per- each dimension, to reveal the components of pov-
son is considered poor if he or she is deprived in at erty and help guide policy priorities. In this way, the
least a third of the weighted indicators. The multidi- adjusted headcount ratio and its dimensional indica-
mensional headcount ratio measures the incidence of tors form a coordinated dashboard for policy analy-
multidimensional poverty by comparing the number sis with a headline number for monitoring and com-
of all those that are multidimensionally poor to the munication purposes and dimensional indicators for
total population. The intensity of poverty denotes the deeper analysis (Alkire, Foster, et al. 2015).
FIGURE 1.4 The Multidimensional Poverty Index (MPI) provides a complementary perspective to the poverty headcount
a. Sub-Saharan Africa and South Asia have the highest MPI levels b. . . . reflecting high incidence and intensity
0.34
Components of multidimensional
0.35 80
0.30 0.28 61
poverty index, 2015
0.25 60 53 52 53
0.20 42 43
40 38
0.15
0.11 21
0.10 20
0.05 0.03 7 5
0.02 0.01 2
0 0
Sub- South Arab East Asia Latin Europe Sub- South Arab East Asia Latin Europe
Saharan Asia States and America and Saharan Asia States and America and
Africa Pacific and the Central Africa Pacific and the Central
Caribbean Asia Caribbean Asia
Multidimensional poverty headcount Poverty intensity
c. The multidimensionally poor reside mostly in d. Multidimensional poverty is significant in fragile and failed states
lower-middle-income countries (composition of MPI poor in failed states, 2015)
Number of MPI poor, 2015 (millions)
is significant among those living in fragile significantly from each other. For example, in
states. Just as in the case of income poverty, Zambia, the multidimensional poverty rate
multidimensional poverty is most intense in as measured by the MPI was 57 percent in
fragile and confl ict-affected states, with the 201314, whereas the income-based poverty
extent of poverty varying with the intensity rate was 74 percent in 2010. For Pakistan
of fragility and conflict. The vast majority of the opposite was true, with the multidimen-
these countries are located in Sub-Saharan sional poverty rate in 201314 of 44 percent,
Africa and South Asia. while the income-based poverty rate in 2010
At the individual country level, the coun- was 13 percent. Both comparisons indicate
try with the highest rate of multidimen- significant differences in the poor popula-
sional poverty is Niger. Niger also has very tions identified by the two methods. Turn-
high fertility levels, as discussed in part ing from international measures to national
2. The country-level patterns of monetary measures, Chile has two official poverty
and multidimensional poverty may deviate measures: an income-based measure and a
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 43
FIGURE 1.5 A multidimensional lens suggests slower poverty reduction progress in India
1 1
2 2
3 3
4 4
0 10 20 30 40 50 60 70 0 20 40 60 60
Monetary headcount ratio, 199394 Mutidimensional headcount ratio, 1999
(percentage points) (percentage points)
multidimensional measure. The poverty rates in many dimensions at the same time, is the
associated with the two in 2013 were 14.4 poorest by the MPI.
percent (income) and 20.4 percent (multidi- Multidimensional poverty measures may
mensional); however, the share of the entire provide useful complementary perspectives
population that is poor under both defini- on the dynamics of poverty over time. India,
tions is just 5.5 percent. for example, exhibits a marked difference
Decomposition of the MPI into the sub- across its various states between the behav-
national level and its component indicators iors of the income-based and multidimen-
may shed light on patterns of intense depri- sional poverty rates through time. Figures
vation. As noted, the poorest subnational 1.5a and 1.5b plot the annualized absolute
region in the world is Salamat in southeast change in the poverty rate over a period of
Chad. Nearly 98 percent of its 354,000 time against the initial value, for a multidi-
inhabitants are MPI poor, and, on average, mensional poverty measure and an income-
they are deprived in nearly 75 percent of the based approach. The line in each graph is the
MPI dimensions, ensuring that Salamat also linear regression of the annualized absolute
is the region with the greatest breadth of pov- change on the starting level. Clearly, the
erty. Three of the five poorest subnational income poverty rates across states in India
regions in the world are in Chad while two exhibit a classical converging pattern, where
are in Burkina Faso. The profi le of multidi- the reduction in the income-based poverty
mensional poverty may also reveal intense rate is higher in the states with the higher
poverty in certain dimensions. Of the 884 initial poverty values. For multidimensional
regions, the region with the highest dimen- poverty, the opposite is true: the states with
sional indicator for nutrition is Affar in Ethi- low multidimensional poverty are making
opia; for child mortality it is Nord-Ouest in greater progress, whereas those with the
Cte dIvoire; and for sanitation, electricity, highest poverty rates are lagging behind.
and assets it is Warap in South Sudan. Yet These examples suggest a need to monitor
Salamat, which has high rates of deprivation multidimensional poverty directly.
44 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
Aspiring to end poverty by 2030 incidence of per capita household income (or
consumption) growth over the next 15 years
In light of the progress made and the chal-
(World Bank 2015c). For example, one could
lenges remaining, what does the future of
assume that income growth will follow that
poverty reduction look like? As argued below,
of the 2000s, which was an extraordinary
the 2030 target is aspirational, and attain-
period of income growth for developing coun-
ing it will require fortuitous circumstances.
tries. If one adopts the optimistic scenario
Moreover, contextual factors arising from the
that per capita income growth in every devel-
changing nature of the poverty that remains
oping country meets the developing-country
are likely to make poverty reduction more
average during the 2000s (4.4 percent in
challenging than it was in the past. Finally,
per capita national account aggregates, or
even if the 2030 target of 3 percent poverty
3.9 percent in household incomes), and also
is met on average globally, deep pockets of
assumes that the distribution of income and
multidimensional poverty are likely to persist.
cross-country inequality remain constant,
then the 3 percent headcount target can be
While attainable, the 2030 target is met (the third scenario in figure 1.6). Even
aspirational so, poverty in Sub-Saharan Africa would still
Although most regions continue to reduce
remain at 14.4 percent.
poverty, meeting the global poverty target by
More pessimistic scenarios suggest that
2030 remains aspirational in all but the most
global poverty will continue to be a chal-
optimistic of scenarios. Poverty scenarios
lenge in 2030, both globally and in specific
depend on the assumptions on the pace and
countries. One cannot take for granted that
the rapid growth rates of the 2000s will be
FIGURE 1.6 World poverty scenarios suggest that the poverty repeated for the next decade and a half for all
target is aspirational but attainable countries simultaneously. If developing coun-
tries realize the same country-specific per
30 capita growth rates as observed during the
26.9
10-year period 200413, the global 3 percent
25 poverty target would be missed, and poverty
Poverty rate in 2030 (%)
achieved. Simulations by Lakner, Negre, and growth in such economies because the avail-
Prydz (2014) show that if average economic ability of jobsthe main channel through
growth rates are extrapolated from the early which growth uplifts the pooris lim-
2000s, the extreme poverty target would not ited (IMF 2014b; Inchauste and Saavedra-
be met unless the growth rate among the B40 Chanduvi 2014; Inchauste et al. 2014;
is at least 2 percentage points higher than the Loayza and Raddatz 2010; World Bank
mean. 1990). Capital-intensive, natural-resource
sectors may generate growth but are likely
Poverty reduction will meet new to have weak backward and forward links
challenges with the rest of the economy, even during
A further challenge is the possibility that commodity boom periods. In the fragile and
future growth may not reach the poor as conflict-affected states (which include several
readily as in the past. As noted, global pov- NRB countries), the poverty problem is even
erty fell by about 1 percentage point a year in more complex. Conflicts, whether they arise
response to the average annual GDP growth because of contested natural resource wealth
rate of 4 percent. Even if the growth rate or are politically motivated, inevitably dis-
still averaged 4 percent from now to 2030, rupt or even reverse growth. The impact
would poverty continue to fall by 1 percent- of conflict is often felt long after peace is
age point a year? The distributional pattern restored.
of household income and consumption puts Continued poverty reduction will require
a relatively high proportion of the popula- incorporating natural resources and natural
tion near the median income or consumption capital in economic decision making. Land
value, with small proportions at extremely degradation and poverty are often deeply
high or low values (Battistin, Blundell, and intertwined, with an estimated 42 percent of
Lewbel 2009). Thus, when the global pov- the worlds poorest living on land that is clas-
erty rate was 37.1 percent in 1990, at the sified as degraded (Nachtergaele et al. 2010).
start of the Millennium Development Goals, About 1.3 billion people are reliant on for-
many poor people were just below the pov- ests, and the majority of these are extremely
erty line, leading to a large percentage point poor. Their level of dependence on forests is
reduction in poverty for a given distribution- surprisingly large and often equal in mag-
neutral increase in GDP. With global poverty nitude to income obtained from agriculture
incidence at 12.7 percent in 2012, the same (Angelsen et al. 2014; Shepherd, Kazoora,
distribution-neutral increase in GDP will lead and Mller 2013). In addition, 1 billion peo-
to less poverty reduction. Povertys respon- ple in developing countries depend upon fish
siveness to distribution-neutral growth will as their primary source of affordable protein.
continue to decline as the 3 percent target is The rural poor often endure a litany of envi-
approached (World Bank 2015c). In short, as ronmental health risks too. Illness, disability,
the 3 percent target gets nearer, higher rates and early death from environmental risks,
of income growth will be needed, and the dis- such as household air pollution from wood
tribution of that growth will need to be more burning in primitive stoves, remain a major
favorable to those with the lowest incomes. cause of child mortality in the developing
Ending poverty is also complicated by world, followed by inadequate sanitation.
the structural characteristics of the most Climate change may become another
impoverished nations, particularly those in important drag on poverty reduction in many
Sub-Saharan Africa. Taking into account countries (Field 2014; Hertel and Rosch
their demographic dynamics, by 2030 a 2010; Leichenko and Silva 2014; Skoufias,
larger share of the worlds impoverished will Rabassa, and Olivieri 2012). Global estimates
reside in NRB economies and fragile and suggest that climate change could account for
conflict-affected states, primarily in Sub- 10.1 million additional poor by mid-century
Saharan Africa. Poverty is less responsive to in the absence of comprehensive and successful
46 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
BOX 1.7 Back to Basics: McNamaras prescient 1972 speech on shared prosperity
At the Annual Meetings in Nairobi in September Social justice is not merely a moral imperative. It is
1972, World Bank President Robert S. McNamara a political imperative as well.
addressed the Board of Governors with a speech Income inequality. The first step should be to
that linked the growth imperative to social justice. establish specific targets, within the development
The speech demarcated the so-called basic needs plans of individual countries, for income growth
approach. It contained various referencessome among the poorest 40 percent of the population.
of them little-known at the timeto the concept I suggest that our goal should be to increase the
of shared prosperity that the World Bank Group income of the poorest sections of society in the
would institute as one of its corporate objectives some short runin five yearsat least as fast as the
four decades later. The interpretations that he offered national average. In the longer runten yearsthe
remain pertinent today and offer apt perspectives on goal should be to increase this growth significantly
how shared prosperity relates to social equity, social faster than the national average.
sustainability, inequality, and multidimensionality. Multidimensionality. The task, then, for the gov-
ernments of the developing countries is to reori-
Social equity and social sustainability. We know, ent their development policies in order to attack
in effect, that there is no rational alternative to directly the personal poverty of the most deprived
moving toward policies of greater social equity. 40 percent of their populations. This the govern-
When the highly privileged are few and the desper- ments can do without abandoning their goals of
ately poor are manyand when the gap between vigorous overall economic growth. But they must
them is worsening rather than improvingit is only be prepared to give greater priority to establishing
a question of time before a decisive choice must be growth targets in terms of essential human needs:
made between the political costs of reform and the in terms of nutrition, housing, health, literacy,
political risks of rebellion. That is why policies spe- and employmenteven if it be at the cost of some
cifically designed to reduce the deprivation among reduction in the pace of advance in certain narrow
the poorest 40 percent in developing countries are and highly privileged sectors whose benefits accrue
prescriptions not only of principle but of prudence. to the few.
income growth of the B40 in absolute terms goal points to the need for a focus on non-
has raised interest in the role of non-income income dimensions of prosperity such as edu-
dimensions and the connections of the con- cation, health, nutrition, and access to essen-
cept with equity and equality. tial infrastructure, as well as on enhancing
the voice and participation of all segments of
Shared prosperity means multidimensional society in the economic, social, and political
development spheres (World Bank 2013b).
The shared prosperity goal recognizes that the The broad focus of the shared prosperity
pursuit of well-being among the most vulner- goal is in keeping with the call for develop-
able in a society is a key development objec- ment goals that go beyond access to or own-
tive. Thus, while the average income growth ership of material goods. Amartya Sen (1983,
among the B40 has become the agreed-upon 1985, 1999)a key proponenthas called
indicator of shared prosperity, the goal itself is for income to be viewed not as the sole end
much broader in that it aspires to sustainably to development but rather as a gauge of what
elevate the well-being of the poorer segments a person is able to do (capability) and man-
of society. Embedded in the goal, therefore, ages to do (functioning). This broader per-
are both intertemporal and multidimensional spective of development has been influential
objectives: shared prosperity requires well- in the literature on broad-based growth and
being to be shared across individuals over has led first to efforts to measure the non-
time. This multidimensional aspect of the income dimensions of development and then
48 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
to work on inclusive growth that examines of promoting shared prosperity targets the
how growth trickles down to the poor. That B40 as an anonymous group irrespective of
work, in turn, has led, through the introduc- the identity of its members.15 This strong
tion of multidimensionality, to the notion of focus on the less privileged places equity at
inclusive development.12 the very heart of the goal and the indicator
While the chosen indicator of shared of shared prosperity.16
prosperity is an income-based metric, Underpinned by equity, the shared pros-
the non-income dimensions of the shared perity concept is intricately related to the
prosperity goal are important (Narayan, inequality of opportunity. World Bank
Saavedra-Chanduvi, and Tiwari 2013). The (2013b) highlights that even though the
use of a relatively simple indicatorgrowth shared prosperity indicator is focused on
in the real value of income or consumption outcomes, the requirement to pursue shared
(depending on the methodology of the house- prosperity in a socially sustainable fashion
hold surveys on which the concept is based) ties the concept to the promotion of equality
for the B40does not mean that non-income of opportunity. This focus is also present in
aspects of well-being should be disregarded.13 modern theories of social equity, which, like
The B40 income-based indicator is a first step Rawlss, build on Harsanyis (1955) veil of
toward making a critical point: growth in ignorance argument: an equitable resource
an economy should not be assumed to mean allocation should reflect what all prospec-
that development progress is automatically tive members of society would agree on
occurring. It is also necessary for this growth before they knew which position they would
to reach the less well-off in society. Beyond occupy in that society. Accordingly, while
that, however, development progress should modern theories of equity remain concerned
be assessed in all of its dimensions. The sec- that individuals be spared from extreme
ond step, therefore, is to consider explicitly deprivation in outcomes, they emphasize the
how, given their synergies, the income and importance of ensuring equal opportuni-
non-income aspects of shared prosperity feed ties for individuals to pursue a life of their
into each other and together can produce choosing.17 The outcome of a persons life,
greater well-being for the poorer segments of in its many dimensions, should reflect efforts
society.14 and talents, and not predetermined circum-
stancessuch as family origins, race, gen-
Equality of opportunity underpins shared der, or place of birthor the social groups a
prosperity person is born into.
Equity is a fundamental building block of In and of itself, however, the shared
shared prosperity. As Mahatma Gandhi prosperity goal is not aimed at reducing the
famously noted, A nations greatness is mea- inequality of outcome. Considerable hetero-
sured by how it treats its weakest members. geneity exists in the opinions of individuals
Yet, as societal preferences have evolved about whether inequality is good or bad and
and moral philosophies have changed, con- should be reduced or not. The most recent
cerns about the less well-off have varied. For wave of the World Value Survey illustrates
example, Benthams utilitarian preference for the degree of polarization in views around
the greatest happiness for the greatest num- the world and also how the preference for
ber, fi rst published in the 1780s, is devoid inequality gradually rises across the income
of any distributional concern, while Rawlss distribution, with large differences across
principle of maximizing opportunity for regions (figure 1.7). Reflecting these differ-
the least privileged, published nearly 200 ences of views, the shared prosperity concept
years later, takes a radically opposite view does not directly link to outcome inequal-
(Bentham [1789] 2000; Rawls 1971). The ity. Positive B40 income growth may, for
World Bank Groups institutional objective example, be avoided with rising inequality,
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 49
FIGURE 1.7 Views of income inequality vary across regions and income deciles
a. Views on income inequality are polarized around the world: in each region, a disproportionate share of respondents either strongly agree with
income should be more equal (1) or we need larger income differences as incentives (10).
20
Frequency of responses (%)
15
10
0
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
East Asia Europe and Latin America Middle East South Asia Sub-Saharan World
and Pacific Central Asia and the Caribbean and North Africa Africa
b. The preference for inequality tends to rise by income decile, even though the difference between the
lowest (1) and highest (10) deciles varies markedly across regions.
Mean score for inequality preference (110)
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10
East Asia Europe and Latin America Middle East South Asia Sub-Saharan World
and Pacific Central Asia and the Caribbean and North Africa Africa
Income decile (10 is highest)
both within the B40 and between groups. sufficient for lower inequality between the
First, inequality may rise within the B40 B40 and other income groups. Negative
by virtue of the mean indicator, in which B40 income growth could lower inequality
positive growth may occur at the expense if T60 growth does even worse, but positive
of the poorest.18 Second, absolute income B40 income growth might not prevent a rise
growth of the B40 is neither necessary nor in inequality if T60 growth does even better.
50 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
FIGURE 1.8 While inequality may still rise, a consistent focus on B40 income growth will always (weakly)
lower inequality relative to the counterfactual of focusing on average income growth
a. Those focused on the B40 will choose plan A, which b. In this constellation, while inequality still rises, a B40 focus
reverses the rise in inequality relative to plan B (which would results in plan A that dampens the rise in inequality
have been the choice if the focus were on average incomes) relative to plan B (which raises average incomes)
8 8
6 6
Percentage points
Percentage points
4 4
2 2
0 0
2 2
Income Income Average Change in Income Income Average Change in
growth growth income income growth growth income income
for the for the growth inequality for the for the growth inequality
bottom 40% top 60% bottom 40% top 60%
Plan A Plan B
Consistent, sustainable effort may reduce where both policy makers would choose the
inequality of outcome same. In all of the above, however, when the
A consistent focus on boosting B40 incomes B40 is targeted, inequality will be lower
will always lead to (weakly) lower inequal- or at least not higherrelative to the alter-
ity compared to the counterfactual of boost- native of pursuing average growth.
ing average incomes. Figure 1.8a illustrates Moreover, if shared prosperity is pursued
the decision problem of choosing between sustainablyan underlying requirement of
two hypothetical scenarios or plans. Plan the goalthe connections with outcome
A would produce rapid B40 income growth inequality are further tightened. The World
but much slower T60 growth. Plan B would Bank Group goals need to be pursued sus-
produce rapid T60 income growth but much tainablyeconomically, environmentally,
slower B40 growth. A policy maker who and sociallyover time and across gen-
maximizes B40 incomes between these two erations. The sustainability requirement
choices will choose plan A,19 whereas a pol- imposes additional feasibility constraints
icy maker focused on maximizing average on the socioeconomic strategies that policy
income growth will choose plan B. Clearly, makers may select as they pursue shared
a B40 focus in this case helps reverse the rise prosperity. Economically, strategies that lead
in inequality relative to the counterfactual to the sustained underperformance of the
of maximizing average income growth. Fig- B40 may eventually stifle the economy-wide
ure 1.8b illustrates a similar decision prob- growth process (Berg, Ostry, and Zettel-
lem with different parameter values, show- meyer 2012; Easterly 2007). No country has
ing that a B40 focus helps dampen the rise transitioned beyond middle-income status
in inequality relative to the counterfactual. while maintaining high levels of inequality
Other examples can be construed that do (World Bank 2013b). Environmentally, if the
not entail a growth-inequality trade-off and B40 bears a disproportionate share of the
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 51
cost of environmental degradation and pol- the average shared prosperity premium stood
lution, a more environmentally sustainable at 1.7 percent.
growth model may strengthen the groups As with poverty reduction, not all coun-
capacity to participate in societys prosperity. tries made equal progress on shared pros-
Socially, a continued rise in the gap between perity. Incomes for the B40 grew in 65
rich and poor may be socially unsustain- countries but declined in 29. For 20 of the
able and incompatible with social equity in latter, the shared prosperity premium was
the longer term. All of these additional con- negative: not only did the incomes of the
straints impinge on the choice of optimal B40 decline, inequality also rose. For these
socioeconomic policies, which may result in countries, the premium ranged from zero
outcomes of lower inequality. to 3.1 percentage points, with an average
around 1.2. Interestingly, whereas 72 per-
cent of the countries that registered positive
Assessing trends in shared prosperity
B40 income growth registered a decline in
What are the recent trends in shared pros- inequality between the B40 and T60 groups,
perity? While overall trends in B40 income about 70 percent of those where B 40
growth appear generally positive, the hetero- incomes declined saw an increase in inequal-
geneity and sustainability of these trends ity between these groups.
are a concern. Data availability and qual- Interesting patterns stand out across
ity remain key challenges. However, the regions and country groupings, with low-
data consistently available and comparable and especially high-income countries regis-
through 2012 suggest that the B40 has in tering more mixed experiences. B40 incomes
many parts of the world enjoyed a prolonged declined in half of the high-income countries
spell of solid income growth. Even so, signifi- and more than a third of the low-income
cant variation exists across regions and coun- ones. This pattern stands in stark contrast to
tries. In addition, the B40, both within and middle-income countries, where some 85 per-
across countries, continues to lag significantly cent registered an increase in B40 incomes.
in non-income dimensions that are crucial to Interestingly, all low-income countries that
individual well-being and income-generating registered positive B40 income growth also
capacity. In light of generally healthy income registered a positive shared prosperity pre-
growth but lagging non-income indicators, mium, whereas more than a third of high-
the sustainability of recent progress may be income countries with positive B40 growth
in question. saw a negative premium. Among developing
regions, B40 income growth exceeded 5 per-
Growth has become more pro-poor over the cent in eight countries of Latin America and
past decade the Caribbean, reducing income inequality
Rising incomes over the past decade have between the B40 and the rest of the popula-
helped the B40 in many countries (figures tion in all of them. Other regions saw a more
1.9 and 1.10). Considering five-year peri- mixed performance.
ods starting about 2007 and ending around The more mixed performance on shared
2012, B40 incomes grew in 65 of the 94 prosperity reported here is the result of a fun-
countries with adequate and comparable damental deterioration of B40 growth and
data. Among them, 47 countries registered a changing composition of the sample com-
a shared prosperity premium, with B40 pared with the last years Global Monitor-
incomes growing faster than the incomes ing Report. First, new comparable household
of the average population, thus reducing data were available for 36 of the 66 countries
income inequality between these groups. For that were included in both updates.20 Among
these countries, the premium ranged from these 36 countries, average B40 income
less than 1 percentage point to well above 3 growth (across sample periods) decelerated
points, suggesting that growth in many coun- from 4.6 percent in last years Report to
tries has been considerably propoor. Indeed, 2.9 percent in this Report. Average income
52 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
FIGURE 1.9 Experiences on shared prosperity differed: While the majority of countries saw solid growth in
B40 incomes, many countries did not
Annualized B40 income growth (bars with no black outline) and average population income growth (shown with a black outline) for a ve-year period,
circa 200712 (%)
Philippines
South
sia
Lao PDR
Rwanda
and
Indone
nam
Ugan
Ma
Africa
Tanz
Thail
gro
dia
ur it
na
Viet
ne
bo
da
ania
Chi
Ma
ania
nte
Ca m
Ma
ur i
Mo
a
tvi
tiu
Ni
li
ia
La
n
g
y
Se
to
e
ar
ria
Es
ia
ng
ne
Et
an
Hu
ga
hi
M hu
l
op
ala Lit ia
ia
w rb
Ma To i Se nia
da go me
ga
sc Ar ia
ar an
Ne Alb ia
pa ven pub
lic
Bh l Slo
uta y z Re
n Kyr
g blic
Pak epu
is tan ch R
Cze
10%
Indi ania
a Rom
Sri L ria
anka 5% Bulga
Bangla
desh Croatia
Tunisia 0%
Poland
Iran, Islamic 5%
Rep. Georgia
Jordan Ukraine
Iraq Turkey
Bolivia Moldova
Peru Slova
k Rep
ublic
ay Russ
Urugu ian F
eder
ay Kaz ation
a g u akh
Par Bel
stan
il
Braz aru
s
Gre
ina ece
ent Ire
Arg bia lan
m Ice d
C olo r lan
do
ua Ita d
Ec m a ly
na Cy
Pa ile pr
Ch lic
us
Lu
ub
xe
ep
Po
ca
R
Ri
bo
r tu
Un
n
o
sta
ica
ur
xic
ga
ite
Sp
g
Co
in
Me
l
do
De
dK
ain
om
la
lva
Uni
ma
nm
ing
D
s
ia
ura
Neth
Sa
ate
ted
Franc
tral
ark
do
way
d
El
Belgium
nd
Austria
a
Finland
Germany
Sweden
m
erlan
Israel
Gu
Canad
Aus
erla
Sta
Ho
Nor
t
nds
es
Switz
Latin America and the Caribbean Middle East and North Africa South Asia SubSaharan Africa
growth of the population decelerated from added, of which 5 developing countries had
3.0 to 1.7 percent. As a result, the average solid growth in B40 incomes, on average,
shared prosperity premium declined from and 23 high-income countries had a decline
1.6 to 1.2 percent. Second, compared with in B40 incomes, on average. Third, 6 obser-
last years Report, 28 new countries were vations were dropped in 201516 on the time
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 53
FIGURE 1.10 Many but not all countries registered a shared prosperity premium
6
Shared prosperity premium
30 11
Number of countries
(percentage points)
4
2
1
3 6
2 20
2 7
4 7
0
10
4
2 13 15 12
7
4 0
15 10 5 0 5 10 15 Low-income Lower-middle- Upper-middle- High-income
countries income income countries
Annualized B40 growth rate (%)
countries countries
Positive B40 income growth and shared prosperity premium
Positive B40 income growth and no shared prosperity premium
Negative B40 income growth and shared prosperity premium
Negative B40 income growth and no shared prosperity premium
FIGURE 1.11 Countries have registered varied patterns of shared prosperity, with different implications
for inequality
25
40
35
baseline 1991 (%)
20 100
Percent
35
Percent
15
30
10 30
50
5 25
25
0
5 20 0 20
1990 2000 2010 1990 2000 2010
Bottom 40% (left axis) Population (left axis)
Income share of the bottom 40% (right axis)
periods for which data were available no lon- States (figure 1.11). In the United States, B40
ger matched the common reference period. incomes declined during the 2000s, perpetu-
In 201415 these 6 countries had registered ating a trend of rising inequality (as mea-
solid income growth.21 sured by the B40 income share)a trend also
The evolution of shared prosperity trends observed in several other high-income coun-
highlights further heterogeneity across coun- tries.22 Chile, on the other hand, experienced
tries, as illustrated by Chile and the United exactly the opposite.
54 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
Recent progress reflects changing drivers of period. For example, the B40 changes are
shared prosperity on average more positive and more variable
What explains the variation in shared pros- across the sample of growth spells in low-
perity across countries and over time: aver- income countries than in higher-income
age income growth or changes in the income countries (figure 1.12c). This pattern is also
share of the B40?23 Shared prosperity, or observed when comparing the 2000s with
growth in average incomes of the B40, con- the 1980s (figure 1.12d).
sists of growth in average incomes plus The explanatory power of average income
growth in the income share of the B40. The growth is further diminished when examin-
variation of growth in average incomes of the ing the poorest income deciles, such as the
B40 across countries and over time can be B10 and the B20. Regardless of income clas-
decomposed into the variation due to growth sification, B20 and especially B10 incomes
in average incomes, and the variation due are much less responsive to average income
to growth in the income share of the B40. growth than B40 incomes. 26 In low-income
Empirical analysis of the relative contribution countries, for example, average income
of mean incomes and B40 shares provides a growth explains less than a third of the total
simple way to distinguish the underlying variation. But even for low- and middle-
drivers of B40 income growth. income countries, the explanatory power
The evidence suggests that most of the remains well under half. Across decades, the
variation in B40 growth is due to variation in explanatory power of average income growth
growth in average incomes. Over the recent diminishes significantly across all indicators,
period of 200712, average income growth but the decline is most pronounced for the
tracked B40 income growth rather closely B10. All of this suggests that changes in the
(figure 1.12a). Dollar, Kleineberg, and Kraay B40 income share have played a nontrivial
(2013, 2015) confirmed that this finding role in explaining increases in B40 income
also held over the past four decades. 24 Fig- growth (figures 1.12e, 1.12f).
ure 1.12b shows that average income growth Given the increased importance of the rise
over this long time period was, in the aver- in the income shares of the lower quintiles,
age country and over the average five-year it comes as no surprise that income inequal-
sample period, positive and larger than the ity in many countries has declined since the
change in the B40 income share, which was 2000s. Figure 1.13 shows that more coun-
close to zero. It also shows that the variation tries experienced declining inequality than
of changes in B40 income shares across the increasing inequality. Latin America has gen-
sample of growth spells was much lower than erally seen significant declines in inequality
that in average growth rates. These findings, in virtually every country, which is consistent
taken together, show that average income with the good shared prosperity performance
growth clearly dominates in the explanation in that region over that decade. Conversely,
of B40 income growth.25 many high-income countries appeared to
Yet, average income growth is not the only have registered an increase in inequality.
driver of B40 income growth, as illustrated
by subsamples of low-income countries for Significant disparities remain in non-income
the most recent decade. A good illustration is dimensions
the relationship in figure 1.12a, which shows To evaluate their well-being comprehen-
significant variation from the trend for 2005 sively, it is important to examine how the
12 that can be explained by changes in the B40 fared in non-income dimensions of well-
B40 income share. Interestingly, the statisti- being. Doing so presents similar challenges
cal properties of changes in the B40 income as making a multidimensional assessment of
share (figure 1.12b) differ markedly when poverty over time and space. As of now, few
the four-decade sample is split into subsam- systematic attempts have been made to ana-
ples according to income level or decennial lyze how the B40 have performed in various
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 55
FIGURE 1.12 The drivers of B40 income growth appear to have changed somewhat
a. Income growth of the bottom 40% correlates well b. Over the last four decades, mean income
with average income growth, 200712 growth was positive and volatile
Annualized income and consumption
10 3 5
8
growth rate of the B40
Standard deviation
2
4 1.5
2 3
0 1
2 2
4 0
0
6 1
8
10 1 0
Growth in Change in income share
15 10 5 0 5 10 15
average income of the bottom 40%
Annualized income or consumption growth rate
of the total population (%) Mean (left axis) Standard deviation (right axis)
4 4
Standard deviation
Standard deviation
2 1.6 2
1.3 3 3
1 1 0.8
0.4 2 0.4 2
0.1 0.2
0 0
1 1
0.4 0.2 0.3
1 0 1 0
Low- Middle- High- Low- Middle- High- 1980s 1990s 2000s 1980s 1990s 2000s
income income income income income income
countries countries countries countries countries countries
Growth in Change in income share
Growth in Change in income share average income of the bottom 40%
average income of the bottom 40%
e. The explanatory power of average growth falls in f. It also diminished during the 2000s, especially
low-income countries and in lower-income deciles for lower-income deciles
90 90 85
79 79
and B40 income growth due to
and B40 income growth due to
80 80
Share of variance of B10, B20,
77
Share of variance of B10, B20,
74 72
70 70
63
59 59 61
60 57 60
52
50 50
43 44
41
40 34 40
30 32
30 30
20 20
Low-income Middle-income High-income 1980s 1990s 2000s
countries countries countries
Bottom 10% of the population Bottom 20% of the population Bottom 40% of the population
Sources: World Bank Global Database for Shared Prosperity, around 200712 (panel a); Dollar, Kleineberg, and Kraay 2013, 2015 (panels bf).
Note: In panels bf, mean and standard deviations are reported for the distribution of minimum five-year spells of average income growth and change in the share of B10, B20, or
B40 in total income, distinguished by income level or decade. Unless period is specified, sample includes 1980s2000s.
56 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
FIGURE 1.13 Income inequality declined over the 2000s in a small majority of countries
1.5
Average absolute change in Gini index
Increasing
1.0
inequalities
0.5
0.5 Declining
inequalities
1.0
1.5
2.0
Low-income countries Lower-middle-income countries Upper-middle-income countries High-income countries
Source: World Bank calculations, based on World Development Indicators, Gini index.
Note: The time period varies depending on the availability of data. Typically, it is from late 1990s and early 2000s to later 2000s and early 2010s. The follow-
ing outliers are not shown for visualization purposes: Central African Republic (2.55), Niger (2.52), and Seychelles (3.29). A Gini index of 0 represents perfect
equality, whereas an index of 100 implies perfect inequality.
non-income indicators. A key question is the same time, significant diversity is observed
whether such analysis is best undertaken when the various dimensions are considered
with a dashboard (analyzing the dimensions jointly, with Finland and Australia registering
separately) or an aggregate indicator (which living standard improvements at an annual-
requires identifying weights for the vari- ized rate over the past two decades of 4.3 and
ous dimensions). Other questions relate to 4.1 percent, respectively, and the United States
whether multidimensional shared prosperity and Japan registering much smaller improve-
is analyzed over time (dynamically), across ments at 1.5 and 1.1 percent, respectively.
the income distribution (statically, comparing Despite robust income growth in devel-
B40 and other segments), or both. Examples oping countries, large disparities linger in
of various approaches are presented in the the access of the B40 to education, health,
following discussion. and other non-income dimensions. Among
The evolution of living standards in developing countries, women in the B40
countries belonging to the Organisation for group face more difficult access to health
Economic Co-operation and Development care compared with the T60, and their chil-
(OECD) has seen marked cross-country dif- dren are more likely to die before age five
ferences over the past two decades. The (figures 1.15a, 1.15b). Many people around
OECD multidimensional living standards the world, especially those in the B40, report
metric is one example of an aggregate mea- that they do not always have enough money
sure that can be compared over time and to feed themselves or their families (figure
across the income distribution. Figure 1.14 1.15c). Unsurprisingly, their children are
shows the implementation of the measure for more likely to be underweight (figure 1.15d).
the B40 target group, where average house- Primary enrollment may have increased in
hold income growth and B40 inequality are many developing countries, but access to
considered together with aggregate measures primary education remains unequal (World
for jobs (unemployment) and health (life Bank 2014a, 2015c).28 Among lower-income
expectancy).27 The measure suggests positive countries, a larger share of children in B40
developments in many of the 18 countries: families are out of school (figure 1.15e).
reduced B40 inequality (14 countries), sup- These inequalities transmit to outcomes, as
portive employment conditions (11 countries), international test scores in math suggest (fig-
and rising life expectancy (all countries). At ure 1.15f, with the same results for science).
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 57
FIGURE 1.14 OECD countries have seen diverse developments in multidimensional living standards over
the past two decades
5 OECD average of
multidimensional living standards
and their contributors, percent
Growth in GDP per capita, B40
2
m
ds
l
m
y
k
ay
es
d
ia
ly
y
en
lic
n
ce
da
ga
ar
ar
ali
an
do
lan
pa
Ita
str
iu
lan
at
rw
ub
an
ed
na
rtu
ng
nm
str
rm
lg
ng
St
Ja
Au
Fin
No
Fr
er
ep
Sw
Ca
Be
Hu
Po
Au
De
Ge
d
Ki
th
hR
ite
d
Ne
ite
Un
ec
Un
Cz
Average income Correction for B40 income inequality B40 living standards
Correction for jobs Correction for health GDP per capita
a. Women in the bottom 40% face more difficult b. Children are more likely to die by
access to health care age 5 among the bottom 40%
100 200
Share of women in the top 60% with
difficult access to health care (%)
60
100
40
50
20
0 0
0 20 40 60 80 100 0 50 100 150 200
Share of women in the bottom 40% with Under-5 mortality rate for the
difficult access to health care (%) bottom 40% (per 1,000)
c. Deprivation of food remains prevalent around d. A larger share of children among the bottom
the world, with marked differences 40% are underweight for their age
70 Under-5 malnutrition prevalence 60
60
Share of respondents reporting
food deprivation (%) a
50
of the top 60% (%)
40
40
30
20
20
10
0 0
High- East Asia Europe Latin Middle South Sub- 0 10 20 30 40 50 60
income and and America East and Asia Saharan Under-5 malnutrition prevalence
OECD Pacific Central and the North Africa of the bottom 40% (%)
countries Asia Caribbean Africa
Bottom 40% of the population Top 60% of the population
e. The proportion of children out of primary school is higher f. Where the bottom 40% performed poorly in
among the bottom 40% in low-income countries math, the gap with the top 60% was larger
50 100
out of school among the top 60% (%)
Share of primary-school-age children
40 80
30 60
20 40
10 20
0 0
0 10 20 30 40 50 0 20 40 60 80 100
Share of primary-school-age children Share of students in the bottom 40% that
out of school among the bottom 40% (%) demonstrate the basic competencies of math (%)
FIGURE 1.15 Disparities in health, education, and nutrition are noteworthy (continued)
g. Countries in Latin America and the Caribbean h. Countries in Latin America and the Caribbean
report a lack of access to the Internet report less access to piped water for
for children in the bottom 40% for children in the bottom 40%
Uruguay Uruguay
Peru Peru
Paraguay
Paraguay
Nicaragua
Mexico Mexico
Honduras Honduras
Guatemala Guatemala
El Salvador
El Salvador
Ecuador
Ecuador Dominican Republic
Costa Rica Costa Rica
Colombia Colombia
Chile Chile
Brazil
Brazil Bolivia
Bolivia Argentina
0 10 20 30 40 50 60 70 80 90 100 0 20 40 60 80 100
Share of children below age 16 Share of children below age 16
with access, circa 2012 (%) with access, circa 2012 (%)
Bottom 40% of the population Top 20% of the population
Source: Health Nutrition and Population Statistics by Wealth Quintile Database (panels a, b, and d); World Gallup Database (panel c, 2014); DHS Surveys
(panel e); OECD Program for International Student Assessment (PISA) (panel f); World Bank (panels g and h).
Note: In panel d, the under-5 malnutrition prevalence reflects two standard deviations of being underweight by age. In panel e, most countries displayed
are low-income countries, with data after 2010.
a. Share of respondents that answered yes in 2014 to the question Have there been times in the past 12 months when you did not have enough money to
buy food that you or your family needs?
Past trends may not be sustainable decades. Whether there is a reversal to more
Average income growthone key driver of muted historical patterns remains to be seen.
shared prosperitymay not be as buoyant Surveys suggest that improvements in living
as it was before the global financial crisis. As standards are perceived as unequal and linked
chapter 3 elaborates, the medium-term out- to perceptions about poverty reduction efforts
look is projecting weaker potential growth (figure 1.16). The factors that supported the
in many middle- and high-income economies
compared with the precrisis period. Emerg- FIGURE 1.16 Perceptions of improvements in
ing markets face a structural slowdown, and living standards and poverty efforts are related
potential growth in high-income economies
is likely to recover to slightly lower levels 100
with improving standard
80
countries dampen potential growth, whereas
of living (%)
60
the sluggish recovery of investment since the
crisis in some countries and the declining 40
prospects for rapid productivity improvement 20
in other countries pose further constraints. 0
Barring policy adjustments, jobs and incomes 0 20 40 60 80 100
are expected to be affected in these countries. Share of population satisfied with efforts
to deal with the poor (%)
The other factor that underpinned rising
B40 incomesthe increase in the income Source: World Bank calculations, based on Gallup World Poll 2014.
share of the B40may, likewise, not be as Note: These results refer to the following questions: In this country, are
you satisfied or dissatisfied with efforts to deal with the poor? (horizontal
appropriate as before. The 2000s saw a rise axis); Right now, do you feel your standard of living is getting better or
in the B40 income share unlike previous getting worse? (vertical axis).
60 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
rise in the income share may turn out to have inequality may also slow growth, as recent
been transitory or unsustainable. For exam- literature suggests. That in turn affects the
ple, if high commodity prices lifted wages in ability of countries to sustainably climb the
the labor-intensive services sector, the onset income ladder (Banerjee and Duflo 2003;
of a period of lower commodity prices may Forbes 2000; Li and Zou 1998; Marrero and
remove some of that impetus. Some countries Rodriguez 2012, 2013; van der Weide and
have seen generous minimum wage develop- Milanovic 2014; Voitchovsky 2005).
ments that have lifted the incomes of the B40. Persistent inequality of opportunity
To the extent that such policies produce nega- in non-income dimensions may eventu-
tive fiscal implications or mounting unit labor ally dampen the dynamism of B40 income
costs, their sustainability is at risk. growth. The B40 continues to exhibit large
disparities with the rest of the population in
Continued elevated levels of inequality its access to basic goods and services of good
pose an additional sustainability risk quality, reflecting in large part inequality of
Elevated levels of income inequality may opportunity. The B40and among them,
not be compatible with a sustained improve- especially womenis thus limited in making
ment in shared prosperity if they damage the the best of their most important asset, labor,
growth process. Indirect evidence for this and in earning higher incomes reflective of
statement is illustrated in figure 1.17, which their marginal productivity. To be sustain-
shows that no country has moved beyond able, longer-term wage developments need to
middle-income status while maintaining be underpinned by productivity.
high levels of inequality (Ferreira and Rav- Moreover, environmental aspects of recent
allion 2011; World Bank 2013b). Too much development patterns are not sustainable.
inequality (whether vertically in income lev- Trends for indicators showing the sustainable
els, horizontally across groups, or dimension- use of natural resources (land, water, for-
ally in aspects other than income) is bound estry, fisheries, biodiversity), pollution (air,
to affect social sustainability. Too much water, toxics, solid waste), and carbon emis-
sions are all going the wrong way.30 Conser-
vatively measured, the combined value of the
FIGURE 1.17 Income inequality in richer associated environmental damages rose by 50
countries tends to be lower percent between 1990 and 2010, mainly in
developing countries. A broader indicator of
70 growth sustainability is the change in total
60 wealth per capita.31 This measure subtracts
Gini coefficient
The rise in pollution is of particular con- FIGURE 1.18 Low- and lower-middle-income countries have fared
cern, especially in cities where much of the the worst in depleting per capita wealth
global population resides. Urban poverty,
particularly in poor countries, typically starts 15
FIGURE 1.19 The share of countries with evidence of unsustainable economies rose between 1995 and 2010
60 60
42 40
40 40 35
26 29
25
19 20
20 20
0 0
199094 199599 200004 200509 201011 199094 199599 200004 200509 201011
c. Latin America and the Caribbean d. Middle East and North Africa
100 100
change in total capital per capita
80 80
60 60
48
40 43 39 42
37 39 38 38
40 40
23
20 20
0 0
199094 199599 200004 200509 201011 199094 199599 200004 200509 201011
82 84
79 80 80
between 1995 and 2010
80 80
60 60
40 40
40 40
20 17 17 20
8
0 0
199094 199599 200004 200509 201011 199094 199599 200004 200509 201011
Sources: World Bank Development Indicators and forthcoming update of World Bank 2011a.
and the B40 to fully participate in and benefit The two aspects of equity that delineate
from the growth process. To pursue growth the policy agenda are avoidance of absolute
without equity would be socially destabiliz- deprivation and equality of opportunity. The
ing and to pursue equity without growth quest to end extreme poverty builds on the
would tend to redistribute economic stagna- societal preference to avoid absolute depriva-
tion, as Robert McNamara stated in 1980.32 tion and protect the livelihoods of its poorest
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 63
members regardless of whether the equal FIGURE 1.20 Exposure to urban pollution is on the rise
opportunity principle has been upheld. The
To assess trends in shared prosperity and calibrate son belonging to the B40 is extremely poor as dened
policies, it is essential to understand the composition by the international poverty line, moderately poor,
of the bottom 40 percent (B40). Just like the poor, the vulnerable, or none of these but rather a member of
B40 is not a static subgroup of the population. Some the middle class or even rich.
people move in and out of the B40, whereas others Most of the countries in which the richest among
are chronically at the lower end of the income distri- the B40 are still extremely poor are in Sub-Saharan
bution. Yet, it is possible to characterize the B40 as a Africa. In some places in Sub-Saharan Africa, most of
group. As shown below, the composition of the B40 East Asia and Pacic, and all of South Asia, the rich-
is very different across countries. These differences est of the B40 are moderately poor. The B40 in these
need to be taken into account when identifying strate- countries thus consists entirely of populations that are
gies to boost shared prosperity, which in some coun- either extremely poor or moderately poor. In most of
tries will overlap strongly with the struggle against Latin America and the Caribbean, the richest among
extreme poverty, whereas in others the connections the B40 are vulnerable. Following impressive gains in
with reducing inequality will be stronger. shared prosperity that lifted many out of poverty, the
The pro le of the richest B40 person varies con- richest B40 person in that region remains susceptible
siderably across countries. Map B1.8.1 illustrates the to falling back into poverty.
geographical distribution of the characteristics of the Overall, the B40 group as a whole encompasses
40th percentile, identifying whether the richest per- many different combinations of extreme poverty,
MAP B.1.8.1 The income of the richest B40 person differs greatly across countries
Income status of the B40 of the income distribution in 2011
IBRD 41778
AUGUST 2015
FIGURE B1.8.1 Whether viewed through the lens of absolute or relative deprivation, the B40 encompasses
diverse populations that vary significantly across countries
The bottom 40% includes the absolutely poor and b. The bottom 40% also includes a significant share of those
ulnerable, to differing degrees (selected countries) considered to be relatively deprived (selected countries)
Bottom Bottom
40% 40%
32 OECD countries
123 countries
0 20 40 60 80 100 0 20 40 60 80 100
Income status at each percentile, 2011 Income status at each percentile, 2012
Extremely poor (< $1.25 a day) Poor after taxes and transfers
Moderately poor ($1.25$4 a day) Poor before taxes and transfers
Vulnerable ($4$10 a day) Non-poor
Middle class and rich (> $10 a day)
Sources: PovcalNet (panel a) and OECD Income Distribution Database (panel b).
Note:Panel a is based on the $1.25 poverty line and 2005 purchasing power parity prices. It includes 123 countries, most of them developing countries, for which data
are available at PovcalNet. Panel a is ranked lexicographically according to the category of the 40th percentile; that is, first, all extremely poor countries at the 40th
percentile are sorted by the share of this group in the total population. Then the same procedure is followed for the moderately poor, the vulnerable, and the middle
class and rich. Panel b is based on the OECD definition of relative poverty and includes 32 OECD countries.
moderate poverty, and vulnerability. At the top of fig- Among richer countries, where absolute poverty is
ure B1.8.1a are countries where extreme poverty rates of lesser concern, the B40 may encompass many of
exceed 40 percent, suggesting that a B40 focus in those who are considered to be relatively poor. Figure
those countries would emphasize the poorest among B1.8.1b shows that in OECD countries many of the
the extremely poor and potentially overlook others in less well-off are considered to be living in relative pov-
extreme poverty above the B40 cutoff but below the erty, even after taking transfers into account. They
extreme proverty line. Directly below are countries are seen to be unable to enjoy an acceptable standard
where moderate poverty is becoming an increasing of living relative to that of the majority of the popula-
concern, since poverty rarely ends when a poor person tion. Given that the relative poverty measure is based
climbs over the extreme poverty line. The lower half on a poverty line set at 60 percent of median national
of the figure shows countries where extreme poverty income, the notion is more closely related to within-
has been mostly eradicated, but many people remain country inequality. Yet, it does show that the focus
moderately poor and a significant share may be char- on the B40 allows for flexibility in focusing on what
acterized as vulnerable to falling back into poverty. societies care most about.
At the bottom of the figure are richer countries, where
most of the B40 have become middle class and have
low risk of falling into extreme poverty.
66 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
2014). This focus on raising the income reform agenda that comprises policies that
share of the poor will be all the more nec- can simultaneously raise growth and equity.
essary given the ambitiousness of the pov- Such synergistic, win-win policies address
erty target, the elevated poverty rates that equality of opportunity and help broaden
are expected to persist in much of Sub- participation in the process of growth; exam-
Saharan Africa, and the large number of ples are policies that improve access to mar-
people in Sub-Saharan Africa and South Asia kets, level the playing field for firms large and
who are expected to continue experiencing small, build human capabilities, and remove
multiple deprivations beyond income poverty. barriers to job creation (Qureshi 2015).
Growth gives governments the fiscal space
More equitable need not mean to implement redistributive policies that raise
less efficient the incomes and welfare of the poor and the
The equity-efficiency trade-off has for a long B40. In the presence of significant failures
time animated the discussion on the feasibil- in credit, insurance, labor, or land markets,
ity and desirability of redistributive policies. where market outcomes may not be effi-
Arthur Okun (1975) hypothesized that redis- cient, there is scope for efficient and equitable
tributive policies intended to reduce inequal- redistributive policies. Policies that redis-
ity imply a big trade-off, where lower tribute wealth can help poorer people over-
inequality can be achieved only at a great come credit constraints to invest in human
efficiency cost (the leaky buckets hypoth- capital or can effectively insure them against
esis).34 The trade-off rests on the premise that transient shocks; targeted safety nets have
markets work perfectly and that redistribu- dynamic efficiency effects that ultimately sup-
tion produces administrative costs, disincen- port growth and enhance its sustainability.
tive effects, and productivity distortions. In
the presence of market failures, however, the More sustainable development does not
equity-efficiency trade-off need not always imply lower growth
hold, a fact that gives rise to the possibility The promise of sustainable development
of redistributive policies that also enhance requires greater commitment to green growth
efficiency (World Bank 2005). 35 While policies. Such policies typically have the
complementarities exist between equity and broad objectives of protecting and ensuring
efficiency, this is not to say that the trade- the sustainable use of natural capital, improv-
off does not exist anymore. In the presence ing environmental quality, and advancing
of resource constraints, many investment lower carbon and more resilient growth in
and policy choices will likely need to con- the face of a changing climate. Green growth
tend with a trade-off of some sort (where the policies not only reduce large welfare costs
time horizon plays a key role in assessing the and environmental externalities. They can
trade-off). How the trade-off is resolved lies contribute directly to economic growth and
at the heart of how growth with equity is the well-being of the poor in several ways,
operationalized in the real world. including by promoting efficiency gains that
Given that such a trade-off need not are cost-effective, reduce energy and materi-
always hold, policies may be able to simulta- als use, and increase private sector profits;
neously improve growth and equity. Growth reducing future costs of natural resources,
and its incidence across the income distribu- such as water, through improved manage-
tion are determined jointly and therefore pol- ment; improving the health and productiv-
icies that affect one will also affect the other. ity of the workforce and lowering health
An equity component need not be embed- expenses in the state budget; promoting the
ded in each policy. It suffices that the overall expansion of new industries and technolo-
package is consistent with growth and equity gies that offset losses in sunset industries;
and that the underlying process is fair (World Responding to changes in consumer prefer-
Bank 2005). Moreover, there is a substantial ences through expansion of less-polluting
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 67
and energy-intensive service industries (often be staffed with trained personnel, stocked,
including realizing opportunities that would and able to provide adequate services.
otherwise be lost, such as tourism); and Effective service delivery, in turn, requires
proactively adapting to disaster risks in ways effective, accountable, and transparent
that reduce the impact of those risks, reduce mechanisms and institutions.
costs, and improve knowledge. Insuring against risks. Social policies can
protect the extremely poor from destitu-
tion and protect the vulnerable against
Identifying key policy ingredients
risks. They can help families avoid irrevers-
To sustainably end extreme poverty and ible losses and prevent them from having
boost shared prosperity, three policy ingredi- to make decisions with costly long-run
ents are needed in any strategy.36 implications. Good social programs sup-
port growth and human development and
Sustaining broad-based growth. Economic come in three kinds. Noncontributory
growth has been the main building block social assistance programs for the chronic
of poverty reduction and shared prosperity or extremely poor protect them from des-
over the past several decades. Among econ- titution and promote investments in their
omies that have managed to sustain rapid childrens human capital. Social insurance
growth for extended periods, five charac- programs prevent people falling back into
teristics are common: effective leadership poverty, whether caused by individual ill-
and governance, macroeconomic stability, ness, temporary unemployment, or local-
a market orientation to guide structural ized droughts. And global insurance mech-
change, an outward orientation for domes- anisms help countries cope with massive
tic and external discipline, and a future ori- natural disasters or pandemics. To design
entation to boost savings and meet invest- such programs, a dynamic understanding
ment needs. Growth is not an end in itself, of poverty and vulnerability is essential.
however. It is a means for increasing the
incomes and well-being of people, and it is In all of the above, it is essential that natu-
most effective in reaching low-income peo- ral capital, environmental health, and eco-
ple when it increases their labor incomes by system sustainability concerns are integrated
supporting productive employment. Policy into economic decision making. In both rural
makers must keep in mind the effects of and urban areas, poverty alleviation strategies
interventions on job creation and income need to give greater attention to the environ-
growth for the extremely poor and the B40. mental and resource dimensions of poverty
Investing in human development. Human because the number of people involved is
development is essential to remedying the large and the consequences of neglect signifi-
multidimensional deprivations of the poor cant. Where resource dependence is high and
and the B40, and a requirement for broad- opportunities for economic diversification are
based economic growth. Vital human limited, it is unlikely that policies can elimi-
development investments include educa- nate poverty without acknowledging the criti-
tion, health and population programs, safe cal role of natural resources in supporting the
water, and sanitation. These services are poor. Natural resources are often the only
especially important for children, whose significant assets that the poor have access to,
opportunities early in life determine their and if managed efficiently they could provide
future lives as adults. The quality of ser- a sustainable foundation for economic viabil-
vices is also important. It is not enough ity. If not, however, the loss of natural capital
to get children to school: teachers need to through weaknesses in property rights, poor
show up, textbooks need to arrive, and local knowledge, price distortions, or poor
children need to be taught in ways that infrastructure means that eradicating poverty
enable them to learn. Health clinics need to over the longer term will be unachievable.
68 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
Broad-based growth must be sustained increase labor force participation. Two dis-
over time tinct, but not mutually exclusive, pathways
Continued progress in poverty reduction and for boosting labor incomes exist: fuller
shared prosperity requires economic dyna- employment and higher returns to employ-
mism to generate income-earning opportu- ment. Growth in labor incomes was the
nities for broad segments of society. As part foundation of the rapid reduction in poverty
of this endeavor, economic growthboth its in East Asia during the 1970s and 1980s,
pace and patternis critical. In very poor as well as in the developing countries that
countries, it is arithmetically impossible to were most successful at reducing poverty in
reduce poverty significantly without growth the 1990s and 2000s. Much of the recovery
because the pool to redistribute from is very since the 2008 economic crisis has been in
small. In richer countries, growth again is the form of jobless growth, which has damp-
key because it explains most of the varia- ened the benefits of growth for lower-income
tion in income among the B40. In addition groups.
to the pace of growth, its pattern also mat- The Commission on Growth and Devel-
ters. Some kinds of growth benefit the poor opment (2008) has highlighted five charac-
or the B40 more effectively than other kinds. teristics as key to rapid and sustained growth
The expansion of smallholder farming or (figure 1.21). The Commission identified 13
labor-intensive manufacturing, for example, economies that since 1950 have grown at an
may convey greater benefits to the poor than average rate of 7 percent or more for 25 years
the expansion of capital-intensive mining or longer.37 Despite the differences between
does. Moreover, for growth to have a last- them, these economies all exhibited the fol-
ing impact, it must be sustained over a long lowing: They had committed, credible, and
period of time. Sustained growth results in capable governments; they maintained mac-
mass job creation, making labor more scarce roeconomic stability; they let markets allo-
and valuable and thereby lifting incomes. cate resources; they fully exploited the
Growth can thereby bite deeply into poverty world economy; and they mustered high rates
and contribute to prosperity by being shared of saving and investment.
within and between generations.
Fast growth in labor-intensive sectors Effective leadership and governance
will help reduce poverty and share prosper- Sustained growth requires committed, cred-
ity, especially when coupled with efforts to ible, and capable governments. Growth does
not just happen. It requires a decades-long
commitment to the credible implementa-
FIGURE 1.21 Five characteristics have been key among countries tion of enabling policies that are designed
that sustained rapid growth
by capable governments. The effectiveness
of governments depends in the fi rst place on
Effective the talent of their workforce, the incentives
leadership and governance Macroeconomic stability they foster, the vigor of their debates, and the
so markets work
organizational structure they impose (Com-
mission on Growth and Development 2008).
Governments are not only policy makers but
Future orientation also service providers, investors, arbitrators,
to meet investment needs
and employers, requiring good governance
in all of these roles. Good governance also
requires strong accountability measures
Outward orientation Market orientation between policy makers and people, to raise
to leverage and discipline to guide structural change the voices of the ultimate beneficiaries of gov-
ernment policy, especially the marginalized
Source: GMR team adaptation from Commission on Growth and Development 2008. and the poor, and between policy makers
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 69
and providers, so as to raise the quality of efficiency gap between the region and the
service delivery (World Bank 2003). United States is explained by misallocation
of resources, where the efficiency gap itself
Macroeconomic stability so markets work explains about half of the income gap (Araujo
Macroeconomic stability is a key prerequisite et al. 2015). Key priorities are the following:
for growth to flourish. Instability in price lev-
els, interest rates, the exchange rate, or the Accelerating productivity growth in agri-
tax burden deters private investment. Sound culture. Increased agricultural productivity
macroeconomic policies reduce distortions growth is important because the majority
in relative prices and returns to assets and of the poor continue to live in rural areas
encourage investments in productive sectors. where agriculture is central to their liveli-
Macroeconomic stability also ensures that fis- hoods. Special consideration is needed for
cal resources are productively used to finance women, who make up over 43 percent of
critical expenditures, including in education, the global agricultural labor force, yet
health, and infrastructure, rather than merely continue to face major constraints reduc-
servicing the debt (Commission on Growth ing their productivity (OSullivan et al.
and Development 2008). The recent financial 2014). Experience in all regions has shown
crisis has brought to the fore the damaging that improving the living conditions of the
consequences of macroeconomic instability extremely and moderately poor hinges on
on economic growth and living standards, the creation of a dynamic agricultural sec-
contributing to job losses, rising poverty lev- tor. Despite some inroads into productivity-
els, and thereby endangering progress toward enhancing agricultural technology, agri-
poverty reduction and shared prosperity. cultural success stories in Africa are few
compared with the experiences in Asia and
Market orientation to guide structural Latin America, and yields per hectare in
change Africa are about the same as they were in
Microeconomic dynamism is a necessary 1970. Better output prices through more
feature of an adaptive economy and, guided open trade (as seen in Cambodia, Ethio-
by the market mechanism, a key driver of pia, and Rwanda, among others) provide
structural change. Growth entails struc- necessary incentives to adopt fertilizer and
tural transformation within and across sec- improved seed varieties, especially when
tors.38 Within sectors, opportunities arise to reinforced by complementary policies to
deepen comparative advantages and boost reduce the cost of inputs, such as improved
productivity by operating more efficiently infrastructure and access to finance and
and moving up the value chain. As compara- insurance. Institutional measures such as
tive advantages evolve, structural shifts occur land reform, market infrastructure, and
between sectors, from agriculture to industry more effective producers organizations can
and services, from rural to urban areas, and catalyze investment in agriculture (Gill and
from informal to formal activities. Well-func- Revenga forthcoming).
tioning markets are essential to guide these Widening the economic footprint of natu-
processes. Their price signals ration scarce ral resources. Many countries have oppor-
resources to their most productive uses. This tunities to enhance the economywide
rationing is accomplished through competi- potential of the natural resource sector.
tion, buttressed by contestability in product Depending on the location, suitable poli-
markets and mobility in capital and labor cies may include improved rural-to-urban
markets.39 The negative impact of inefficient connectivity, stronger value-chains, rural
resource allocation may not be immediately finance, protection of community and
visible, but it will slowly accrue over time. indigenous property rights, and environ-
Recent evidence from Latin America sug- mental regulation. The potential pitfalls of
gests, for example, that 80 percent of the NRB growth are well understood, both at
70 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
households to accumulate assets by reduc- high for children who are needed to attend to
ing inequalities of opportunity are therefore household chores such as collecting water or
crucial. fi rewood, cooking, caring for younger chil-
Equitable access to quality social ser- dren, or helping with the family farm. Par-
vices is key. To upgrade the human capital ents may consider the fi nancial and oppor-
of lower-income groups, investments need tunity costs too high if they are unaware
to be made to ensure equality of access for of the potential returns to investing in their
critical basic social services, such as educa- childrens education, or they may rightly cal-
tion, health, water, and sanitation. These culate that the returns are low because absen-
investments often take place over multiple tee teachers or lack of supplies deliver a low-
periods, with critical windows and sensitive quality education.
periods depending on the type of investment. In middle- and high-income countries,
For example, in low- and middle-income where the quantity of education has been
countries, policies targeted at promoting more impressive than its results, it is a priority
infant and child survival and those focused to ensure quality of education. Access to pri-
on investments in nutrition and stimulation mary and secondary education is widespread
during the fi rst years of life have the highest or universal in richer countries, where indica-
potential returns. Addressing deprivations tors of enrollment and years of schooling are
during the prenatal period is critical. Provid- generally good (see box 1.9 for the example
ing access to prenatal care and ensuring that of Chile). But important differences persist
births are managed by skilled professionals in the terms of access and outcomes (figure
will reduce the odds of maternal and child 1.22). Students from poorer families often
mortality (Campbell and Graham 2006). receive inferior-quality education, worsen-
Beyond birth and survival, early environ- ing their learning outcomes. For example,
ments have a powerful influence on shaping in countries such as Argentina, Brazil, Bul-
long-term outcomes. Socioeconomic gaps in garia, Indonesia, and Tunisia, the share of
child development emerge early in life, before B40 students who demonstrate basic math
school begins; persist through childhood; and competencies in the Programme for Inter-
are strongly predictive of adult outcomes, national Student Assessment test is less than
shaping social and economic inequalities in half that of top 20 percent students (World
the long run (Fryer and Levitt 2004; Paxson Bank 2015e). In South Asia, inequalities in
and Schady 2007). educational outcomes appear to be increas-
ingly driven by differences in school quality
Access to quality education for all rather than by access to schools (World Bank
Investments to increase access to education 2015a). This situation is especially apparent
and vocational training and to improve edu- in settings where higher-income households
cational quality are needed to equip poor can turn to private schools when public
people to take advantage of opportunities. schools are failing.
Despite impressive gains in school enrollment Improvements in educational quality
over the past 25 years, 55 million primary- require that schools and teachers be held
school-age children do not attend school, accountable for student performance. Build-
especially in Sub-Saharan Africa. In some ing schools, training teachers, and procuring
cases no school is nearby, but more often supplies are only the first steps. In addition to
other obstacles prevent children from attend- adequate resources, school systems and teach-
ing school. School fees may be prohibitively ers need to be accountable for using resources
expensive for parents. Even schools that are to deliver results according to established met-
nominally free may be unaffordable because rics. Not only must teachers show up but they
of ancillary costs such as books, supplies, also must be given the right incentives, as well
uniforms, or miscellaneous fees. The oppor- as the complementary inputs and support, to
tunity cost of attending school may be too teach effectively. Evidence from Kenya shows
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 73
Chiles growth-with-equity approach has produced workers in the B40 across all sectors in the economy.
substantial development progress. Infant mortality As a result, the education gap between the B40 and
declined between 1990 and 2011 from 16 deaths per the T60, shown in figure B1.9.2, decreased steadily
1,000 births to 7the second-lowest level in Latin as Chile progressed toward universal secondary edu-
America. As measured by the Gini index, income cation. Alongside these developments, national labor
inequality declined from 57.3 to 50.8 between 1990 productivity increased from $12 to $28 for an hour
and 2011, and the income share held by the bottom of work.a
40 percent (B40) rose from 9.9 to 12.7. Since 1990, More work, however, remains to be done. Chiles
gross domestic product (GDP) per capita growth has level of inequality remains high compared with the
averaged 3.9 percent a year. This progress can be asso- region and Organisation for Co-operation and Devel-
ciated with policies that aligned growth with equity. opment (OECD) countries. Chiles inequality is also
The economy was opened to international trade and reflected in low intergenerational social mobility,
disciplined by fiscal prudence. Government expendi- which is largely caused by unequal access to quality
tures were directed toward programs that prioritized education (Nez and Miranda 2011). Social pub-
families investments in health and human capital to lic spending has risen significantly over the last two
reduce the inequality of opportunity. Overall Chileans decades, especially on health and education, but still
are healthier and better educated than they were in lags regional and OECD averages. The Chilean tax-
1990, and they enjoy higher standards of living. transfer system is characterized by low progressivity
The policies Chile undertook resulted in broad and has been less effective in reducing poverty and
benefits for the B40. For instance, figure B1.9.1 income inequality compared with the experience in
shows increasing secondary completion rates for the OECD (IMF 2014a).
FIGURE B1.9.1 Across all sectors, Chilean B40 FIGURE B1.9.2 Educational catch-up of the B40
workers are now better educated went hand-in-hand with rising productivity
Secondary completion of the bottom 40% Secondary education gap (bottom 40% to top 60%)
and labor productivity
80 50
Secondary completion rate (%)
40
60
30
Percent
40
20
20
10
0 0
1990 2000 2011 1990 2000 2011
Agriculture Industry Services Secondary education gap, bottom 40% to top 60%
Labor productivity per hour worked (2014 PPP)
Source: World Bank calculations, based on CASEN and data from the Conference Board.
Note: For productivity: Total Economy Database; share of workers by sector and level of skill from the B40 was calculated using household surveys (Encuesta de
Caracterizacin Socioeconmica Nacional) from Chile for the respective years. PPP = purchasing power parity.
how greater parental and parent-teacher asso- (Duflo, Dupas, and Kremer 2015). Greater
ciation involvement in teacher selection and exposure to the quality of services available
school governance can improve the qual- elsewhere may also help parents and teachers
ity of education and student performance demand better educational quality. Despite
74 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
Ukraine
Argentina
Russian Federation
Brazil
Poland
Moldova Bulgaria
Kyrgyz Republic
Indonesia
Georgia
Armenia Tunisia
0 10 20 30 40 50 60 0 20 40 60 80 100
Share of youths who completed Share of students demonstrating basic
postsecondary school (%) competency in PISA math test, 2012 (%)
Bottom 40% of the population Top 60% of the population Top 20% of the population
Sources: For panel a, ECAPOV 2015; for panel b, World Bank calculations, based on OECD 2012.
Note: For panel a, the age cohort for the estimates refers to youth ages 2225 years for Georgia, the Kyrgyz Republic, Moldova, and the Russian Federation;
ages 2124 for Armenia and Ukraine; and ages 2427 for Poland. All data are from 2012. For panel b, the PISA test score is for the share of students above
level 2 in math.
the pronounced gaps in educational perfor- Reducing the costs of health care for low-
mance, people in the B40 express as much income individuals is also needed, including
or more satisfaction with public education better control of both official out-of-pocket
services than do those in the T20 in most payments and unofficial fees that are some-
regions; the main exceptions are South Asia times paid to speed delivery of services.
and, to a lesser extent, Sub-Saharan Africa Richer countries, especially those whose
(figure 1.23). populations are aging rapidly, need health
systems that are equipped to meet the grow-
Health care to meet evolving needs ing burden of chronic noncommunicable dis-
In the health sector, investments are needed eases. Treatment of cardiovascular diseases,
to strengthen the physical infrastructure, chronic respiratory diseases, cancer, and
especially the systems that deliver health care. diabetes claims a rapidly growing share of
The quality of health care delivery needs to national health care budgets. For low-income
be upgraded, particularly in key areas such as households without adequate health insur-
primary care and maternal and child health. ance, these diseases also have a major impact
At the same time, health care services need on household budgets. The incidence of
to be extended to areas that are currently noncommunicable disease can be curbed by
underserved, possibly through partnerships prevention-oriented policies such as dietary
with the private sector and greater use of education, food price policies that do not
community-level providers. As in educa- effectively subsidize unhealthy foods, public
tion, increasing the accountability of the funding for smoking-cessation programs,
health system is crucial and can be achieved and programs to encourage more physically
by better linking spending to results, as active lifestyles. Policies that contain the out-
community-level monitoring has done in of-pocket costs for low-income patients are
Uganda (Gill and Revenga forthcoming). also needed.
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 75
Water and sanitation for healthy FIGURE 1.23 In several regions, satisfaction with access to public
environments services for health care and education is low
Creating an environment conducive to good
public health is just as important as improving a. Satisfaction with access to public services for health care, 2014
90
the health care system. Improving health and
physical well-being begins with prevention.
policies is an important determinant of their such risks. Social insurance policies are
effectiveness; avoiding disincentives to work, not only designed to help families through
such as sharp reductions in benefits for rela- idiosyncratic shocks but are also geared to
tively small increases in earned income, is keep people out of poverty from predictable
particularly important. events; contributory old-age pensions to pro-
Conditional cash transfers provide ben- vide income during retirement are one exam-
efits to alleviate current poverty while simul- ple. The choice of policy instrument depends
taneously promoting behavior that is likely to upon the nature of the risk being considered
provide a pathway out of poverty. Pioneered and the affordability of the intervention. Pre-
in Latin America and now in place around cautionary policies can cushion the vulner-
the globe, such programs provide cash or able against shocks to a limited extent. In
noncash benefits to families on the condition developing countries, where farming and self-
that they make investments in human capital, employment are more prevalent and income
such as taking their children for vaccinations support mechanisms more limited, macro-
or other preventive health services or sending economic instability caused by price shocks
their children to school. The cash transfers has less impact on open unemployment and
received by households not only ease their more on earnings from work (World Bank
poverty but also allow them to look beyond 2013b). Governments can adopt active social
their immediate subsistence needs to invest in protection policies to mitigate the impact of
their childrens futures. shocks on the poor. Many countries have
public unemployment insurance systems to
Social insurance to deal with vulnerability help mitigate the risk of job loss. Many also
Individualsespecially those among the have disability insurance to cover situations
already poor and the B40face a variety where illness or injury affects employment
of risks that can have serious consequences opportunities.
for their well-being. External shocks, such
as localized droughts or floods, and repeated Global insurance to absorb systemic shocks
shocks can drive households into (deeper) Beyond assisting the destitute and insuring
poverty. Commodity price volatility may against individual risks, protection also needs
depress income from agriculture and may to extend to large systemic shocks. Natural
hurt the vulnerable the most. Events specific disasters or global pandemics are examples
to individuals, such as illness or poor health of systemic shocks that can set progress back
of the head of household, can have the same for years. Natural and climate-related shocks
effect. In these cases it is not joblessness appear to be growing in importance, with
per se that pushes families into poverty but the poor in low-income countries the least
rather the destruction of personal and house- prepared for managing such risks. To bet-
hold assets. Even taking these shocks into ter equip them to cope with these risks, a
account, however, job losses remain a criti- range of options exists that transcends bor-
cal factor sending people deeper into poverty. ders. One option is to ensure that funding for
More generally, as countries pursue market- disaster preparedness and disaster response
oriented structural change and expose their is already available before such events occur.
economies to greater forces of competition, In this context, the World Bank Group has
adjustment costs may arise in the near term worked with donors and the private sector to
even if over the longer term net positive ben- develop a Disaster Risk Financing and Insur-
efits may accrue. However, a competitive ance facility that does exactly this. A similar
economy can coexist with an inclusive society initiative, the Pandemic Emergency Facility,
if minimum levels of protection are provided is being developed to quickly disburse sub-
against the risks of economic restructuring. stantial funding in response to objective epi-
Social insurance policies are an important demiological criteria. An additional goal of
mechanism for providing protection against such initiatives is to stimulate greater country
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 77
protection mechanisms. Throughout, such 8. The MPI is calculated and reported yearly by
strategy needs to be mindful of sustainabil- the Oxford Poverty and Human Development
ityeconomic, social, and environmen- Initiative and the United Nations Develop-
tal. With such strategies in place, the world ment Programme (Alkire and Foster 2011;
stands a better chance of ending extreme Alkire and Santos 2013).
poverty by 2030 and lifting the well-being of 9. While household surveys may track con-
lower-income people in every country of the sumption or income, reference is made just to
world. income for convenience.
10. The second of the World Bank Groups goals
has been extensively discussed in World Bank
Notes (2013b, 2015c). The discussion in this Report
1. Monetary poverty measures are based on builds on these publications, focusing selec-
household surveys that measure deprivation tively on only two aspects: links to equity and
on the basis of either income or consump- inequality, and the non-income dimension.
tion data. To simplify, this Report refers to 11. See also the influential book on redistribu-
income poverty for both cases. In a simi- tion with growth (Chenery et al. 1974) and
lar vein, most references to poverty, unless the broad-based growth discussion in World
explicitly stated otherwise, mean extreme Bank (1990).
poverty. 12. Rauniyar and Kanbur (2010) provide an
2. The availability and the quality of data example of the latter, which closely connects
remain a concern in the assessment of both to examining how shared prosperity, when
goals, and the robustness of underlying meth- measured in all of its dimensions, benefits the
odologies will require continued scrutiny. less well-off.
Increasing the availability and quality of data 13. In some respects, the indicator is itself a
is a key priority to strengthen analysis, pol- multidimensional amalgamation because it
icy formulation, and policy implementation summarizes the ability to obtain goods and
(World Bank 2015d). services critical for welfare through market
3. Forthcoming update of World Bank 2011a. transactions.
Furthermore, 7.0 million deaths in develop- 14. Basu (2001, 2006) noted that income indica-
ing countries in 2010, or 18 percent of total tors focusing on the poorer income deciles
deaths, were due to pollution (IHME 2010). may correlate more strongly than average
4. Based on the international poverty line of incomes with non-income indicators of well-
$1.90 a day (2011 PPP). A similar trend is being, such as greater life expectancy and
observed when comparing 1990 with 2011 higher literacy.
using a poverty line of $1.25 a day (2005 PPP). 15. If the shared prosperity objective were illus-
5. China became an upper-middle-income coun- trated by a social welfare function, it would
try in 2010. attach positive weights through the 40th per-
6. Because poverty data for several fragile and centile but zero weight thereafter. A singular
conflict-affected states are unavailable, the focus on the B40, however, would conflict
actual numbers of poor living in these coun- with the poverty goal (given that in many
tries could be much higher. countries extreme poverty incidence is well
7. To evaluate the inclusiveness of growth, it above 40 percent); it would also be inconsis-
is useful to examine how the rate of average tent with the requirement of social sustain-
income growth transmits into changes in pov- ability (which requires that the interest of
erty alleviation. The depth elasticity compares the B40 cannot be considered with total dis-
the growth elasticities of the person-equivalent regard to or independently of the rest of the
and traditional headcount ratios. It also indi- income distribution).
cates how well changes in the traditional head- 16. Derived from prosperitas (doing well in
count predict changes in the person-equivalent Latin), prosperity can be defi ned as a state,
measure (Castleman, Foster, and Smith 2015). the optimal distribution of which over a
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 79
given population inevitably involves norma- is treated as an instrument rather than an end
tive questions about social equity. Therefore, in itself.
shared prosperityor prosperitas vulgaris 24. The authors examine the relationship through
(that is, prosperity shared by all)intrinsi- the lens of the social welfare function that
cally reflects a societal value judgment about corresponds to the shared prosperity concept,
the equitable distribution of resources as which coincides with the average income of
articulated through a process of social choice. the B40 group.
17. World Bank (2005) refers to the theories by 25. The observation also appears to hold within
John Rawls (1971), Amartya Sen (1985), countries. Skoufias, Tiwari, and Shidiq (2014)
Ronald Dworkin (1981a, 1981b), and John find a strong positive correlation between
Roemer (1998). overall consumption growth and B40 growth
18. Indicators based on mean income growth across provinces in Thailand.
tend to penalize the less well-off. Since aver- 26. The role of growth in accounting for changes
age income weights the incomes of everyone in social welfare appears to be smaller for
equally, it assigns a greater weight to those in bottom-sensitive social welfare functions,
richer percentiles of the income distribution, mainly because the growth rate of the income
since richer percentiles have higher incomes shares of the poorest deciles exhibits the
(World Bank 2015b). highest volatility between spells. This vola-
19. Such a strategy is indicated in World Bank tility is amplified by social welfare functions
(2013b, 19), where the shared prosperity that place a high weight on the poor. Dol-
objective is articulated to achieve the maxi- lar, Kleineberg, and Kraay (2013) argue that
mum possible increase in living standards of part of this variation may be due to sampling
the less well-off. Other references, however, variation.
such as World Bank (2015c, 1) suggest that 27. Efforts are under way to incorporate inequal-
the objective merely entails increasing the ity in longevity and unemployment across
average incomes of the bottom 40 percent of educational groups.
the population in each country. 28. Primary completion rates in low-income coun-
20. The 2014 15 GMR assesses the shared tries are 2030 percent for the B40 (70100
prosperity performance of countries around percent for the T20). Even in middle-income
200611, whereas the 201516 Report exam- countries, such as Albania, Lesotho, Nicara-
ines the period around 200712. gua, and Nigeria, the gaps are significant.
21. Botswana, Mozambique, Namibia, Nicara- 29. For example, among 41 countries, the index
gua, Tajikistan, and West Bank and Gaza. of the inequality of opportunity is 2 percent
22. Today, the richest 10 percent of the popu- in Norway compared with 34 percent in
lation in Organisation for Economic Co- Guatemala.
operation and Development countries earns 30. World Development Indicators, World Bank,
9.5 times the income of the poorest 10 per- July 2015.
cent; in the 1980s this ratio stood at 7:1, and 31. The concept of change in total wealth per
it has been rising ever since (Cingano 2014). capita rests upon the premise of three forms
23. The previous section examined B40 income of capitalnatural, human, and physical.
growth and its implications for the B40 per- Transformation of one form of capital into
cent income share, a measure of inequality of another is possible. Thus, education expendi-
independent interest, with a view to illustrate tures are added to gross natural savings and
different patterns across countries. In this sec- partly offset the depletion of natural capital
tion, the B40 income growth is explained by (World Bank 2014a, 12429).
the constituent components that are thought 32. Specifically, McNamara said: The two goals
to drive the explanatory variable: average are intrinsically related, though governments
income growth and its elasticity with respect are often tempted to pursue one without ade-
to the B40 (the change in the B40 income quate attention to the other. But from a devel-
share), where the latter measure of inequality opment point of view that approach always
80 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
fails in the end. For the pursuit of growth mitigation and coping mechanisms need to be
without a reasonable concern for equity is in place to protect individualsthough not
ultimately socially destabilizing, and often necessarily industries, fi rms, or jobsfrom
violently so. And the pursuit of equity without the downside risks of failure.
a reasonable concern for growth merely tends
to redistribute economic stagnation. Neither
pursuit, taken by itself, can lead to sustained,
References
successful development. (McNamara 1980). Aghion, P., C. Harris, and P. Howitt. 2001.
33. World Bank (2005) fi nds that this elasticity Competition, Imitation and Growth with
is close to zero in countries with high income Step-by-Step Innovation. Review of Eco-
inequality. nomic Studies 68 (3): 46792.
34. The year 2015 marks the 40th anniversary Alkire, S., and J. Foster. 2011. Understandings
of publication of Arthur M. Okuns famous and Misunderstandings of Multidimensional
book, Equality and Efficiency: The Big Poverty Measurement. Journal of Economic
Trade-Off. One of the original supply-side Inequality 9: 47687.
economists, Okun introduced the meta- Alkire, S., J. Foster, and M. E. Santos. 2011.
phor of the leaky bucket, which has become Where Did Identification Go? Journal of
famous among economists: The money Economic Inequality 9: 50105.
must be carried from the rich to the poor in Alkire, S., J. Foster, S. Seth, M. E. Santos, J. M.
a leaky bucket. Some of it will simply disap- Roche, and P. Ballon. 2015. Multidimensional
pear in transit, so the poor will not receive all
Poverty Measurement and Analysis. Oxford,
the money that is taken from the rich (Okun
U.K.: Oxford University Press.
1975, 91).
Alkire, S., C. Jindra, G. R. Aguilar, S. Seth,
35. Some financial inclusion policies, such as
and A. Vaz. 2015. Global Multidimensional
broadening credit access (in governments
Poverty Index 2015. Oxford, U.K.: Oxford
efforts toward achieving equitable opportu-
Poverty and Human Development Initiative.
nities), could entail a trade-off with macro-
Alkire, S., and M. E. Santos. 2013. Measur-
economic stability even if they achieve higher
ing Acute Poverty in the Developing World:
growth (Sahay et al. 2015).
Robustness and Scope of the Multidimensional
36. This section builds on Gill and Revenga
Poverty Index. Working Paper 59, Oxford
(forthcoming) and World Bank (2010b,
Poverty and Human Development Initiative,
2010c, 2014c).
37. These economies were Botswana; Brazil; Oxford, U.K.
China; Hong Kong SAR, China; Indone- Alkire, S., and S. Seth. 2013. Multidimensional
sia; Japan; the Republic of Korea; Malaysia; Poverty Reduction in India between 1999 and
Malta; Oman; Singapore; Taiwan, China; 2006: Where and How? Working Paper 60,
and Thailand. Oxford Poverty and Human Development Ini-
38. Commission on Growth and Development tiative, Oxford, U.K.
(2008) notes: The growth of GDP may be Angelsen, A., P. Jagger, R. Babigumira, B.
measured up in the macroeconomic treetops, Belcher, N. J. Hogarth, S. Bauch, and S. Wun-
but all the action is in the microeconomic der. 2014. Environmental Income and Rural
undergrowth, where new limbs sprout, and Livelihoods: A Global-Comparative Analy-
dead wood is cleared away. sis. World Development 64 (Supplement 1):
39. Howitt 2009. Aghion, Harris, and Howitt S12S28.
(2001) fi nd, however, that greater competi- Araujo, J. A. de T. R., E. Vostroknutova, K. M.
tion does not automatically lead to faster Wacker, and M. Clavijo. 2015. Understanding
productivity growth, because preconditions Latin America and the Caribbeans Income
need to be satisfied so that firms are suffi- Gap. Washington, DC: World Bank Group.
ciently enabled to innovate. For competition Atkinson, A. B. 2014. After Piketty? British
to effectively spur innovation, elementary risk Journal of Sociology 65: 61938.
GLOBAL MONITORING REPORT 2015/2016 ENDING EXTREME POVERTY AND SHARING PROSPERITY 81
Atkinson, A. B., T. Piketty, and E. Saez. 2011. Brunori, P., F. H. G. Ferreira, and V. Peragine.
Top Incomes in the Long Run of History. 2013. Inequality of Opportunity, Income
Journal of Economic Literature 49 (1): 371. Inequality and Economic Mobility: Some
Banerjee, A. V., and E. Duflo. 2003. Inequality International Comparisons. Policy Research
and Growth: What Can the Data Say? Jour- Working Paper 6304, World Bank, Washing-
nal of Economic Growth 8 (3): 26799. ton, DC.
Basu, K. 2001. On the Goals of Development. Burgess R., and D. Donaldson. 2010. Can Open-
In Frontiers of Development Economics: The ness Mitigate the Effects of Weather Shocks?
Future in Perspective, edited by G. M. Meier Evidence from Indias Famine Era. American
and J. E. Stiglitz, 6186. New York: Oxford Economic Review 100 (2): 44953.
University Press. Bussolo, M., R. De Hoyos, D. Medvedev, and D.
. 2006. Globalization, Poverty, and van der Mensbrugghe. 2008. Global Growth
Inequality: What Is the Relationship? What and Distribution: Are China and India Reshap-
Can Be Done? World Development 34 (8): ing the World? Working Paper RP2008/29,
136173. United Nations University World Institute for
Battistin, E., R. Blundell, and A. Lewbel. 2009. Development Economic Research, Helsinki.
Why Is Consumption More Log Normal than Campbell, O., and W. Graham. 2006. Strategies
Income? Gibrats Law Revisited. Journal of for Reducing Maternal Mortality: Getting On
Political Economy 117: 114054. with What Works. Lancet 368 (7): 128499.
Bentham, J. 2000. (Published in 1789.) The Prin- Castleman, T., J. Foster, and S. C. Smith. 2015.
ciples of Morals and Legislation. Kitchener, Person-Equivalent Headcount Measures of
Ontario: Batoche Books. Poverty. Institute for International Economic
Berg, A., J. D. Ostry, and J. Zettelmeyer. 2012. Policy Working Paper Series 2015-10, Elliot
What Makes Growth Sustained? Journal of School of International Affairs, George Wash-
Development Economics 98 (2): 14966. ington University, Washington, DC.
Boarini R., F. Murtin, and P. Schreyer. Forth- Chandra, V., J. Y. Lin, and Y. Wang. 2012.
coming. Inclusive Growth: The OECD Leading Dragons Phenomenon: New Oppor-
Measurement Framework. OECD Statistics tunities for Catch-Up in Low-Income Coun-
Directorate Working Paper, Organisation for tries. Policy Research Working Paper 6000,
Economic Co-operation and Development, World Bank, Washington, DC.
Paris. Chen, S., and M. Ravallion. 2003. Household
Bourguignon, F., and G. Fields. 1990. Poverty Welfare Impacts of Chinas Accession to the
Measures and Anti-Poverty Policy. Recherches World Trade Organization. Policy Research
Economique de Louvain 56 (34): 40927. Working Paper 3040, World Bank, Washing-
Bourguignon, F., and L. Pereira da Silva, eds. ton, DC.
2003. The Impact of Economic Policies on . 2010. The Developing World Is Poorer
Poverty and Income Distribution: Evalua- than We Thought, but No Less Successful in
tion Techniques and Tools. New York: Oxford the Fight against Poverty. Quarterly Journal
University Press for the World Bank. of Economics 125 (4): 1577625.
Bourguignon, F., et al. 2010. The Millen- . 2013. More Relatively Poor People in
nium Development Goals at M idpoint: a Less Absolutely Poor World. Review of
An Assessment. In Equity and Growth in a Income and Wealth 59 (1): 128.
Globalizing World, edited by R. Kanbur and Chenery, H., C. Bell, J. Duloy, and R. Duloy.
A. M. Spence, 1739. Washington, DC: Com- 1974. Redistribution with Growth. Oxford,
mission for Growth and Development. U.K.: Oxford University Press.
Brauer, M., et al. Forthcoming. Ambient Air Cingano, F. 2014. Trends in Income Inequality
Pollution Exposure Estimation for the Global and its Impact on Economic Growth. OECD
Burden of Disease 2013. Institute for Health Social, Employment and Migration Working
Metrics and Evaluation, University of Wash- Paper 163, Organization for Economic Co-
ington, Seattle. operation and Development, Paris.
82 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
IHME (Institute for Health Metrics and Evalu- Poverty? Policy Research Working Paper
ation). Global Burden of Disease 2010 Study 7106, World Bank, Washington, DC.
(database). IHME, University of Washington, Leichenko, R., and J. A. Silva. 2014. Climate
Seattle (accessed August 2015). Change and Poverty: Vulnerability, Impacts,
IMF (International Monetary Fund). 2011. New and Alleviation Strategies. Wiley Interdis-
Growth Drivers for Low-Income Countries: ciplinary Reviews: Climate Change 5 (4):
The Role of BRICS. Washington, DC: IMF. 53956.
. 2013. Regional Economic Outlook, Li, H., and H.-F. Zou. 1998. Income Inequality
Sub-Saharan Africa: Keeping the Pace. https:// Is Not Harmful for Growth: Theory and Evi-
www.imf.org/external/pubs/ft/reo/2013/afr dence. Review of Development Economics 2
/eng/sreo1013.htm. (3): 31834.
. 2014a. Chile: Selected Issues. IMF Loayza, N., and C. Raddatz. 2010. The Compo-
Country Report 14/219. http://www.imf.org sition of Growth Matters for Poverty Allevia-
/external/pubs/ft/scr/2014/cr14219.pdf. tion. Journal of Development Economics 93:
. 2014b. Regional Economic Outlook, 13751.
Sub-Saharan Africa: Staying the Course. Marrero, G., and J.- G. Rodriguez. 2012 .
https://www.imf.org /external/pubs/ft/reo Inequality of Opportunity in Europe.
/2014/afr/eng/sreo1014.pdf. Review of Income and Wealth 58 (4): 597621.
Inchauste, G., and J. Saavedra-Chanduvi. 2014. . 2013. Inequality of Opportunity and
Opportunity Knocks: Deepening Our Under- Growth. Journal of Development Economics
standing of Poverty Reduction. In Under- 104 (C): 10722.
standing Changes in Poverty, 113. Washing- McNamara, R. S. 1972. Address to the Board
ton, DC: World Bank. of Governors by Robert S. McNamara. World
Inchauste, G., J. P. Azevedo, B. Essama-Nssah, Bank, Washington, DC. http://documents
S. Olivieri, T. Van Nguyen, J. Saavedra- .worldbank.org/curated/en/1972/09/15535489
Chanduvi, and H. Winkler. 2014. Understand- /address-board-governors-robert-s-mcnamara.
ing Changes in Poverty. Directions in Devel- . 1980. Remarks to the Foreign Rela-
opment: Poverty. Washington, DC: World tions Association and Economic Society of
Bank. the Canton of Berne, November 28, 1980.
Jalan, J., and M. Ravallion. 2001. Household World Bank, Washington, DC . https://
Income Dynamics in Rural China. Policy archivesholdings.worldbank.org/remarks-to
Research Working Paper 2706, World Bank, -foreign-relations-association-and-economic
Washington, DC. -society-of-canton-of-berne-nov-28-1980
Jolliffe, D., and E. B. Prydz. 2015. Global Pov- -correspondence-01.
erty Goals and Prices: How Purchasing Power Messner, J. J., N. Hakenn, P. Taft, H. Blyth, K.
Parity Matters. Policy Research Working Lawrence, S. Pavlou Graham, and F. Umaa.
Paper 7256, World Bank, Washington, DC. 2015. Fragile States Index 2015: The Book.
Kraay, A., and D. McKenzie. 2014. Do Poverty Washington, DC: The Fund for Peace.
Traps Exist? Policy Research Working Paper Milanovic, B. 2015. All the Ginis Database.
6835, World Bank, Washington, DC. Washington, DC: World Bank.
Kuznets, S. 1955. Economic Growth and Income Nachtergaele, F., M. Petri, R. Biancalani, G. Van
Inequality. American Economic Review 45 Lynden, and H. van Velthuizen. 2010. Global
(1): 128. L and Degradation Information System
Lakner, C., and B. Milanovic. 2013. Global (GLADIS), Beta Version, An Information
Income Distribution: From the Fall of the Database for Land Degradation Assessment
Berlin Wall to the Great Recession. Policy at Global Level: Land Degradation Assess-
Research Working Paper 6719, World Bank, ment in Drylands. Technical Report 17.
Washington, DC. Rome: United Nations Food and Agriculture
Lakner, C., M. Negre, and E. B. Prydz. 2014. Organization.
Twinning the Goals: How Can Promot- Narayan, A., J. Saavedra-Chanduvi, and S.
ing Shared Prosperity Help to Reduce Global Tiwari. 2013. Shared Prosperity: Links to
84 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
Skoufi as, E, M. Rabassa, and S. Olivieri. 2012. . 2003. World Development Report
The Forecast for Poverty: A Review of 2003/2004: Making Services Work for Poor
the Evidence. In The Poverty and Welfare People. Washington, DC: World Bank.
Impacts of Climate Change: Quantifying the . 2005. World Development Report
Effects, Identifying the Adaptation Strate- 2005/2006: Equity and Development. Wash-
gies, edited by E. Skouafias. Washington, DC: ington, DC: World Bank.
World Bank. . 2010a. Malaysia Economic Monitor:
Skoufi as, E., S. Tiwari, and A. R. Shidiq. 2014. Growth through Innovation. Washington,
Sharing Prosperity: The Poverty, Growth and DC: World Bank.
Equity Nexus in Thailand. Policy Research . 2010b. Malaysia Economic Monitor:
Working Paper, World Bank, Washington, DC. Inclusive Growth. Washington, DC: World
Stiglitz, J. E., A. Sen, and J.-P. Fitoussi. 2009. Bank.
Report by the Commission on the Mea- . 2010c. World Development Report:
surement of Economic Performance and Development and Climate Change. Washing-
Social Progress. The Commission on the ton DC: World Bank.
Measurement of Economic Performance . 2011a. The Changing Wealth of Nations:
a nd S o c i a l P rog re s s . ht t p: //e c .eu ropa Measuring Sustainable Development in the
.eu /eu rostat /docu ments /118025/118123 New Millennium. Washington, DC: World
/Fitoussi+Commission+report. Bank.
Szkely, M., and M. Hilgert. 2000. What Drives . 2011b. World Development Report:
Differences in Inequality across Countries? Confl ict, Security, and Development. Wash-
IDB Working Paper 369, Inter-American ington, DC: World Bank.
Development Bank, Washington, DC. . 2012. Inclusive Green Growth: The
Szkely, M., N. Lustig, M. Cumpa, and J. A. Meja. Pathway to Sustainable Development. Wash-
2000. Do We Know How Much Poverty ington, DC: World Bank.
There Is? IDB Working Paper 437, Inter-Amer- . 2013a. Economic Mobility and the Rise
ican Development Bank, Washington, DC. of the Latin American Middle Class. Washing-
UNDP (United Nations Development Program). ton, DC: World Bank.
1997. Human Development Report. New . 2013b. The World Bank Group Goals:
York: UNDP. End Extreme Poverty and Promote Shared
van der Weide, R., and B. Milanovic. 2014. Prosperity. Washington, DC: World Bank
Inequality Is Bad for Growth of the Poor (But . 2013c. World Development Report: Risk
Not for That of the Rich. Policy Research and Opportunity: Managing Risk for Devel-
Working Paper 6963, World Bank, Washing- opment. Washington, DC: World Bank.
ton, DC. . 2014a. Global Monitoring Report
Voitchovsky, S. 2005. Does the Profile of Income 2014/2015: Ending Poverty and Sharing Pros-
Inequality Matter for Economic Growth? perity. Washington, DC: World Bank.
Journal of Economic Growth 10: 27396. . 2014b. Implications of a Changing China
Winters, L. A, N. McCulloch, and A. McKay. for Brazil: A New Window of Opportunity?
2004. Trade Liberalization and Poverty: The Washington, DC: World Bank.
Evidence So Far. Journal of Economic Litera- . 2014c. Shared Prosperity Paving the Way
ture 42 (1): 72115. in Europe and Central Asia. Washington, DC:
WITS (World Integrated Trade Solution) Data- World Bank.
base. 2014. http://wits.worldbank.org. . 2015a. Addressing Inequality in South
World Bank. 1990. World Development Report Asia. Washington, DC: World Bank.
1990: Poverty. New York: Oxford University . 2015b. Global Economic Prospects:
Press. Having Fiscal Space and Using It. January,
. 2001. World Development Report Washington, DC: World Bank.
2000/2001: Attacking Poverty. Washington, . 2015c. A Measured Approach to End-
DC: World Bank. ing Poverty and Boosting Shared Prosperity:
86 ENDING EXTREME POVERTY AND SHARING PROSPERITY GLOBAL MONITORING REPORT 2015/2016
Concepts, Data, and the Twin Goals. Wash- Poverty. Unpublished report, World Bank,
ington, DC: World Bank. Washington, DC.
. 2015d. The Poverty Focus of Country Yohe, G., and R. S. J. Tol. 2009. Indicators for
Programs: Lessons from World Bank Experi- Social and Economic Coping CapacityMov-
ence. Independent Evaluation Group. Wash- ing Towards a Working Definition of Adaptive
ington, DC: World Bank. Capacity. Global Environmental Change 12:
. 2015e. Visualize Inequality: PISA, the 2540.
Bottom 40%. Washington, DC: World Bank. Yoshida, N., H. Uematsu, and C. E. Sobrado.
. 2015f. World Development Indicators 2014. Is Extreme Poverty Going to End? An
2015 (database). Washington, DC. http://data Analytical Framework to Evaluate Progress
.worldbank.org/products/wdi. in Ending Extreme Poverty. Policy Research
. Forthcoming. Poverty in Africa: Revisit- Working Paper 6740, Washington, DC: World
ing the Facts. Washington, DC: World Bank. Bank.
World Bank and WTO (World Trade Organi-
zation). 2015. The Role of Trade in Ending
2
Scaling Up Impact: Transitioning
from Millennium to Sustainable
Development Goals
With 2015 marking a watershed between the MDGs and the SDGs, the world can celebrate
the many development achievements since 2000. Still, outcomes vary substantially between
regions, across the rural-urban divide, and by demographic characteristics. Even where good
progress has been made, deprivations persist, leaving a substantial unfi nished agenda. In
a context of megatrends that are reshaping challenges and opportunities, the SDGs forge a
global compact for transformational human progress while safeguarding the environment. The
MDG experience highlights the importance of inclusiveness and country ownership, effective
monitoring, and strong implementation, supported by enhanced financing for development.
Building on the Millennium Development well-being. Still, the wide variation in out-
Goals (MDGs) experience, the transition to comes translates into a substantial unfin-
the Sustainable Development Goals (SDGs) ished development agenda. With over 900
framework in 2015 reflects a welcome move million people still living in poverty in 2012
into a more comprehensive, multidimensional (defi ned as living on less than $1.90 a day,
approach to development. During this water- 2011 purchasing power parity), persistent
shed year, with the MDGs expiring and the and increasingly concentrated deprivations
SDGs being adopted, it is worth reflecting on urgently need to be addressed (chapter 1). At
what has been accomplished during the past the same time, the importance of environ-
15 years, and how the SDGs can best carry mental sustainability has moved to the fore,
the development agenda forward over the and new patterns of eco-friendly production
coming 15 years. and consumption are necessary to ensure
Substantial progress has been made in continued development progress.
recent decades, although there is much het- The MDGs played an important role in
erogeneity among regions, between rural and galvanizing global efforts for development.
urban areas, and in demographic features. Given the complexity of development, the
In many ways, development has advanced gains of recent decades cannot be attributed
more rapidly over the past 15 years than at to any single factor or process. Nonethe-
any other time in human history. Millions of less, the MDGs helped frame the broader
people have realized major improvements in goals of development and build a coalition
87
88 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
Sources: World Development Indicators and Global Monitoring Report team estimates.
Note: Progress is based on extrapolation of latest five-year annual growth rates for each country, except for MDG 5.0, which uses the latest three years. Sufficient progress indicates
that an extrapolation of the last observed data point with the growth rate over the last observable five-year period shows that the MDG can be attained. Insufficient progress is
defined as being able to meet the MDG between 2016 and 2020. Moderately off target indicates that the MDG can be met between 2020 and 2030. Seriously off target indicates
that the MDG will not even be met by 2030. Insufficient data means that not enough data points are available to estimate progress or that the MDGs starting value is missing
(except for MDG 2 and MDG 3). In the poverty target, 11 of the 66 countries that have met the target have less than 2 percent of people living below $1.25 a day.
90 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
continues to go hungry because of interre- but not sufficient for achieving the broader
lated factors such as low agricultural pro- goal of gender equality and womens empow-
ductivity and unemployment (Sanchez and erment (UN 2005). Wide gender disparities
Swaminathan 2005). persist, acting as major hindrances to devel-
Access to primary school education and opment progress.
literacy rates are increasing strongly. Educa- Many developing countries are achiev-
tion is a goal in and of itself, but it is also ing major reductions in child mortality. The
a powerful driver of progress toward other number of children who die before their fifth
MDGs. Education builds what Amartya Sen birthday fell from 13 million in 1990 to just
(1999) refers to as human capabilitiesthe over 6 million in 2013, implying that 17,000
essential and individual power to reflect, fewer children die each day compared with
make better choices, seek a voice in society, 1990. Examples of effective country-level
and enjoy a better life. Between 2000 and interventions that have saved thousands of
2012, the increase in primary school enroll- lives come from around the world, includ-
ment in developing countries rose from 83 ing 10 low- and middle-income fast-track
percent to 90 percent, almost twice as fast as countries: Bangladesh, Cambodia, China,
over the preceding 12 years. Consequently, the Arab Republic of Egypt, Ethiopia, the
the number of children not attending school Lao Peoples Democratic Republic, Nepal,
dropped from 102 million to 57 million, not- Peru, Rwanda, and Vietnam (PMNCH
withstanding continued population growth. et al. 2014). Contributing to the success were
National programs that lowered barriers to an increase in the provision of maternal and
accessing education and global initiatives, neonatal services (helped by cash incentives
like the Global Partnership for Education to use them), an expansion of immunization
(previously known as the Education for All programs, greater use of mobile phones to
Fast Track Initiative), helped to ramp up pri- promote health (including information on
mary school enrollments rates (Bruns, Min- nutrition and breast-feeding), wider access
gat, and Rakotomalala 2003; Riddell 2003). to sanitation and safe water, and stronger
In addition to ongoing efforts to expand data systems to inform policy (Roberts, Car-
coverage to all children, attention is turning nahan, and Gakidou 2013). Yet, at current
toward improving quality. trends, the target of reducing under-five mor-
The promotion of gender equality and tality rate by two-thirds between 1990 and
empowerment of women is moving forward, 2015 will not be met.
as evidenced by the remarkable progress Maternal mortality has declined by nearly
toward eliminating gender disparities in edu- two-fifths since 2000. For every 100,000
cation. Almost two-thirds of countries have live births, 370 mothers perished in 2000.
reached the target. Greater education for girls By 2013, this had fallen to 230a rate of
has long-term impacts: improving the health decline more than twice as fast as in the pre-
of infants and children, immunization rates, ceding decade. Progress hinged on expand-
family nutrition, and the next generations ing access to both prenatal and postnatal
schooling attainment (World Bank 2001). care (such as increasing the share of births
For every 100 boys who attended second- attended by skilled practitioners), strengthen-
ary school in 2000, there were only 90 girls. ing patient referral networks, boosting fam-
Focused attention to girls education at the ily planning, and expanding the education
country level, supported by global partner- of girls (PMNCH et al. 2014). Enhancing
ships (such as the Girls Education Initiative), the educational attainment of girls has been
is helping promote gender parity in primary found to be especially effectivethe risk of
and secondary enrollment. Despite progress maternal death is 2.7 times higher among
in school attendance, questions remain on women with no education than among those
the quality of education, and less progress is who have completed 12 years of school, and
evident at the tertiary (postsecondary) level.1 2 times higher for women with 1 to 6 years
In addition, closing gender gaps is necessary of education (Karlsen et al. 2011). Despite the
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 91
progress over the past decade, the target of Assistance Committee members of the
reducing maternal mortality rates by three- Organisation for Economic Co-operation
quarters will not be achieved. and Development (OECD) increased devel-
The incidence of AIDS, malaria, and opment aid disbursements to $134.7 bil-
tuberculosis has fallen sharply in recent lion, compared with about $80.0 billion in
decades. Since 2001, the number of people the mid-1990s. However, at 0.3 percent of
newly infected with HIV (human immuno- GDP, official development assistance (ODA)
deficiency virus, the virus that causes AIDS) remains well below the target of 0.7 percent
has declined by about 33 percent. In addi- of GDP. On the goal of access to Internet and
tion, access to antiretroviral medicines has communication technologies, there has been
increased to a record 9.7 million people. In much progress. Spearheaded by private sec-
Sub-Saharan Africa, only 10,000 people tor investments, mobile/cellular subscriptions
had access in 2000. Likewise, the incidence have risen dramatically in developing coun-
of tuberculosis fell at an average rate of 1.5 tries since 2000, enabling a range of services
percent a year between 2000 and 2013, and such as cellphone banking and information
deaths from malaria fell by some 26 per- sharing on market prices of agricultural pro-
cent. It is estimated that since 2000, about duce. Nonetheless, broadband Internet access
1.1 million deaths from malaria have been remains out of reach for many.
averted. Complementing national plans,
global initiatives such as the Global Fund to
Synergies across the MDGs have helped
Fight AIDS, Tuberculosis and Malaria; the
progress
U.S. Presidents Emergency Plan for AIDS
Relief initiative; the World Health Orga- While progress on each of the MDGs is
nizations (WHOs) 3 by 5 initiative; the often considered separately, they are mutu-
MDG Health Alliance; and the Malaria No ally reinforcing and interrelated. Income and
More campaign helped accelerate progress. non-income dimensions of poverty are closely
Lower burdens of AIDS and noncommunica- intertwined, with several studies showing
ble diseases have been associated with much that households in the lowest income quin-
greater progress toward reducing child mor- tiles also face deprivation on other dimen-
tality (Stuckler, Basu, and McKee 2010). sions of development (as elaborated in chap-
The MDG targets on access to safe drink- ter 1). There are also strong correlations
ing water and sanitation, and reducing the among non-income MDGs, such as female
number of slum dwellers, have been reached. literacy and under-five mortality (figure 2.2).
Between 1990 and 2011, about 1.9 billion In some instances, these correlations are the
people gained access to improved sanitation result of common drivers, such as the quality
facilities, helping curb the incidence of illness of public institutions, the capacity to deliver
associated with open defecation. The most social services, the extent of urbanization,
progress occurred in East Asia and Pacific. and demographic trends. Nonetheless, strong
Between 2000 and 2010, more than 200 mil- causal relationships exist among various
lion slum dwellers gained access to improved MDGs, such as between maternal health and
water and sanitary conditions, well above school enrollment, gender gaps in education
the MDG target of 100 million. Yet with and infant mortality, and access to sanitation
increased urbanization and rapid population and stunting among children, highlighting
growth in some regions, the overall number areas that are mutually reinforcing.
of slum dwellers increased from 650 million The MDGs related to health are especially
in 1990 to 863 million in 2012. More work important in providing mutual reinforcement.
needs to be done to reduce the absolute num- Improving maternal health has been critical
ber of slum dwellers, despite the attainment for both neonatal and under-five mortality,
of the MDG goals. helping to reduce complications during preg-
The MDG process helped strengthen nancy and at birth (King, Klasen, and Porter
global partnerships. In 2013, Development 2009). Interventions to expand immunization
92 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
0 0
0 10 20 30 40 50 60 70 80 90 100 0 20 40 60 80 100
Female literacy rate, ages 1524 (%) Female literacy rate, ages 1524 (%)
100 100
(deaths per 1,000 live births)
80 80
60 60
40 40
20 20
0 0
30 50 70 90 0 20 40 60 80 100
Share of population with access (%) Share of population with access (%)
Trend line
to use available health services. The odds Theoretical and empirical evidence demon-
of children in Sub-Saharan Africa receiving strate how MDGs reinforce one another,
the tuberculosis vaccine is 50 percent higher but the effects vary. For example, in some
among children of mothers with primary instances there is little correlation between
school education relative to those without poverty reduction and non-income goals, such
(Lay and Robilliard 2009). While the avail- as under-five mortality or primary school
ability of piped water reduced the overall inci- completion rates (Bourguignon et al. 2008a).
dence of child deaths in rural India, the effect Among pairs of non-income MDGs, such
was weaker among poorly educated moth- as gender parity and child mortality, perfor-
ers. Better education leads to higher earn- mance varies significantly across developing
ings for women, which contributes to lower countries (Klasen and Lo Bue 2013). Positive
child mortality as mothers are able to spend spillovers between MDGs are hampered by
more on childrens health. As noted above, low-quality public services and weak politi-
education for girls remains key to reducing cal commitment, as well as by violence and
maternal mortality through its effect on low- inequality. In contrast, countries exhibiting
ering adolescent pregnancies and enhancing high rates of economic growth, strong insti-
health-seeking behaviors. Education for girls tutions, and good governance tend to show
and boys is also a strong preventive weapon stronger synergistic relationships among the
against HIV/AIDS, and it contributes to bet- MDGs, because these determinants mutually
ter natural resource management, including reinforce each other over time (Lo Bue 2013,
the conservation of the tropical rain forest 2015; Klasen and Lo Bue 2013).
(Godoy and Contreras 2001; World Bank
2003).
Progress toward the MDGs varied
Expanding access to sanitation is essential
greatly
to reducing stunting among children. Open
defecation has a significant impact on the Despite the solid development gains in many
incidence of diarrhea and stunting among areas, significant work remains, particularly
children (Hammer and Spears 2013; Spears regarding the non-income goals. The tide
2013). For example, after controlling for fac- has turned on the incidence of major deadly
tors such as socioeconomic status, maternal diseases, but a high number of preventable
education, and calorie availability, differences deaths persist. With the development of new
in open defecation still explain 3555 percent medicines, HIV patients receiving treatment
of the statistical differences in rates of child- have nearly the same life expectancy as those
hood stunting across different districts in without HIV. However, about 63 percent of
India (Spears, Ghosh, and Cumming 2013). people living with HIV, mostly in develop-
Sanitation still remains a major challenge in ing countries, lack access to antiretroviral
India, where more than half the population drugs. Tuberculosis killed 1.5 million people
defecates in the open. In Cambodia, five- in 2013, many in the prime of their produc-
year-old children were found to be 2.03.6 tive lives. An estimated 198 million cases of
centimeters shorter in communities where all malaria were registered in 2013, claiming the
households defecate openly than in communi- lives of about 453,000 children a year and
ties where no one does (World Bank 2013b). robbing Sub-Saharan economies of an esti-
Access to safe water, sanitation, womens mated $12 billion in lost economic activity. As
education, gender equality, and the quantity noted, the global partnerships needed to help
and quality of food available are key drivers address these challenges are not reaching their
of past reductions in stunting, with income potential, with ODA averaging well below the
growth and governance playing essential target set by the MDGs (Kenny and Dykstra
facilitating roles (Smith and Haddad 2015). 2013). The heterogeneity of outcomes mani-
Strong institutions and economic growth fests across regions, between urban and rural
enhance the synergies among the MDGs. areas, and by demographic features.
94 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
Variation across regions with relatively low levels of poverty and man-
While more than two-thirds of countries aged to lower poverty further over the 1990
achieved the MDG target on halving extreme to 2012 period. Nonetheless, wide dispari-
povertythe highest success rate of all the ties in poverty levels exist across and within
MDGsthe decline in poverty across regions countries in these regions.
has been uneven.2 East Asia and Pacific real- Wide disparities in the non-income
ized an unprecedented fall of extreme pov- MDGs persist across and within regions.
erty, led by China. In 1990, extreme poverty For example, the primary school comple-
in the region was on par with Sub-Saharan tion rate in developing countries as a whole
Africa, and about a third higher than the rose from about 79 percent in 1990 to 91
average for all developing countries. China percent in 2012, but only two regions,
was a major driving force in the decline of the East Asia and Pacific and Europe and Cen-
poverty rate of East Asia and Pacific. Buoyed tral Asia, have achieved or are close to the
by strong growth in India, poverty in South goal of 100 percent. Consider MDG 4,
Asia fell rapidly during 19902012 reaching which aims to reduce the under-five mor-
the MDG target. tality rate by two-thirds between 1990 and
Sub-Saharan Africa is the only region not 2015. Only East Asia and Pacific and Latin
on target to halve extreme poverty. There America and the Caribbean have met the
is substantial variation across Sub-Saharan target, while 17 countries in Sub-Saharan
Africa: 16 countries are expected to meet Africa and three countries in the Middle
MDG 1 (based on the $1.25 income thresh- East and North Africa are seriously off
old) by the end of 2015, but 21 countries track. Regarding HIV/AIDS, the number
are not expected to reach the target even by of people globally who are newly infected
2030. Given that Sub-Saharan Africa started is falling, down 38 percent since 2000.
off the MDG period with the lowest average Still, the epidemic remains centered in Sub-
per capita income and exhibits a compara- Saharan Africa, home to about 70 percent
tively lower sensitivity of poverty to changes of the worlds adults living with HIV, with
in growth (growth elasticity of poverty), the prevalence rates of 4.5 percent of the popula-
framing of the MDG benchmarks may place tion in 2013, compared with below 1 percent
a greater onus on the region to achieve the elsewhere. Non-income MDG performed
goals (Clemens and Moss 2005; Easterly unevenly across countries and regions,
2007). Compared with the two preceding reflecting initial conditions, economic
decades, where extreme poverty either rose growth, macro- and microeconomic policy,
or remained flat, trends in the post-2000 population dynamics, and effectiveness of
period exhibited an acceleration of progress, government service delivery (Bourguignon,
with the $1.25 a day poverty head count Diaz-Bonilla, and Lofgren 2008b).
ratio falling from about 60.0 percent in 2000
to 46.8 percent in 2011. That is a meaningful Variation between urban and rural areas
achievement, but concern is growing in the Within countries, there are large dispari-
development community that poverty will ties in development outcomes between bet-
become increasingly concentrated in natural- ter performing urban centers and lagging
resource-based economies and fragile and rural areas. More than three-quarters of the
confl ict states, many in Sub-Saharan Africa worlds extremely poor live in rural areas in
(as discussed in chapter 1). developing countries. While overall poverty
The three regions with better initial con- and the gap between rural and urban areas
ditions also made progress. Compared with has been falling, poverty rates in rural areas
other developing regions, Europe and Central remain substantially higher than in urban
Asia, Latin America and the Caribbean, and areas, as more high-paying and productive
the Middle East and North Africa started off jobs are created in urban centers. Households
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 95
in rural communities in East Asia and Pacific of children in urban areas complete primary
and Latin America and the Caribbean are school, but in rural areas only 57 percent of
more than four times as likely to be living children reach this critical stepping stone.
in extreme poverty as those in urban areas Urbanization varies substantially across
(World Bank 2013a). Sub-Saharan Africa has regions and is associated with large differ-
the largest gap in absolute terms, with pov- ences in development progress. The three
erty rates in rural areas of 29.4 percent in regions with the highest rates of urbaniza-
2008, compared with 11.6 percent in urban tion in 1990 Europe and Central Asia
areasa gap of 17.8 percentage points. (74 percent), Latin America and the Carib-
Similar rural-urban differences are bean (71 percent), and the Middle East and
observed for the non-income indicators, North Africa (55 percent)also performed
largely because of the higher unit cost of relatively better on both the income and non-
delivering services in rural areas. For exam- income dimensions of poverty. Indeed, only a
ple, gaps in access to safe water and sanita- few countries have transitioned from poverty
tion are substantial between rural and urban to prosperity without urbanizing (Ciccone
areas (figure 2.3). In East Asia and Pacific, and Hall 1996; Glaeser and Joshi-Ghani
while 98 percent of people living in urban 2013; Glaeser and Mar 2001). Productivity
areas have access to improved water sources and urban scale tend to go together (Melo,
and 80 percent have access to improved sani- Graham, and Noland 2009; Puga 2010;
tation facilities, the corresponding figures Rosenthal and Strange 2004, 2010). How-
for rural communities are 85 percent and 59 ever, urbanization stood at only 32.2 per-
percent, respectively. The divergence is even cent in South Asia and 36.7 percent in Sub-
wider in Sub-Saharan Africa, where the dif- Saharan Africa in 2013. This disparity sug-
ference in access to improved water sources gests substantial scope to reap development
between urban and rural dwellers is more benefits from urbanization in terms of higher
than 30 percentage points. Such disparities productivity from agglomeration economies
are also evident in other non-income dimen- and lower unit costs of service provision.
sions. For example, in Senegal, 83 percent Still, urbanization needs to be managed to
FIGURE 2.3 Large disparities exist between urban and rural areas
a. Access to improved water sources (higher in urban areas) b. Access to improved sanitation (better in urban areas)
100 100
Share of population with access (%)
Share of population with access (%)
80 80
60 60
40 40
20 20
0 0
East Asia Europe Latin Middle South Sub- East Asia Europe Latin Middle South Sub-
and and America East and Asia Saharan and and America East and Asia Saharan
Pacific Central and the North Africa Pacific Central and the North Africa
Asia Caribbean Africa Asia Caribbean Africa
Rural Urban
ensure adequate service provision. As noted, percent in 2013, but the number of mal-
although the MDG of improving the lives of nourished children increased by 4.8 million,
100 million slum dwellers was met, increased because of a 70 percent increase in the under-
urbanization and population growth in some five population over this period.
regions raised the overall number by one- Age structures also matter for the attain-
third between 1990 and 2012. ment of development goals. Savings and
investment tend to be lower in countries
Variation across demographic patterns with higher total dependency ratios than in
Finally, progress on the MDGs differs mark- countries where more of the population is of
edly depending on key demographic features. working age and the economy is benefiting
Of the countries deemed to be far from achiev- from the so-called demographic dividend.3
ing the extreme poverty reduction target, 92 Hence, countries with higher dependency
percent are in a demographic phase character- ratios (often due to high fertility rates) gener-
ized by high fertility rates exceeding four chil- ally have fewer domestic resources per capita
dren per woman, high ratios of dependents to to invest in social services, unless they are
people of working age, and rapid population able to access international capital markets
growth. Countries in this demographic phase or receive substantial aid flows.
are also far from achieving most non-income
MDG targets, including those on undernour-
A large unfinished agenda remains
ishment (74 percent), under-five mortality
(77 percent), maternal mortality (74 percent), Taken together, disparities in MDG out-
sanitation (82 percent), and access to safe comes mean that much remains to be done.
water (74 percent). In other key areas, such None of the MDGs has been achieved by
as gender equality as reflected in the share all developing countries. The largest gaps in
of women in secondary education or in wage MDG progress are increasingly concentrated
employment outside the agricultural sector, in countries characterized by high fertility
there are major data gaps and indications of and rapid population growth, many of which
large disparities (UNESCO 2015). Almost all are natural-resource-based economies and
countries still in this demographic phase are struggling with fragility and confl ict situa-
in Sub-Saharan Africa (97 percent). (See part tions. However, even for developing countries
2 of this report for a detailed discussion of that have made good progress toward the
demographic dynamics and development). MDGs, an unfinished agenda remains inter-
Rapid population growth can make devel- nally across spatial dimensions, particularly
opment progress more difficult, and the along the urban-rural divide. Further, for
MDG monitoring framework tends to mag- most developing countries, some of the great-
nify the impact of population growth. Not est challenges lie in meeting the non-income
only can rapid population growth complicate MDGs, in particular those related to health
efforts to expand coverage of public services, (maternal and infant mortality), nutrition
many MDG targets are expressed relative to (undernourishment and hunger), and envi-
population (Hermann 2015). For instance, ronmental sustainability, including forest
Sub-Saharan Africas school-age population cover, fish stocks and ecosystem protection,
increased by 70 percent during the MDG as well as limiting carbon emissions.4 Never-
period, and while the overall numbers of out- theless, the unprecedented development gains
of-school children fell, the region is still lag- made over the past decade and a half, in part
ging behind the MDG targets on universal supported by the MDG process (box 2.1),
school enrollment, given the large increase provide ample evidence that the trajectory
in the absolute number of children attend- of development progress can be bent toward
ing school. In another example from Sub- accelerated achievement on this unfinished
Saharan Africa, the under-five malnutrition agenda, while also tackling the emerging
rate fell from 29.2 percent in 1992 to 21.0 challenges in a changing world.
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 97
BOX 2.1 The MDG process has played a generally positive role in supporting development
Did the process of setting development goals make point is identified as 199697, and for the adolescent
a discernable difference? What might have hap- child birth rate (Target 5B) the marked fall began in
pened in the absence of the MDGs? Several empirical 2004. As for the proportion of children under age one
approaches have been adopted to address these ques- immunized against measles (Target 4A), there was no
tions. One method of trying to evaluate the impact statistically discernable change in the trajectory dur-
of the partnership and monitoring framework on ing the time period under review. It is also worth not-
development progress centers on estimating counter- ing that these analyses abstract from what else could
factuals, and then comparing how various indicators have been undertaken with the resources, if they had
actually evolved (McArthur 2014). Another related not been applied to achieving the MDGs.
approach is to analyze the trend of MDG indicators Variations in how underlying trends of individual
before and after the adoption of the MDGs and apply MDGs changed at the regional level are also notable
statistical tests aimed at discerning changes in their (figure B2.1.1). For example, using pre-MDG data to
trajectories. generate linear counterfactual trends on the educa-
The evidence available shows that the MDG tion enrollment ratio for females and males, the post-
process had major impacts in some indicators but MDG enrollment rates were higher than what would
little direct effect in others. Under-five mortality have been expected in both South Asia and Sub-
(MDG 4), for example, has fallen dramatically in the Saharan Africa. In South Asia, the statistically deter-
poorest countries since the MDGs were agreed (McAr- mined structural break occurred in 2003, a few
thur 2014). Controlling for various factors, statistical years after the launch of the MDGs. In contrast, in
methods applied to 19 MDG indicators checking for Sub-Saharan Africa it occurred in 1997, before the
an interruption in the time series between 1992 and commencement of the MDGs, suggesting that even
2008 found an acceleration (in progress on an indi- though enrollment accelerated during the MDG
cator like the primary enrollment ratio going up) or period, some positive underlying factors providing
deceleration (in progress on an indicator like maternal support were already in place. Similar accelerations
mortality going down) in the trajectories after 2001 are observable for Europe and Central Asia and Latin
in five indicators (Friedman 2013). For instance, the America and the Caribbean. In East Asia and Pacific,
incidence of tuberculosis (Target 6C) began falling however, where female-to-male enrollment ratios
sharply in 2000, for HIV (Target 6A) the turning were already at very high levels, there has been no dis-
FIGURE B2.1.1 Sample of actual progress compared with counterfactuals based on pre-MDG trends
Gender parity in primary school enrollment improved more quickly than before
a. South Asia b. Sub-Saharan Africa
100 100
Ratio of girls to boys (%)
Ratio of girls to boys (%)
90 90
80 80
70 70
60 60
1990 1995 2000 2005 2010 1990 1995 2000 2005 2010
Actual Counterfactual
BOX 2.1 The MDG process has played a generally positive role in supporting development
(continued)
FIGURE B2.1.1 Sample of actual progress compared with counterfactuals based on pre-MDG trends (continued)
Incidence of tuberculosis fell sharply compared to pre-MDG trends
c. South Asia d. Sub-Saharan Africa
230 450
Incidence of tuberculosis (per 100,000 people)
210
350
200
300
190
180 250
1990 1995 2000 2005 2010 1990 1995 2000 2005 2010
Actual Counterfactual
Source: World Bank calculations.
Note: The gray columns represent the year 2000, referencing the baseline situation before the adoption of the MDGs. The counterfactuals, represented by the orange
lines, extend the 19902000 (pre-MDG) trends into the 200113 period, based on a regression including a trend and autoregressive terms. An alternate approach using
the Hodrick-Prescott filter to extend the pre-MDG trends into the MDG period was also used, generating similar results. The Bai-Perron methodology was used to test
for the presence of structural breaks. For gender parity, the results confirmed the presence of a structural break for South Asia and Sub-Saharan Africa in 2003 and 1997,
respectively. For tuberculosis, the test results confirmed the presence of a structural break for South Asia and Sub-Saharan Africa in 2004 and 2002, respectively. Struc-
tural breaks were observed for other MDG indicators including primary school enrollment and child mortality rates.
cernable acceleration. In the Middle East and North Track Initiative that was established in 2002), or of
Africa, actuals were lower than pre-MDG trends, technical breakthroughs (like the development of
possibly because of conflict. antiretroviral drugs to combat AIDS). Even where
The overall impact of the MDGs depends on the impact at the time of the Millennium Declaration
factors unique to each MDG, some of which are in 2000 is not statistically discernable in outcomes,
country specific. Each MDG has its own his- the MDG process has provided a valuable platform
tory, such as the establishment of implementation to galvanize coalitions of stakeholders seeking to
arrangements (including the timing and size of tar- address some of the worlds toughest development
geted global funds, like the Education for AllFast problems.
(especially for the global commons) and was less effective in promoting development
on improved accountability frameworks to progress. The World Bank Group supports
monitor contributions and progress (Kharas the SDGs, aligning its strategy for engage-
and Zhang 2014). The SDGs are also able ment through the goals of ending poverty
to build on the MDG experience, reflecting and promoting shared prosperity in a sus-
valuable learning on what worked and what tainable manner (box 2.2).
BOX 2.2 What is the relationship between the World Bank Groups goals and the
Sustainable Development Goals?
The World Bank Groups goals anchor its overarching the underlying sustainability requirement would,
mission of a world free of poverty to two high-level however, suggest that these goals and the SDGs are
objectives of ending extreme poverty and promoting aligned. The World Bank Groups goals need to be
shared prosperity, and doing so sustainably. They pursued in a manner that is economically, socially,
were established to bring focus and greater account- and environmentally sustainable. The goals them-
ability to the organizations own work. As the authors selves are also inherently multidimensional, as
of the report setting out the goals (World Bank elaborated in chapter 1, even if their monetary indi-
2013d, 9) point out: The goals we have articulated cators manifest themselves more narrowly. Yet, end-
are not solely for the World Bank Group to achieve but ing poverty and promoting shared prosperity are
rather are goals that we hope are consistent with those unequivocally also about progress in non-monetary
of our 188 member countries. The SDGs follow in the dimensions of welfare including education, health,
tradition of the Millennium Development Goals and nutrition, and access to essential infrastructure, as
are endorsed by the General Assembly of the United well as about enhancing voice and participation of all
Nations and speak to the breadth of the development segments of society in economic, social, and political
challenge (UN 2015f). spheres. (World Bank 2013d, 8). Furthermore, the
The World Bank Groups goals are embedded in additional requirement that the World Bank Groups
the SDGs, with some minor differences in goals, tar- goals be achieved in a sustainable manner raises the
gets and indicators. The poverty goal (TG1), for exam- need for additional analysis, monitoring, and dia-
ple, calls for ending extreme poverty, which is defined logue. Hence, the two sets of goals can be seen as very
as reducing the share of those living on less than $1.25 similar, even if they remain different with respect to
poverty a day (in 2005 constant dollars) to 3 percent their original intent and the level of aggregation at
by 2030. The corresponding SDG goal is stronger in which they are presented.
that it aspires to end poverty everywhere and in all of Recognizing that accelerating development is a
its forms, a goal that amounts to reducing the same shared endeavor, the World Bank Group fully sup-
indicator to zero by 2030 (SDG1.1). The shared pros- ports the SDGs. The World Bank Group has worked
perity goal (TG2) sets out to increase the well-being of closely with the United Nations on various aspects
the poorer segments of society, as measured by income of the post-2015 agenda, among them fi nancing for
growth of the bottom 40 percent of the population in development and data issues, and is expected to con-
each country, without specifying a target (fostering tinue to work with the UN on implementation. Realiz-
and promoting income growth). The corresponding ing the extraordinary opportunity of ending extreme
SDG goal is somewhat different; it aspires to reduce poverty in a generation and promoting shared pros-
inequality within and among countries, defined as perity more widely is feasible only through collective
the extent to which, by 2030, countries progressively efforts of all stakeholders, most importantly through
achieve and sustain income growth in the bottom 40 national initiative, supported by international entities.
percent in excess of the national average (SDG 10.1) The global compact applies universally, to high- and
without stipulating a specific target on the extent of low-income countries alike, and to national and inter-
this excess. The SDG goal is focused relatively more national implementing agencies and fi nanciers alike.
on inequality than the World Bank Groups goal. The World Bank Group will benchmark its activities
A broader perspective that recognizes the multi- with a view to help accelerate progress on the post-
dimensionality of the World Bank Groups goals and 2015 agenda.
100 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
The highly inclusive and open SDG pro- advancement, however, will require con-
cess augurs well for sustaining the buy-in certed effort, including through the fuller
needed to accelerate progress. The SDGs participation of business and civil society.
emerged from wide-ranging stakeholder
engagements, reflecting views from 193 gov- Evolving context of development
ernments and more than 7 million respon- Several megatrends are playing a critical role
dents to an online survey conducted by the in framing what will be feasible over the SDG
United Nations (UN) (Bhattacharya and period to 2030. These include the unprec-
Kharas 2015; United Nations 2015e). They edented increase in global connectedness, the
also benefited from the insights of a UN pace of technological change and adoption,
High Level Panel of Eminent Persons (from the move toward urbanization, the evolution
government, civil society, and the private of demographic trends, and the impact of
sector), the Open Working Group of the UN human activity on environmental degrada-
General Assembly on Sustainable Develop- tion and climate change (Dobbs, Manyika,
ment Goals (drawing on extensive thematic and Woetzel 2015; Singh 2012). Effective
consultations), and the Intergovernmental implementation of the SDGs will need to
Committee of Experts on Sustainable Devel- be mindful of these trends and their wide-
opment Financing. The work of these and ranging implications in order to mitigate risks
other key bodies reach important milestones and accelerate transformational development
in 2015 with the Financing for Develop- progress.
ment Conference in Addis Ababa in July, Extraordinary and intensifying connect-
the UN General Assembly meeting endors- edness is changing the world. Trade, fi nance,
ing the SDGs in September, and the United communications, and migration are all
Nations Framework Convention on Climate expanding rapidly, bringing the world closer
Change (UNFCC) Conference of the Par- together. Between 1990 and 2015, global
ties meeting in Paris in December. These are merchandise trade grew 1.4 to 2.4 times as
building critical momentum for action going fast as the world economy, rising to the equiv-
forward. alent of around 60 percent of world GDP (fig-
ure 2.4a). 5 Over the same period, fi nancial
flowsincluding foreign direct investment
Changed circumstances demand a new
(FDI), official development aid, and private
approach
capitalrose from about $87 billion to $1.3
Grounded in a global compact for human trillion. The composition of fi nancial flows
development and preservation of the planet, has also undergone a major shift: in 1990
the SDGs represent a qualitative departure FDI was $21 billion, less than half of ODA
from previous frameworks (UN 2015f). With at $53 billion; by 2014, FDI reached $735
their emphasis on universality, responsibil- billion and was more than five times larger
ity, and accountability, the SDGs are more than ODA flows of $135 billion. Global com-
holistic in approach than the MDGS were, munications have skyrocketed: for example,
and in their very nature reflect and respond mobile subscriptions rose from 5 per million
to several megatrends that are having a pro- in 1980 to more than 90 for every 100 people
found impact on the trajectory of economic, today (figure 2.4b) (Kose and Ozturk 2014).
social, and environmental progress around People are also on the move, with 1 billion
the world. Given the extensive progress to international tourists in 2013, and 232 mil-
date, and the growing power of humanity lion international migrants (compared with
to affect change, there is an extraordinary 154 million in 1990) (UN 2013b). Another
opportunity to end poverty in all of its forms, 750 million people have migrated internally.
while safeguarding the environment and pur- In seeking a global compact to address many
suing other development goals. Sustained of the worlds most difficult challenges, the
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 101
FIGURE 2.4 Global connectedness has increased through intensified trade and communications
a. Global trade and finance are more integrated b. Internet and mobile phone use is skyrocketing
80
60
60
40
40
20
20
0 0
1980 1984 1988 1992 1996 2000 2004 2008 2012
4
4
1
7
00
2
05
65
75
85
19
19
95
Source: Kose and Ozturk 2014. Source: World Development Indicators, World Bank.
Note: Trade integration reflects ratio of total imports and exports to
global GDP. Financial integration is the ratio of total financial in-flows and
out-flows (including bank loans, direct investment, bonds, and equities)
to global GDP.
SDGs reflect the unprecedented connected- per capita income growth in low-income
ness of the present age. countries.
The global center of economic growth is Deepening global trade and investment
rapidly moving toward emerging markets, connections could also help reverse slipping
but their comparatively faster growth needs potential growth in high-income countries.
to be supported by expanded investment. Concerns about weakening growth prospects
For almost 2000 years, the center of global in high-income economies are reflected in
growth moved slowly from a point between the secular stagnation hypothesis, which
China and India, the worlds two most popu- highlights a chronic excess of savings over
lous nations, toward industrializing Europe investment because interest rates are unable
and North America (Dobbs, Manyika, and to adjust to equate savings with investment at
Woetzel 2015, 19). The process has reversed full employment (Summers 2015). Low pro-
and is accelerating dramaticallyfrom a ductivity growth and an aging population in
position just north of Europe in 2000, the high-income countries may also be limiting
center of global economic growth could investment opportunities and contributing to
return to its origin in Asia in just 25 years. the excess of savings. In such circumstances,
This trend is generally welcome, as more greater public investment in high-income
populous and poorer countries in the emerg- countries is likely to lower the debt-to-GDP
ing South sustain high rates of growth and ratios. They also provide substantial scope
catch up with advanced countries. Realiz- for a debt-financed infrastructure push in
ing the potential for faster growth, however, emerging markets, both to increase high-
depends on scaling up high-return investment return public capital stock and to spur private
in the emerging South, both public and pri- investment (Arslanalp, Bornhorst, and Gupta
vate. The SDGs reflect this imperative in their 2011; IMF 2014). Through expanded trade
call for sustainable industrialization, greater and investment links, greater public invest-
infrastructure investment, and accelerated ment in emerging market economies can also
102 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
help generate opportunities for exports and Demographic change is exerting a power-
boost growth in high-income countries. ful influence on development trajectories. As
Progress is being supported by a quicken- discussed in more detail in part 2, several
ing of technological innovation and adop- demographic changes, including the rise of
tion, enabling more sustainable and efficient the total dependency ratio at the global level
practices. Humankind will generate more for the fi rst time since the 1960s, the cessa-
data in the next five years than in the previ- tion in the growth of the global youth popu-
ous 5,000. The digital and data revolutions lation (ages 015), and the aging of popula-
are driving technical change in a range of tions in many countries, are giving rise to
fields, and are expected to underpin accel- new opportunities and challenges over the
erating technical change in next-generation coming decades. In addition to promoting
genomics, materials science, energy stor- womens empowerment and universal access
age and renewables, advanced robotics, and to sexual and reproductive health as develop-
information technologies, among others. 6 ment objectives in their own right, the SDGs
The adoption of new technologies is also are motivated by demographic pressures and
accelerating (although developing countries the urgent need to prioritize sustainability.
sometimes have difficulty in using them Global consumption is growing rapidly,
effectively), largely because of the nature of especially in emerging market economies,
offerings at almost zero cost, as well as the and it will be essential to promote patterns
increased communications and greater con- that are environmentally sustainable. The
nectedness of the world. These trends and global consuming class, defined as people
efforts to broaden access to technology are with disposable income above $10 a day, is
a central part of numerous SDGs, including expected to exceed 4.2 billion by 2025, com-
boosting agricultural productivity, promot- pared with 1.2 billion in 1990, with most
ing the empowerment of women, expanding purchasing power garnered in emerging
access to clean energy, diversifying industry market economies (Dobbs, Manyika, and
and breaking the link between carbon emis- Woetzel 2015). On top of existing ecological
sions and economic growth. challenges, the current trajectory of resource
The urbanization megatrend brings great and energy intensity of production scaled to
scope for accelerating development progress this future level of demand show impacts that
if key challenges can be met. The popula- are unsustainable in terms of water, forests,
tion of cities in emerging economies is pro- fish, pollution, and climate. The consuming
jected to double from 2 billion in 2000 to 4 class is benefiting greatly from new technolo-
billion by 2030, and the footprint of urban gies, with information, applications, and
areas is expected to triple from 200,000 to online services that are increasingly avail-
600,000 square kilometers (World Bank able at extremely low or no cost. However,
2013c). About 80 percent of the worlds as emphasized in the SDGs, it will be para-
GDP is generated in cities, attracting rapid mount that emerging production and con-
inflows of people. While the economies of sumption patterns be increasingly environ-
scale of urban agglomeration and lower unit mentally and socially sustainable. The World
costs of service provision generate prosper- Bank Group, among others, is promoting a
ity and improved well-being, the rapid pace conceptualization of development progress
of urbanization raises numerous challenges that goes beyond traditional measures of
(also for rural areas losing people) that need GDP to reflect changes in physical, human,
to be addressed with effective planning, con- and natural capital, which helps countries
necting, and financing, to ensure resilient better estimate whether their growth is sus-
and sustainable development (World Bank tainable (World Bank 2011).
2013c). The SDGs give due emphasis to the Finally, climate change is bringing a warm-
critical role of the impulse toward urbaniza- ing world with more extreme weather events,
tion in development. and urgent mitigation as well as adaptation
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 103
The hunger component of MDG 1 has universal health coverage, reduce the number
been captured in a separate SDG 2. Reflect- of deaths and illnesses from environmental
ing the complexity of food issues, SDG 2 aims contamination, and lower global deaths and
to end hunger, achieve food security and injuries from road traffic accidents.
improved nutrition, and promote sustainable The SDGs on education and gender equal-
agriculture. Associated targets encompass ity are broadened from the corresponding
not only hunger and nutrition but also efforts MDGs. SDG 4 builds on MDG 2s focus on
to boost agricultural productivity, ensure the achievement of universal primary educa-
sustainable practices, remove distortionary tion and includes early childhood develop-
trade restrictions in world food markets, and ment; equal access for women and men to
enhance the functioning of food commodity technical, vocational, and tertiary educa-
markets with better market information to tion; literacy among adults; and learning
help reduce volatility. about sustainable development and lifestyles.
SDG 3 on health pulls together several SDG 5 aims to achieve gender equality and
related MDGs but is expanded to cover addi- empower all women and girls by emphasiz-
tional dimensions of healthy living. It seeks to ing additional dimensions of inequality in
ensure healthy lives and promote well-being the treatment of females, including ending
for all at all ages, addressing MDGs 4, 5, violence against all women and girls every-
and 6 on maternal and child health, as well where, eliminating harmful practices such as
as the key communicable diseases of malaria, child, early, and forced marriage, and ending
tuberculosis, and HI V/AIDS. Both the female genital mutilation. Ensuring universal
MDGs and the SDGs include targets on uni- access to sexual and reproductive health and
versal access to reproductive health, which rights is another component. Significantly,
plays a key role in shaping demographic tra- the SDGs recognize that reproductive health
jectories. The expansions center on efforts to is also a critical rights issue.
seek more investment in neglected tropical A major shift in the evolution of the
diseases, address the increasingly important commitment to development goals centers
issue of non-communicable diseases, ensure on the heightened focus of the SDGs on
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 105
environmental issues. MDG 7 on ensur- the income distribution in each country, but
ing environmental sustainability has been it does not specify that it should be higher
expanded into five dedicated SDGs, includ- than the national average. Goals on inequal-
ing SDG 6 on water and sanitation; SDG 12 ity and shared prosperity are evidently uni-
on ensuring sustainable consumption and versal, applying to all countries.
production patterns; SDG 13 on the need to The SDG framework includes several
take urgent action to combat climate change other new components, including SDG 7 on
and its impacts; SDG 14 on the oceans, energy, and SDG 16 on promoting peaceful
seas, and marine resources; and SDG 15 on and inclusive societies. SDG 7 on ensuring
terrestrial ecosystems, including forests, des- universal access to affordable, reliable, and
erts, and biodiversity. Environmental issues modern energy services is central to develop-
also feature prominently in several additional ment and underpins many other SDG goals.
SDGs. These include SDG 2 on agricul- Similarly, SDG 16 recognizes that develop-
ture; SDG 7 on energy (seeking to increase ment is thwarted or highly vulnerable in
the share of renewable energy); SDG 8 on fragile and confl ict situations, as well as in
economic growth (referring to the need to contexts where governance is weak. Years of
decouple economic growth from environ- development progress can rapidly be undone
mental degradation); SDG 9 on industrial- by the outbreak of conflict. And, poverty and
ization (emphasizing increased resource-use deprivation are increasingly concentrated in
efficiency and greater adoption of clean and countries characterized by fragility, violence,
environmentally sound technologies); and and limited institutional progress. SDG 16
SDG 11 on human settlements (aiming to calls for promoting the rule of law and access
reduce the adverse per capita environmen- to justice, reducing illicit arms flows, and
tal impact of cities and implement holistic lessening corruption and bribery in an effort
disaster risk management). These expan- to address the drivers of conflict.
sions reflect growing concern about envi- Finally, SDG 17 focuses squarely on the
ronmental sustainability and the recognition key elements needed to ensure effective
that even the primary SDG 1 on poverty will implementation. This goal focuses on arrang-
not be reachable if the present trends of rural ing and facilitating sufficient financing, coop-
resource degradation and climate change erating on technology, enhancing capacity-
continue. building efforts, and promoting an open and
The new monitoring framework places equitable multilateral trading system. SDG
greater focus on income distribution, 17 also notes the need for greater policy and
which is also reflected in the World Bank institutional coherence; multi-stakeholder
Groups goal on shared prosperity. While partnerships; and enhanced data, monitor-
MDG 1 noted the share of poorest quintile ing, and accountability.
in national consumption as an indicator of
the poverty target, it did not receive much
To accelerate progress, the SDGs can
attention in the development discourse dur-
learn from the MDGs
ing the MDG period. In contrast, distribu-
tional issues have been elevated to a sepa- To maximize the odds of success on the
rate goal, with SDG 10 aiming to reduce unfi nished development agenda, it is impor-
inequality within and among countries. This tant to learn from the MDGs. Numerous les-
goal includes a tractable target of sustaining sons emerge from the MDG process (includ-
the income growth of the bottom 40 percent ing challenges faced; see Fehling, Nelson,
of the population at a rate higher than the and Venkatapuram 2013), some of which
national average. As detailed in chapter 1, have already contributed to the framing of
the second of the World Bank Groups goals the SDGs and others that can help under-
is on shared prosperity, which emphasizes the pin development efforts between now and
income growth of the bottom 40 percent of 2030 (Kanie et al. 2014; UN 2012). These
106 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
center on ensuring inclusiveness and owner- forward has been attributed to the specific-
ship at the country level; building on syner- ity of targets that were time bound. Progress
gies between goals; specifying targets that was weaker on goals that were less specific
can be monitored with good data and that and harder to monitor, and where good data
are time bound; and supporting strong imple- were lacking. Building strong data systems
mentation, including ensuring adequate is essential in this regard (box 2.3). With
financing and effective use of resources. 304 proposed indicators, some of which are
difficult to monitor or have very little data
Inclusiveness and ownership coverage and availability, monitoring the
A key lesson is to adopt highly consultative SDGs will be challenging, and will entail
goal-setting processes. Given that most of large costs. Substantial work is needed to
the critical actions required to make progress strengthen statistical systems at the national
on the MDGs had to be implemented at the level and improve methodologies. About
country level, inclusiveness and ownership $1 billion a year may be needed in 77 low-
were essential, extending to policy makers, income countries to strengthen statistical
representatives from the private sector and systems to support and track the SDGs con-
civil society, and other stakeholders. The sistently (SDSN 2015). Scaled-up data and
SDG process has sought to reflect this lesson, monitoring will require enhancing global
and the proposals are built upon extensive mechanisms and support.
consultations, facilitating adoption in coun-
try development programs. Strong implementation
Success or failure will hinge on implementa-
Synergies between development goals tion. Moving from goal setting to implemen-
Progress toward the MDGs was helped tation requires analysis and tailoring of the
by synergies, and the effectiveness of SDG targets to the country level. It also calls for
efforts will also depend on leveraging gains enhanced accountability for financing and
in one goal for advances in others. The links other key steps among development partners
between MDGs on infant mortality and and the wider international community. In
access to sanitation and safe water are well the case of several MDGs, implementation
documented. The SDGs reflect this experi- arrangements were effectively not in place
ence in their more integrated approach, and until five to seven years after the Millennium
will benefit from synergies across numer- Declaration, leading to significant delays.
ous SDGs. For example, progress toward Building on MDG structures, the implemen-
SDG 5 on achieving gender equality would tation of the SDGs is better placed, despite
have a major impact on the prospects for the added areas of focus.
lowering infant mortality, eliminating hun- Still, several structural factors pose chal-
ger, and raising school attendance. SDG 16 lenges that need to be confronted if the goals
on promoting peaceful and inclusive societ- are to be met. As highlighted in chapter 1,
ies has targets on reducing all forms of vio- the evolution of poverty points to an increas-
lence and corruption, both of which are key ing concentration of poverty in hard-to-reach
impediments to progress on all other SDGs. places, such as in fragile and confl ict situa-
The scope for synergies is also an important tions, where governance is weak. In addi-
consideration when prioritizing efforts on the tion, the growth elasticity of poverty is fall-
SDGs at the country level. ing, suggesting that the remaining pockets
of poverty are less responsive to economic
Sound monitoring growth. Finally, the prospects for growth
Like the MDGs, the SDGs require sound over the coming years are somewhat damp-
monitoring, which in turn hinges on more ened compared with the MDG period, when
and better data. Much of the success of the strong growth supported progress, as is dis-
MDGs in moving the development agenda cussed in chapter 3.
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 107
BOX 2.3 What gets measured gets done: The importance of data
Data availability has improved under the MDG frame- Several factors account for the data challenges in
work. While setting goals remains a key step to solving the MDG process. The effort to generate the data
development challenges, without critical data inputs needed to monitor the MDGs has often been driven
measuring initial conditions and monitoring progress, by external actors, rather than being embedded in the
effective policy making is hampered. One beneficial priorities of national statistical offices. For instance,
outcome of the MDG process has been the push for on the maternal mortality indicator, while some trend
better data (Manning 2009) and its contribution to the analysis can be carried out for about 80 percent of
ongoing data revolution (UN 2014b). In 2003, only developing countries, this share drops to about 10
four developing countries had two or more data points percent when data collected from international
for at least 16 of the 22 MDG indicators. By 2013, organizations are excluded. In some cases, national
129 countries met this metric of data availability. The statistical offices perceived the approach of interna-
improvement in data was greatly facilitated by the tional actors as top-down and undermining their
expansion of household surveys, a key data source for own efforts, especially when estimates differed from
monitoring the MDGs. For instance, the average num- national ones. Finally, some of the MDGs were not
ber of surveys produced each year in both Ethiopia readily quantifi able (such as achieve full and pro-
and Ghana has almost doubled since 2000. Behind the ductive employment and decent work, or universal
increased availability of data lies enhanced national access to reproductive health), making it difficult to
statistical capacity building, with data often collected generate relevant monitoring indicators.
in collaboration with international experts. Governments and other stakeholders should invest
Much more needs to be done to fill data gaps. more in statistical capacity building and a smart
Ongoing improvements in data notwithstanding, data revolution. Given the increased number of
significant gaps remain for key MDG indicators. For goals, targets, and indicators under the SDGs, the
instance, on the goal of maternal mortality, only 11 associated data challenges are even more onerous
percent of developing countries have available data. than those of the MDGs. It is important to invest in
In part, that is because civil registration systems on statistical capacity and build on existing mechanisms
births and deaths are incomplete, with coverage rang- and systems to gather the micro-level data needed for
ing from 50 percent in Latin America to 25 percent monitoring the SDGs. Monitoring efforts, however,
in South Asia, and a mere 6 percent in Sub-Saharan will benefit from the ongoing smart data revolution,
Africa (Boerma and Stansfield 2007; Devarajan 2013; which is filtering through all aspects of modern soci-
Murray, 2007). Another challenge is the lack of disag- ety, such as elections managed with biometrics, for-
gregation by gender, income quintile, or disabilities, ests monitored by satellite imagery, banking under-
which complicates targeted policy formulation. Even taken on smart phones, and medical x-rays sent for
when data are available, they often come with signifi- examination halfway around the world. The associ-
cant lags, and there are concerns about consistency ated data revolution has the potential to reduce long
and reliability. For instance, less than 60 percent of lags and dramatically improve the quality of data.
developing countries report data with less than a two- Between household survey years, national statistical
year lag on the MDGs related to health and education offices could leverage the expertise of telecommunica-
(including gender parity in education, maternal mor- tion companies and software developers to carry out
tality, and the prevalence of undernourishment), and real-time surveys on mortality rates and even poverty
in many cases broad assumptions were made in order data. By one estimate this could reduce the cost of
to arrive at existing estimates (Sachs 2012). surveys by about 60 percent.
108 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
As with the MDGs, demographic pat- making it even harder to expand coverage
terns may also pose signifi cant challenges and increase the quality of schooling. More
to achieving the SDGs. The demographic targeted approaches will be needed in these
trends projected over the coming decades contexts.
will have a major impact on the trajectory The challenges associated with the sheer
of development (see part 2 of this report). scale and breadth of the SDGs require con-
For example, more than 2 billion babies will certed effort and scaled-up fi nancing. Ulti-
be born worldwide between now and 2030 mately, the SDGs are the product of a deep
(UN 2015b). When comparing the coming political process. Sustaining support among
15 years with the past 15 years, relatively political constituencies, especially when dif-
more births are expected in low-income fi cult and unpopular actions are required,
countries in Africa, where health systems are hinges on leadership and continuing engage-
weak, coverage is incomplete, and maternal ment on core SDG issues. Building on the
and infant mortality rates are high. Mak- investment in implementation arrangements
ing progress on related SDG indicators and of the MDGs, the SDGs are better placed
expanding the coverage of health services for scaled-up action. Still, more needs to
when the underlying demand continues to be done to boost implementation capacity,
increase is a major challenge. The same is including by mobilizing adequate financ-
true for the 2 billion children that are pro- ing (box 2.4). Some prioritization of SDG-
jected to reach school age over the next 15 related activities at both the global and the
years. Africa may see a 34 percent increase country levels will need to be reflected in
in school-age children (five-year-olds), spending plans (Lomborg et al. 2014). The
Mobilizing adequate resources and ensuring their sector resources oriented toward development goals,
effective use is essential to making progress on the and boost international public finance. More detailed
unfi nished development agenda.a The renewed com- fi nancing plans need to be prepared at the country
mitment to development in 2015 is an important level (Kharas and McArthur 2014, 2015).
opportunity to strengthen enabling policies and Domestic resources will continue to make up
institutions, as well as to mobilize needed resources. the bulk of public spending aimed directly at key
Experience shows that these elements are closely development priorities. Only about half of develop-
related, especially in a rapidly changing global con- ing countries are able to collect 15 percent of GDP
text, where more low- and middle-income coun- or more in taxes (this figure is even lower in fragile
tries are able to access international capital markets and conflict states), a modest level given wide-ranging
(more than 70 emerging market countries have bond needs (IMF 2011). Improving the tax structure for
ratings), and foreign direct investment in 2013 was domestic resource mobilization also remains a chal-
more than five times larger than official development lenge. For example, policy makers are urged to avoid
assistance (ODA). The 2002 Monterrey Consensus creating economic distortions through tax holidays,
on the MDGs highlighted the importance of global or discouraging trade openness with various tax mea-
development cooperation to mobilize and increase sures. Increasing the quality and efficiency of public
the effective use of financial resources. The post- spending will help generate needed resources to meet
2015 fi nancing framework will build on the lessons key development goals. Around 8 percent of govern-
learned during the MDG era, emphasizing the need to ment spending around the world, equivalent to $1.9
mobilize domestic resources and ensure sound man- trillion, is spent on subsidies in one form or another,
agement of public expenditures, encourage private with energy subsidies alone costing the public purse
about $300 billion (IMF 2014). The recent fall in of countries has gained prominence in the aid land-
oil prices presents a golden opportunity to elimi- scape, including the BRICS (Brazil, the Russian Fed-
nate or dramatically reduce such subsidies. Expand- eration, India, China, and South Africa), the Republic
ing the evidence base on the incidence of such sub- of Korea, Saudi Arabia, and Turkey.
sidies may encourage positive change. Strengthening Climate fi nance is a relatively new and growing
public expenditure management systems, including source of funding available to developing countries
enhanced independent oversight, multiyear budget- for climate change mitigation and adaptation proj-
ing, and fiscal responsibility laws, can also contribute ects and programs. The term has been used in a nar-
meaningfully. rower sense to refer to transfers of public resources
Private resources play a central role, and efforts from developed to developing countries in light of UN
should focus on incentivizing flows. Private sources, Climate Convention obligations to provide new and
including foreign direct investment, bank loans, additional fi nancial resources, and in a wider sense
capital markets, private transfers (such as workers to refer to all financial flows relating to climate mitiga-
remittances), and philanthropy, account for the bulk tion and adaptation. Developed country governments
of external resource flows to emerging market econo- currently provide between $10 billion to $20 billion
mies. Given that much of these flows are motivated per year of such funds, and at the 2009 UN climate
by risk/reward considerations, public policy needs to change conference in Copenhagen, they committed to
help lower and manage risk or increase the rewards providing a collective $100 billion per year by 2020.
associated with private investment. Development While the focus of climate finance is clearly on climate
partners, such as the multilateral development banks mitigation and adaptation, many mitigation actions
and the International Monetary Fund, seek to serve (investments in energy and resource efficiency), adap-
as leveraging machines, catalyzing private sector tation actions (public transit and sustainable cities),
flows (through both advice and policy-based lending), capacity building, and research and development also
and by helping to underpin strong macroeconomic have national and local co-benefits.
conditions and investment climates (World Bank The multilateral development banks play a funda-
2015b). Their agenda also includes the promotion mental role not only as financial intermediaries lever-
of local capital markets for more effective resource aging shareholder contributions but also in support-
intermediation. ing debt restructuring initiatives, strengthening public
ODA is the foundation and catalyst for leverag- expenditure management, and crowding in private
ing greatly expanded public and private sector capi- sector financing. The multilateral development banks
tal flows for development. ODA remains the largest and the IMF are committed to delivering fi nancing
source of external resources to low-income and frag- solutions that will help countries achieve the SDGs,
ile and conflicted countries, where private investment and they are exploring ways to increase available
and access to international capital markets is limited. financial resources, expand policy guidance and tech-
However, current levels of ODA, which reached about nical assistance, promote and catalyze private invest-
$135 billion in 2013, will be insufficient to meet the ment, support international action on regional and
SDGs. Indeed, ODA flows to Africa have fallen in global development issues, and improve coordina-
real terms over the past few years. ODA would have tion and alignment (World Bank 2015a, 23). Toward
to more than double to meet the 0.7 percent of gross these ends, the World Bank Group and other multilat-
national income target set by the Development Assis- eral development banks have made commitments of
tance Committee of the Organisation for Economic over $400 billion for the three-year period 201618.
Co-operation and Development. ODA needs to be Ongoing efforts emphasize additionality, efficiency,
used more intelligently to channel additional sources and effectiveness. The IMF has also increased access
of fi nancing towards development goals, leveraging norms and limits across concessional facilities by 50
billions for trillions. Issues of aid quality and effec- percent for all eligible countries.
tiveness, including predictability, alignment, harmo-
nization, and coherence with the World Banks goals a. The discussion in this section is based on World Bank
and the SDG agenda, remain salient. A diverse group 2015a.
110 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
Outcome Document from the Third Inter- achievements. The SDGs are the next step in
national Financing for Development Confer- the global efforts to transform development:
ence in Addis Ababa emphasizes seven key much broader in nature, with clear targets for
areas (UN 2015e): monitoring and a sharpened focus on safe-
guarding the worlds fragile ecosystems. The
Delivering social protection and essential lessons learned from the MDGs improve the
public services, with a social compact for likelihood of success of the more sweeping
ensuring adequate service provision, sup- SDGs. Realizing the potential of the so-called
ported by appropriate spending at the megatrendssuch as global connectedness
national level and augmented with interna- and the shift of the global economic center
tional resources. of gravity toward dynamic economies in the
Scaling up efforts to end hunger and mal- Eastcan help facilitate progress toward
nutrition, including by investing in sustain- reaching the SDGs. To achieve its promise,
able agriculture and fisheries, especially the however, the SDGs require major commit-
productivity of smallholder farmers. ments regarding policy and institutional
Establishing a new forum to bridge the reform and mobilization of adequate fi nanc-
infrastructure gap, increasing sustainable ing. Achievement of the SDGs also requires
and inclusive infrastructure investment meeting emerging economic challenges over
in developing countries, with additional the medium term, the subject of the next
finance, better technology, and elevated chapter.
technical assistance.
Promoting inclusive and sustainable
industrialization, which is essential for
Notes
growth, economic diversification, innova- 1. Empirical evidence suggests that what counts
tion, and high-value-addition jobs. for economic growth is what students actually
Generating full and productive employ- learn, not how many years of schooling they
ment and decent work for all, promoting complete. While nearly all education systems
micro-, small, and medium enterprises, are expanding quantitatively, many are failing
including credit and other financial ser- in this fundamental purpose (Hanushek and
vices, and creating an environment where Woessmann 2007). For instance, in 2006, even
the business sector plays a central role in though Brazil and Mexico were on track to
generating employment and growth. meet the MDG target, a large share of Brazilian
Protecting our ecosystems for all, through (78 percent) and Mexican youth (50 percent)
coherent policy, financing, trade, and tech- lacked minimally adequate competencies in
nology that will be essential to mitigating mathematics, and over 90 percent did not reach
and avoiding harmful activities. a reasonable global standard (Filmer, Hasan,
Promoting peaceful and inclusive societ- and Pritchett 2006; Pritchett, Banerji, and
ies as the foundation of socially, economi- Kenny 2013). Similarly, another study focusing
cally, and environmentally sustainable on East Africa found that while primary enroll-
development. ment rates have risen significantly over the past
15 years, children remain functionally illiter-
ate or innumerate, despite completing multiple
Conclusion years of schooling (Jones et al. 2014).
As the world transitions from the MDGs to 2. See the MDG Report Card in appendix A for
the SDGs, the opportunities presented by more detailed regional comparisons of each
rapid global change hold great promise for MDG and associated targets.
transforming development while safeguard- 3. The total dependency ratio is the sum of
ing the environment. The MDGs shaped the people ages 014 and 65 and over, divided by
development agenda since the turn of the the number of people ages 1564, multiplied
century, with wide-ranging and impressive by 100.
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 111
4. In addition to improved water, sanitation, and Bhattacharya, A., and H. Kharas. 2015. Worthy
slums, MDG 7 (on ensuring environmental sus- of Support. The Economist, April 8.
tainability) included indicators on the propor- Boerma, J. T., and S. K. Stansfield. 2007. Health
tion of land area covered by forest, the propor- statistics: Are we making the right invest-
tion of fish stocks within safe biological limits, ments? Lancet 369: 77986.
the proportion of total water resources used, Bourguignon, F., A. Bnassy-Qur, S. Dercon, A.
the proportion of terrestrial and marine areas Estache, J. W. Gunning, R. Kanbur, S. Klasen,
protected, the proportion of species threatened S. Maxwell, J-P Platteau, and A. Spadaro.
with extinction, the level of CO2 emissions per 2008a. Millenium Development Goals at
capita and per $1 GDP (PPP), and the con- Midpoint: Where Do We Stand and Where
sumption of ozone-depleting substances. Do We Need to Go? European Report on
5. Trade growth has slowed in the postcrisis Development.
yearsin 2012 and 2013, trade grew more Bourguignon, F., C. Diaz-Bonilla, and H. Lofgren.
slowly than the world economy for the first time 2008b. Aid, Service Delivery, and the Millen-
nium Development Goals in an Economy-wide
in four decades. This slowdown has sparked a
Framework. Policy Research Working Paper
debate about peak trade: while there may be
4683, World Bank, Washington, DC.
scope for further growth in trade, structural
Bruns, B., A. Mingat, and R. Rakotomalala.
changes in U.S. and Chinese supply chains,
2003. Achieving Universal Primary Education
together with the end of the big push from the
by 2015: A Chance for Every Child. Washing-
fragmentation of production networks, may
ton, DC: World Bank.
signal that trade growth has peaked (Constan-
Burke, M., S. M. Hsiang, and E. Miguel. 2015.
tinescu, Mattoo, and Ruta 2014).
Climate and Conflict. Annual Review of
6. Dobbs, Manyika, and Woetzel 2015. See
Economics (forthcoming).
Gordon 2014 for a skeptical view about Ciccone, A., and R. E. Hall. 1996. Productivity
techno-optimism. and the Density of Economic Activity. Ameri-
7. U.N. Secretary General Ban Ki-moon indicated can Economic Review 86 (1): 5470.
that the SDGs break new ground with goals Clemens, M., and T. Moss. 2005. Whats Wrong
on inequalities, economic growth, decent jobs, with the Millennium Development Goals?
cities and human settlements, industrialization, CGD Brief, Center for Global Development,
energy, climate change, sustainable consump- Washington, DC (September).
tion and production, peace, justice, and insti- Constantinescu, C., A. Mattoo, and M. Ruta.
tutions. The environmental dimension of the 2014. Slow Trade: Part of the Global Trade
agenda is articulated across the whole agenda. Slowdown since the Crisis Has Been Driven
The SDGs are underpinned with a goal on by Structural, Not Cyclical, Factors. Finance
global partnerships for the means of implemen- and Development. International Monetary
tation (UN 2014a). Fund, Washington, DC (December).
Devarajan, S. 2013. Africas Statistical Trag-
edy. Review of Income and Wealth, Interna-
References
tional Association for Research in Income and
Andres, L., B. Briceo, C. Chase, and J. A. Ech- Wealth, Ottawa.
enique. 2014. Sanitation and Externalities: Dobbs, R., J. Manyika, and J. Woetzel. 2015.
Evidence from Early Childhood Health in No Ordinary DisruptionThe Four Global
Rural India. Policy Research Working Paper Forces Breaking All the Trends. New York:
6737, World Bank, Washington, DC. McKinsey and Company, Public Affairs.
Arslanalp, S., F. Bornhorst, and S. Gupta. 2011. Dollar, D., and A. Kraay. 2002. Growth Is Good
Investing in Growth: Revisiting the Debate for the Poor, Journal of Economic Growth
over Whether Public Investment in Infrastruc- (7): 195225.
ture Is Productive. Finance and Develop- . 2013. Growth Is Still Good for the
ment. International Monetary Fund, Washing- Poor. Policy Research Working Paper 6568,
ton, DC (March). World Bank, Washington, DC.
112 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
Easterly, W. 2007. How the Millennium Devel- Hermann, M., ed. 2015. Consequential Omis-
opment Goals Are Unfair to Africa. Brook- sions: How Demography Shapes Development
ings Global Economy and Development Lessons from the MDGs for the SDGs. Berlin
Working Paper 14, Brookings Institution, Institute for Population and Development, and
Washington, DC (November). the United Nations Population Fund.
Fay, M., D. Leipziger, Q. Wodon, and T. Yepes. IMF (International Monetary Fund). 2015.
2005. Achieving Child-Health-Related Financing For DevelopmentRevisiting the
Millennium Development Goals: The Role Monterrey Consensus. International Mon-
of Infrastructure. World Development 33: etary Fund, Washington, DC.
126784. . 2014. World Economic Outlook. Wash-
Fehling, M., B. D. Nelson, and S. Venkatapuram. ington, DC: International Monetary Fund.
2013. Limitations of the Millennium Devel- Jones, S., Y. Schipper, S. Ruto, and R. Rajani.
opment Goals: A Literature Review. Global 2014. Can Your Child Read and Count? Mea-
Public Health 8 (10): 110922. suring Learning Outcomes in East Africa.
Filmer, D., A. Hasan, and L. Pritchett. 2006. A Journal of African Economies 23 (5): 64372.
Millennium Learning Goal: Measuring Real Kanie, N., N. Abe, M. Iguchi, J. Yang, N. Kabiri,
Progress in Education. Working Paper 97, Y. Kitamura, S. Mangagi, et al. 2014. Inte-
Center for Global Development, Washington, gration and Diffusion in Sustainable Develop-
DC. ment Goals: Learning from the Past, Looking
Friedman, H. S. 2013. Causal Inference and
into the Future. Sustainability 6 (4): 176175.
the Millennium Development Goals (MDGs):
Karlsen, S., L. Say, J.-P. Souza, C. J. Hogue,
Assessing Whether There Was an Accelera-
D. L. Calles, A. M. Glmezoglu, and R. Raine.
tion in MDG Development Indicators Fol-
2011. The Relationship between Maternal
lowing the MDG Declaration. MPRA Paper
Education and Mortality among Women Giv-
48793, August. http://mpra.ub.uni-muenchen
ing Birth in Health Care Institutions: Analysis
.de/48793/.
of the Cross-Sectional WHO Global Survey on
Glaeser, E . L ., and A. Joshi-Ghani. 2013.
Maternal and Perinatal Health. BMC Public
Rethinking Cities: Toward Shared Prosper-
Health 11 (606).
ity. Economic Premise 126, World Bank,
Kenny, C., and S. Dykstra. 2013. The Global
Washington, DC.
Partnership for Development: A Review of
Glaeser, E. L., and D. Mar. 2001. Cities and
Skills. Journal of Labor Economics 19 (2): MDG 8 and Proposals for the Post-2015 Devel-
31642. opment Agenda. Policy Paper 026, Center for
Godoy, R., and M. Contreras. 2001. A Compar- Global Development, Washington, DC (July).
ative Study of Education and Tropical Defores- Kharas, H. 2015. The Post-2015 Agenda: A
tation among Lowland Bolivian Amerindians: Road Map for a Developing World. Future
Forest Values, Environmental Externality, and Development Blog, Brookings Institution,
School Subsidies. Economic Development Washington, DC, February 10.
and Cultural Change 49 (3): 55574. Kharas, H. and J. W. McArthur. 2014. Three
Gordon, R. J. 2014. The demise of U.S. economic Breakthrough Agreements Will Underpin the
growth: Restatement, rebuttal, and reflection. Post-2015 Global Agenda. Upfront Blog,
NBER Working Paper 19895, February. Brookings Institution, Washington, DC ,
Hammer J., and D. Spears. 2013. Village Sanita- December 9.
tion and Childrens Human Capital: Evidence . 2015. Nine Priority Commitments
from a Randomized Experiment by the Maha- to be Made at the UNs July 2015 Financing
rashtra Government. Policy Research Work- for Development Conference in Addis Ababa,
ing Paper 6580, World Bank, Washington, DC. Ethiopia. Global Views 50, Brookings Insti-
Hanushek, E. A., and L. Woessmann. 2007. tution, Washington, DC (February).
The Role of Education Quality for Economic Kharas, H. and C. Zhang. 2014. New Agenda,
Growth. Policy Research Working Paper New Narrative: What Happens after 2015?
4122, World Bank, Washington, DC. SAIS Review of International Affairs 34 (2).
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 113
King, E. M., S. Klasen, and M. Porter. 2009. Danish Institute for International Studies,
Women and Development. In Global Cri- Copenhagen.
ses, Global Solutions, edited by B. Lomborg, McArthur, J. W. 2013. Own the Goals: What the
2nd ed. Cambridge, UK: Cambridge University Millennium Development Goals Have Accom-
Press. plished. Foreign Affairs 92 (2): 15262.
Klasen, S. 2005. Bridging the Gender Gap . 2014. Seven Million Lives Saved:
to Promote Economic and Social Develop- Under-5 Mortality since the Launch of the
ment. Journal of International Affairs 58 (2): Millennium Development Goals. Global
24556. Economy and Development Working Paper
Klasen, S. and M. C. Lo Bue. 2013. Identify- 78, Brookings Institution, Washington, DC
ing Synergies and Complementarities between (September).
MDGs: Results from Cluster Analysis. Social Melo, P. C., D. J. Graham, and R. B. Noland.
Indicators Research 113 (2): 64770. 2009. A Meta-Analysis of Estimates of Urban
Klugman, J., L. Hanmer, S. Twigg, T. Hasan, Agglomeration Economies. Regional Science
J. McCleary-Sills, and J. Santamaria. 2014. and Urban Economics 39 (3): 33242.
Voice and Agency: Empowering Women and Murray, C. J. 2007. Towards Good Practice for
Girls for Shared Prosperity. Washington, DC: Health Statistics: Lessons from the Millen-
World Bank Group. nium Development Goal Health Indicators.
Kose, A. M. and E. O. Ozturk. 2014. A World The Lancet 369: 86273.
of Change: Taking Stock of the Past Half PMNCH (Partnership for Maternal, Newborn
Century. Finance and Development, Inter- and Child Health), WHO (World Health
national Monetary Fund, Washington, DC Organization), World Bank, and AHPSR (Alli-
(September). ance for Health Policy and Systems Research).
Kumar, S., and S. Vollmer. 2013. Does Access to 2014. Success Factors for Womens and Chil-
Improved Sanitation Reduce Childhood Diar- drens Health: Policy and Programme High-
rhea in Rural India? Health Economics 22: lights from 10 Fast-Track Countries. Geneva:
41027. World Health Organization.
Lay, J. 2010. MDG Achievements, Determi- Pritchett, L., R. Banerji, and C. Kenny. 2013.
nants, and Resource Needs: What Has Been Schooling Is Not Education! Using Assess-
Learnt? Policy Research Working Paper ment to Change the Politics of Non-Learning.
5320, World Bank, Washington, DC. Report of the Center for Global Development
Lay, J., and A. S. Robilliard. 2009. The Comple- Study Group on Measuring Learning Out-
mentarity of MDG Achievements. The Case comes, Washington, DC.
of Child Mortality in Sub-Saharan Africa. Prss, A., D. Kay, L. Fewtrell, and J. Bartram.
Policy Research Working Paper 5062, World 2002. Estimating the Burden of Disease from
Bank, Washington, DC. Water, Sanitation, and Hygiene at a Global
Lo Bue, M. C. 2013. Are There Synergies Level. Environmental Health Perspectives
between MDGs? Development in Brief 3, 110: 53742.
KFW-Development Research. Puga, D. 2010. The Magnitude and Causes
. 2015. The Complementarities of Child of Agglomeration Economies. Journal of
Health Achievements in Developing Coun- Regional Science 50 (1): 20319.
tries. Ph.D thesis, University of Gottingen, Riddell, A. 2003. The Introduction of Free Pri-
Germany. mary Education in Sub-Saharan Africa. Back-
Lomborg, B., et al. 2014. Preliminary Benefit- ground Paper commissioned for Global Moni-
Cost Assessment of the Final OWG Outcome. toring Report 2003/4 Education for All,
Copenhagen Consensus Center, Copenhagen World Bank, Washington, DC.
(August). Roberts, T., E. Carnahan, and E. Gakidou.
Manning, R. 2009. Using Indicators to Encour- 2013. Burden Attributable to Suboptimal
age Development: Lessons from the Millen- Breastfeeding: A Cross-Country Analysis of
nium Development Goals. Report 2009:1, Country-Specific Trends and Their Relation to
114 TRANSITIONING FROM MDGS TO SDGS GLOBAL MONITORING REPORT 2015/2016
Child Health Inequalities. The Lancet 381: . 2012. Review of the Contributions
S126. of the MDG Agenda to Foster Development:
Rosenthal, S. S., and W. C. Strange. 2004. Evi- Lessons for the Post-2015 UN Development
dence on the Nature and Sources of Agglom- Agenda. UN System Task Team on the Post-
eration Economies. In Handbook of Regional 2015 UN Development Agenda, New York
and Urban Economics, vol. 4, edited by (March).
J. V. Henderson and J.-F. Thisse. Amsterdam: . 2013a. Lessons Learned from MDG
North-Holland. Monitoring From A Statistical Perspective.
. 2010. Small Establishments/Big Effects: Report of the Task Team on Lessons Learned
Agglomeration, Industrial Organization and from MDG Monitoring of the IAEG-MDG,
Entrepreneurship. In The Economics of March. United Nations, New York.
Agglomeration, edited by E. L. Glaeser. Cam- . 2013b. Trends in International Migrant
bridge, MA: National Bureau of Economic Stock: Migrants by Destination and Ori-
Research. gin United Nations database, POP/DB/MIG
Sachs, J. D. 2012. From Millennium Devel- /Stock/Rev.2013.
opment Goals to Sustainable Development . 2014a. The Road to Dignity by 2030:
Goals. The Lancet 379 (June): 220611.
Ending Poverty, Transforming All Lives and
Sanchez, Pedro, and M. S. Swaminathan. 2005.
Protecting the Planet. Synthesis Report of the
Cutting World Hunger in Half. Science 307
Secretary-General on the Post-2015 Sustain-
(January).
able Development Agenda, United Nations,
SDSN (Sustainable Development Solutions Net-
New York (December).
work). 2015. Data for Development: A Needs
. 2014b. A World that Counts: Mobi-
Assessment for SDG Monitoring and Statisti-
lizing the Data Revolution for Sustainable
cal Capacity Development. April.
Development. United Nations, New York
Sen, Amartya. 1999. Development as Freedom.
(November).
New York: Oxford University Press.
. 2015a. Global Sustainable Development
Singh, Sarwant. 2012. New Mega Trends. Lon-
Report. Advance unedited edition. New York:
don: Palgrave Macmillan.
United Nations Department of Economic
Smith, L., and L. Haddad. 2015. Reducing Child
Undernutrition: Past Drivers and Priorities for and Social Affairs, Division for Sustainable
the Post-MDG Era. World Development 68 Development.
(April): 180204. . 2015b. Integrating Population Issues
Spears, D. 2013. How Much International into Sustainable Development, Including in
Variation in Child Height Can Open Defeca- the post-2015 Development Agenda. Report
tion Explain? Policy Research Working Paper of the Secretary General, Economic and Social
6351, World Bank, Washington, DC. Council, Commission on Population and
Spears D., A. Ghosh, and O. Cumming. 2013. Development, United Nations, New York.
Open Defecation and Childhood Stunting . 2015c. The Millennium Develop-
in India: An Ecological Analysis of New Data ment Goals Report 2015. New York: United
from 112 Districts. PLoS ONE 8 (9): e73784. Nations.
Stuckler, D., S. Basu, and M. McKee. 2010. . 2015d. My World: The United Nations
Drivers of Inequality in Millennium Develop- Global Survey for a Better World. United
ment Goal Progress: A Statistical Analysis. Nations, http://vote.myworld2015.org/.
PLoS Med 7(3): e1000241. . 2015e. Outcome Document of the Third
Summers, L. 2015. On Secular Stagnation: A Financing for Development Conference Addis
Response to Bernanke. Blog. Ababa Action Agenda. United Nations, New
UN (United Nations). 2005. Taking Action: York (July 15).
Achieving Gender Equality and Empowering . 2015f. Transforming our World: The
Women. United Nations Development Pro- 2030 Agenda for Sustainable Development.
gramme, New York. United Nations, New York (August).
GLOBAL MONITORING REPORT 2015/2016 TRANSITIONING FROM MDGS TO SDGS 115
UNESCO (United Nations Educational, Scientific . 2013b. Investing in the Next Genera-
and Cultural Organization). 2015. Education tion: Growing Tall and Smart with Toilets
for All 20002015: Achievements and Chal- Stopping Open Defecation Improves Childrens
lenges. Paris: UNESCO Publishing. Height in Cambodia. Water and Sanitation
WHO (World Health Organization), United Program: Research Brief, World Bank, Wash-
Nations Childrens Fund, United Nations ington, DC (November).
Population Fund, World Bank, and United . 2013c. Planning, Connecting & Financ-
Nations Population Division. 2014. Trends in ing CitiesNow. Washington, DC: World
Maternal Mortality: 1990 to 2013. Geneva: Bank.
World Health Organization. . 2013d. The World Bank Group Goals
World Bank. 2001. Engendering Develop- End Extreme Poverty and Promote Shared
ment: Through Gender Equality in Rights, Prosperity. Washington, DC: World Bank.
Resources, and Voice. Policy Research Report . 2014. Turn Down the Heat: Confronting
21776. New York: Oxford University Press. the New Climate Normal. Washington, DC:
. 2003. Achieving Universal Primary Edu- World Bank.
cation by 2015: A Chance for Every Child. . 2015a. From Billions to Trillions: Trans-
Washington, DC: World Bank. forming Development Finance. Development
. 2011. The Changing Wealth of Nations: Committee Paper, DC2015- 0002, World
Measuring Sustainable Development in the Bank, Washington, DC.
New Millennium. Washington, DC: World . 2015b. Information Note: Post-2015
Bank. Financing for Development in the World Bank
. 2013a. Global Monitoring Report 2013: Group. World Bank, Washington, DC.
Rural-Urban Dynamics and the Millennium
Development Goals. Washington, DC: World
Bank.
3
Global Macroeconomic
Performance and Outlook:
Prospects for Growth
This chapter includes an overview of recent outlook have risen: They include risks from
macroeconomic developments, a short-term Chinas growth transition, excessive finan-
global economic outlook, and the risks fac- cial market volatility and tightening of
ing the outlook, which draw on the Interna- financial conditions, the impact of a sizable
tional Monetary Funds (IMFs) World Eco- appreciation of the U.S. dollar on balance
nomic Outlook (WEO).1 It also assesses the sheet exposures, even lower commodity
appropriateness of macroeconomic policies in prices, rising geopolitical risks, and lower
advanced, emerging market, and low-income potential growth.
developing countries. With the year marking Growth in advanced economies (AEs)
a shift in the objectives of the global develop- is expected to continue to recover into
ment agendawith the Sustainable Develop- 201516, and accommodative monetary
ment Goals (SDGs) replacing the Millennium policy is appropriate to support this recov-
Development Goals (MDGs) of the past 15 ery. Fiscal policy needs to be supportive
yearsthe chapter discusses the global eco- where conditions allow, while many AEs
nomic performance in a longer-term perspec- need to establish credible medium-term fis-
tive, by also drawing on the key demographic cal frameworks and consolidation plans.
trends that influence economic prospects of Strengthening of regulation and supervi-
different groups of economies. The main mes- sion of rapidly expanding nonbank fi nan-
sages are the following: cial activities is also needed. Overall, given
the weakened near- and medium-term
Overall, global growth in 2015 is projected growth outlook for many AEs, raising
to be lower than in 2014, with prospects actual and potential growth is a key eco-
across major countries and regions uneven. nomic policy priority.
Domestic inflation is expected to remain The 201516 growth outlook for EMs
subdued, in large part due to the significant is uneven and has weakened overall for
weakening in global commodity prices, many with the end of the commodity prices
although inflation is projected to rise in supercycle. Geopolitical tensions, tighten-
some emerging market countries (EMs) ing of financial conditions, and lower com-
that have suffered from sizable exchange modity prices weigh on the outlook for
rate depreciations. Downside risks to the many countries. Overall, demand support
117
118 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK GLOBAL MONITORING REPORT 2015/2016
needs to be carefully weighed against the pulled out of recession. In contrast, growth in
need to manage vulnerabilities. Those with EMDCs slowed down further with the con-
policy flexibility should use it to the extent tinued adjustment in many countries to lower
possible; for others, the priority should be potential growth prospects. Among EMs,
growth friendly fiscal rebalancing; finan- the slowdown in 2014 was driven to a large
cial buffers, where available, should be used extent by subdued growth in Latin America
to smooth the impact of lower commodity and the Caribbean and in the Common-
export prices. Lower commodity prices wealth of Independent States (CIS). Growth
also call for a timely reform of energy sub- in LIDCs was maintained at a robust 6.0 per-
sidies. As in AEs, raising potential growth cent, even though several countries in Africa
over the medium term is a priority. were severely affected by the Ebola epidemic.
Low-income developing countries (LIDCs) In 2015, global growth is projected at 3.1
are projected to see growth slow in 2015 percentsome 0.7 percentage point lower
as growth in oil-exporting LIDCs drops than the forecast made in GMR 2014/15
off sharply before recovering in 2016. with growth in AEs projected to average 2.0
Where warranted, policies should remain percent and in EMDCs 4.0 percent. Growth
focused on rebuilding fiscal and external in AEs is projected to pick up relative to 2014
buffers and achieving medium-term devel- on further strengthening of the recovery in the
opment priorities. In many emerging mar- euro area and the return to positive growth in
ket and developing countries, allowing for Japan, supported by declining oil prices. In con-
exchange rate flexibility will help adjust to trast, growth in EMDCs is expected to decline
external shocks. againthe fifth year in a row and the low-
During the MDG-monitoring period, most est since the 2009 global financial crisis. This
emerging market and developing countries reflects lower growth in both EMs and LIDCs,
(EMDCs) grew at a sustained strong pace, held back in many by lower commodity prices,
notwithstanding the negative impact from tighter external financial conditions (especially
the 2009 global financial crisis. Together in Latin America and the Caribbean), and dis-
with strong growth, per capita income dif- tress related to geopolitical factors (in the CIS
ferences among countries were reduced, and in the Middle East and North Africa).
and absolute poverty was halved over this Economic conditions in the CIS remain
period. very weak. Growth in Russia and Ukraine is
For the SDG-monitoring period, pros- projected to be negative with adverse spill-
pects are for global growth to trend down, overs to the rest of the region. The deep reces-
mostly because of a decrease in global sions in both countries reflect the persistent
population growth. Developing countries effects of the sharp decline in oil prices com-
would need to address disparate demo- bined with international sanctions in Russia
graphic evolutions with an appropriate set and, for Ukraine, the continuing conflict in
of macroeconomic and structural policies the eastern part of the country.
to enable further reductions in absolute Growth in emerging and developing Asia
poverty levels and to narrow income differ- is expected to continue its downward trend in
ences relative to more advanced economies. 2015 largely due to lower growth in China.
Growth in India will benefit from policy
Recent developments and short- reforms, a pick-up in investment, and lower
and medium-term prospects commodity prices. Average growth in other
countries in the region is projected to remain
In 2014, global growth was 3.4 percent, about unchanged.
broadly in line with the projections made In emerging and developing Europe,
in the Global Monitoring Report (GMR) growth is expected to remain broadly
2014/15, and reflecting growth of 1.8 percent unchanged from 2014. The economic con-
in AEs and 4.6 percent in EMDCs (table 3.1). traction in the CIS weighs on growth, but
Growth in AEs picked up as the euro area low oil prices and continued recovery in the
GLOBAL MONITORING REPORT 2015/2016 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK 119
TABLE 3.1 The global growth rebound has been pushed back to 2016
Global output, annual percent change
Actual Projections
Low-Income developing countries 6.4 5.9 6.1 6.0 4.8 5.8 6.0
Emerging market countries 6.5 5.5 4.9 4.5 3.9 4.4 5.1
Fragile States 5.0 6.6 4.9 1.3 1.4 6.3 6.8
Small States 5.5 2.4 1.6 2.3 1.4 2.8 3.1
Source: IMF World Economic Outlook.
Note: Country groupings are defined in appendix table C5.2.
Euro Area provide an offset. High corporate Despite a small recovery relative to 2014,
debt levels and subdued domestic demand growth in fragile states is projected to remain
will weigh on growth in Turkey. low in 2015. This reflects continuing civil
Growth across the Middle East, North strife and conflict in some countries (for
Africa, Afghanistan, and Pakistan is expected example, South Sudan and Yemen), and the
to remain modest, in line with growth in continued effects of the Ebola epidemic for
2014. Growth is expected to be negatively some economies in West Africa (Liberia and
affected by low oil prices, regional conflicts, Sierra Leone).
and social tensions. The downward revision of the global
Growth in Latin America and the Carib- growth forecast for 2015 is largely driven by
bean is expected to turn negative in 2015. In a significant lowering of growth prospects in
Brazil, the economy is expected to contract EMs (from 4.8 percent in the 2014/15 GMR
with a sharp drop in private sector confi- to 3.9 percent). Indeed, some of the key down-
dence, the needed tightening of the macro- side risks identified in GMR 2014/15 have
economic policy stance to contain inflation, materializedsuch as tighter external finan-
along with weaker in commodity prices, with cial conditions and geopolitical tensions
negative spillovers for the rest of the region. working on top of the sharp, unanticipated
Venezuela is expected to enter into a deep retreat in oil and other commodity prices. But
recession as the oil price decline has exacer- growth in AEs has also been revised down
bated macroeconomic imbalances. Growth slightly relative to GMR 2014/15, on lower
in many other countries in the region is neg- growth in the United States and, in LIDCs,
atively affected by low metal, oil, and other on account of lower growth in commodity
commodity prices. exporters, including Nigeria.
Growth in Sub-Saharan African countries Per capita growth in the median LIDC has
is expected to slow down on lower growth been drifting lower since the strong rebound
in oil-exporting countries, particularly Nige- from the 2009 global crisis, but it remains
ria. Growth is also expected to be negatively above growth in the median AE country and
affected by slowing growth in China and, for median EM country (figure 3.1). With the
some, a tightening of global financial condi- concurrent slowdown in EMs and recovery
tions and a retreat in other commodity prices in AEs, per capita growth in the median AE
besides oil. country and median EM country is expected
120 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK GLOBAL MONITORING REPORT 2015/2016
FIGURE 3.1 Steady income gains for a typical LIDC continue to distressed economies in the CIS, Middle East
be maintained and North Africa, as well as a recovery in
Latin America and the Caribbean, on a par-
5 tial normalization of economic growth in
Forecast
4 Brazil and spillovers from stronger growth in
(% change, median country)
2
jected to return to about 6 percent growth as
1
growth in oil-exporting LIDCs recovers.
0
1
Medium-term global growth is expected
2 to be somewhat higher than the level pro-
3 jected for 2016 on higher growth in EMDCs.
4 Higher growth in EMDCs is predicated on a
5 return to normalcy for several countries that
2001 2003 2005 2007 2009 2011 2013 2015 2017 2020 have been growing at below potential (due
Emerging market Low-income Advanced to an easing of geopolitical tensions in the
countries developing countries economies CIS, the Middle East and North Africa, and
on a recovery of investment confidence and
Source: IMF World Economic Outlook.
Note: Country groupings are defined in appendix table C5.2.
growth in Latin America and the Caribbean).
Growth in AEs will trend down as output
gaps are closed.
to converge in 2015at about 1.5 percent Global inflation is expected to be sub-
for the first time since the early 2000s. dued, with consumer price inflation in most
Global growth is expected to increase to countries remaining in the low single dig-
3.6 percent in 2016, reflecting a growth pick- its, partly driven by declining international
up in all three main country groups. The commodity prices (figure 3.2). In twenty-
continued recovery in AEs, averaging 2.2 per- some countriesmainly European AEs and
cent, is projected to be led by a rebound in EMsdeflation took hold in 2014. With the
the United States that is expected to be sup- exception of Switzerland, the countries with
ported by lower energy prices, reduced fiscal deflation in 2014 are expected to return to
drag, strengthened balance sheets, and an low inflation in 2016. In about one dozen
improving housing market. The pick-up in countries, howeverall EMs or LIDCs
growth in EMs to 4.4 percent is predicated on inflation is in the double digits, and for
an expected turnaround in growth in several someincluding Belarus, Iran, and Ven-
ezuelainflation is projected to remain high
in 2016, in part reflecting the effects of
FIGURE 3.2 The commodity price supercycle is coming to an end
exchange rate depreciation.
370
Commodity priceswhich were on a
340 Forecast roller coaster during 200811trended
310 lower during 201215 against the back-
Index (2000 = 100)
FIGURE 3.3 The commodity price shock in 2015 is broadly of the same magnitude as in 2009
20
Forecast
10
0
10
20
30
40
50
2008 2009 2010 2011 2012 2013 2014 2015 2016
b. Changes in GDP per capita, terms of trade, and inflation in emerging market and developing countries
16
12 Forecast
Annual % change
8
4
0
4
8
12
2008 2009 2010 2011 2012 2013 2014 2015 2016
path for oil and other commodity prices, This suggests that both supply and demand
respectively, through 2020. shifts lie behind the 2015 price correction, in
Many developing countries are dependent contrast to 2009 where the price correction
on the exports or imports of a few commodi- was mostly driven by lower demand.
ties, and as the prices of such export or import Downside risks have risen, particularly
commodities change, so do these countries for EMDCs, given the interaction of exter-
terms of trade and domestic inflation (figure nal and domestic headwinds, as well as risks
3.3). Higher commodity prices in 2010 and from Chinas growth transition. Risks for AEs
2011 were associated with terms-of-trade include disruptive asset price shifts and finan-
gains for the majority of EMDCs. As com- cial market turmoil, with adverse spillovers for
modity prices weakened in 201215, these EMDCs. In the context of weak demand and
terms-of-trade gains were eroded. While the low inflation, the risk of secular stagnation
commodity price decline in 2015 is of about and hysteresis for AEs remains, particularly
the same magnitude as in 2009, the expected given constraints posed by monetary policy at
dispersion of growth, inflation, and terms-of- the zero lower bound and high debt levels.
trade changes across EMDCs are projected to Risks for EMDCs have increased in
be significantly lower this year than in 2009. the context of slowing growth. Although
122 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK GLOBAL MONITORING REPORT 2015/2016
FIGURE 3.4 Global imbalances are projected to continue to trend down, but at a more gradual pace
3
Forecast
Share of world GDP (%)
2
1
0
1
2
3
2000 2003 2006 2009 2012 2015 2018 2020
Low-income developing countries with surplus Low-income developing countries with deficit
Emerging market countries with surplus Emerging market countries with deficit
Advanced economies with surplus Other advanced economies with deficit
Statistical discrepancy United States
commodity prices have fallen significantly, stable prices of traded goods and services,
as discussed above, there are risks that they a further modest uptick in world trade is
could fall further, straining balance sheets and expected for 2016 and beyond.
growth prospects for commodity-exporting The sharp widening in global current
EMDCs. Also, adjustments in commodity account imbalances in the run up to the 2009
markets can be slow and price volatility in financial crisis has reversed since, but recent
the interim high. A further dollar appreciation progress in further lowering the imbalances
against the backdrop of asynchronous mon- has been slow. Global current account imbal-
etary policy stances in major economies could ances peaked at 3 percent of global GDP in
lead to an unbalanced global recovery and 2006, narrowing sharply post-crisis as the cur-
associated capital flow reversal from EMDCs, rent account deficits in the United States and
and exacerbate balance sheet exposures. some smaller AEs narrowed, together with the
Chinas ongoing growth transition is creating surpluses in emerging market capital export-
spillovers, and an abrupt growth slowdown ing countries (figure 3.4). However, current
in China could have major repercussions for account balances are expected to remain
growth in other economies, both directly and broadly stable in 2015, with the contraction
through the impact on commodity prices. in the surpluses in oil-exporting economies
Moreover, further increases in geopolitical offset by surpluses in oil importers. Moreover,
tensions (stemming from ongoing events in there has been a rotation of imbalances with
Russia, Ukraine, the Middle East, and parts a widening of imbalances for several EMDCs.
of Africa) could generate regional and global The downward trend in imbalances from
spillovers and disrupt global trade and finan- 2012 to 2015 is projected to continue at a
cial activity. gradual pace through 2020.
For the third year in a row, world trade Current account imbalances in LIDCs
was subdued in 2014, reflecting in part, low remain wider than before the global finan-
economic growth. Even though AEs trade cial crisis (figure 3.5). The current account
performance is expected to remain resilient, deficit (defined here as net of foreign direct
world trade is expected to pick up only mar- investments to focus attention on the residual
ginally in 2015 as trade growth slows further deficit) for the median LIDC has increased
in EMs (particularly in Asian EMs, such as from around 2 percent of GDP in 200911 to
China). Against the background of broadly about 34 percent in recent years, peaking at
GLOBAL MONITORING REPORT 2015/2016 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK 123
FIGURE 3.5 A typical LIDC has a higher current account deficit now than before the 2009 global
crisis
Forecast
Share of GDP, median country (%)
20 5
2008 2009 2010 2011 2012 2013 2014 2015 2016
Current account balance, including FDI (right axis) Imports (left axis) Exports (left axis)
TABLE 3.2 LIDC net capital inflows stay flat while EM net capital flows turn negative in 2015
Net capital inows, weighted averages, percent of GDP
Actual Projections
200108 200912 2013 2014 2015 2016 201720
Emerging market countries 2.6 2.7 2.1 0.7 1.6 0.4 1.0
Transfers, net 1.1 0.7 0.4 0.3 0.4 0.4 0.4
Financial ows, net 1.4 2.0 1.7 0.4 2.0 0.0 0.5
Direct investment, net 2.2 1.7 1.6 1.4 1.1 1.1 0.6
Portfolio investment, net 0.4 0.8 0.5 0.4 0.2 0.4 0.3
Other investment, net 0.4 0.5 0.4 1.5 3.3 1.5 0.3
Memorandum item:
Change in reserve assets (, accumulation) 3.9 2.9 2.1 0.4 1.7 0.2 0.3
Low-Income developing countries 6.9 10.3 10.8 10.2 10.7 11.0 10.5
Transfers, net 6.4 6.9 6.0 5.8 6.0 5.9 5.5
Financial ows, net 0.5 3.4 4.8 4.3 4.7 5.0 5.0
Direct investment, net 2.7 3.5 3.1 2.6 2.8 3.2 3.5
Portfolio investment, net 0.1 0.4 0.9 0.6 0.5 0.4 0.5
Other investment, net 2.4 0.5 0.8 1.1 1.4 1.4 1.1
Memorandum item:
Change in reserve assets (, accumulation) 2.1 0.6 0.3 0.5 0.1 0.2 0.9
FIGURE 3.6 Share of LIDCs with reserve coverage of less than three months is expected to increase
9
8 Forecast
7
(months of imports)
Official reserves
6
5
4
3
2
1
0
2008 2009 2010 2011 2012 2013 2014 2015 2016
a loosening of monetary conditions in 2014 FIGURE 3.7 Fiscal deficits are higher now than before the 2009
(figure 3.8). In LIDCs, there was relatively less global crisis
reliance on monetary policy loosening in the
form of a lowering of short-term interest rates Forecast
0
rather than allowing for a depreciation of the
Share of GDP,
exchange rate, but the difference between
2
EMs and LIDCs in that respect was not large.
Against the background of these policy 3
measures, monetary aggregates continued to 4
grow faster than nominal GDP in EMs until 5
2014 (figure 3.9). These monetary trends have 2008 2009 2010 2011 2012 2013 2014 2015 2016
taken place in the context of low to moderate Emerging market countries Low-income developing countries
inflation in the vast majority of countries.
Source: IMF World Economic Outlook.
Against the background of slower growth Note: General government balance (net lending/net borrowing) as defined in IMF Government
and broadly stable inflation in 2014, less than Finance Statistics Manual 2001. Country groupings are defined in appendix table C5.2.
FIGURE 3.8 The share of emerging market countries as well as low-income developing countries
that experienced loosening monetary conditions fell somewhat in 2014
70 70
60 60
50 50
40 40
30 30
20 20
10 10
0 0
MCI Discount rate Exchange rate MCI Discount rate Exchange rate
2008 2009 2010 2011 2012 2013 2014
FIGURE 3.9 The growth in monetary aggregates is trending down in 2014 and early 2015
25
20
15
Percent
10
5
0
5
10
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q2
2008 2009 2010 2011 2012 2013 2014 2015
FIGURE 3.10 The share of emerging market countries as well as low-income developing countries that loosened
both monetary and fiscal policies fell sharply in 2014
40 40
30 30
20 20
10 10
0 0
Monetary Monetary Monetary Fiscal loosening Monetary Monetary Monetary Fiscal loosening
and fiscal and fiscal loosening and monetary and fiscal and fiscal loosening and monetary
loosening tightening and fiscal tigthening loosening tightening and fiscal tigthening
tightening tightening
to the 2009 global financial crisis, the assess- income levels one-tenth of the global average;
ments became more positive, with particularly by 2000 one-fourth of all countries had rela-
positive assessments of macroeconomic poli- tive incomes lower than that.
cies in the crisis year. While the perceived qual- In contrast, the strong economic expan-
ity of macroeconomic policies has since dete- sion during the MDG-monitoring period was
riorated somewhat, it is generally still higher accompanied by greater income convergence.
now than in the early part of the MDG-mon- The global Gini declined from 75 percent in
itoring period (figure 3.11). Selected macro- 2000 to 62 percent in 2015.3 And as inter-
economic indicatorsthe background against country income differences diminished over
which IMF country teams have assessed poli- the MDG-monitoring period, per capita GDP
ciesare shown in figure 3.12. growth at 2.1 percent remained about in line
In 2014, the perceived consistency of mac- with the historical trend of 2.3 percent annu-
roeconomic policy slipped, with the number ally (figure 3.14).
of countries with unsatisfactory performance Notwithstanding this narrowing of global
increasing sharply. The assessments of mon- income differences, the share of poor coun-
etary policy continue to be somewhat more tries has remained high. One-seventh of all
positive than those of fiscal policy, with countries still have GDP per capita below
assessments of both types of policies becom- one-tenth the mean global income level, and
ing less positive in 2014. the countries where the poorest 40 percent
To further gauge the geographical differ- of the worlds population live account for
ences in perceived quality of policies, one just 6 percent of global income (figure 3.15).
can also consider the breakdown in answers Excluding China and India, per capita GDP
across geographical areas (table 3.4). These in these countries increased sharply over the
differences are minor over time. past 15 years, but their income level relative
to mean global income is no larger now than
in 1950.
Long-term convergence and An alternative measure of progress during
growth trends the MDG-monitoring period is the number
With the completion of the MDG-monitoring of countries that graduated into high-income
period and the launching of the SDGs, it is an status. About one-fourth of all countries are
opportune moment to provide a longer-term now high-income countries, as compared
perspective on growth and income conver- with one-fifth in 2000 (figure 3.16). The pace
gence. How did outcomes during 200015 at which countries graduate from middle-
compare with historical trends? And what are income to high-income status has picked
the prospects for the SDG-monitoring period up, but it trails the pace at which countries
of 201630? graduate from low-income to middle-income
An impressive global economic expansion status. Although the number of high-income
took place in the half century leading up to countries increased significantly from 2000 to
the adoption of the Millennium Declaration 2015, the share of the worlds population liv-
in 2000, although with diverging income lev- ing in high-income countries remained about
els across countries. Total GDP expanded constant over this period because of rela-
sevenfold and GDP per capita tripled (in tively lower population growth in the richer
constant U.S. dollars at market exchange countries.
rates). However, as the Lorenz curve, which Looking ahead, prospects for growth
provides a comprehensive representation of and income convergence over the SDG-
global per capita income distribution (figure monitoring period would be influenced by
3.13) shows, the associated Gini coefficients demographic trends. The average annual
increased from 67 percent in 1950 to 75 per- global population increase is projected to fall to
cent in 2000. Indeed, Burkina Faso and China 1 percent during 201530 from 1 percent
were the two poorest countries in 1950 with during 200015. But population growth will
128 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK GLOBAL MONITORING REPORT 2015/2016
FIGURE 3.11 The quality of macroeconomic policies is lower now than during the 2009 global crisis
Quality of macroeconomic policies in low-income countries, 200314 a,b
category (%)
40 40
30 30
20 20
10 10
0 0
Unsatisfactory Adequate Good Unsatisfactory Adequate Good
category (%)
40 40
30 30
20 20
10 10
0 0
Unsatisfactory Adequate Good Unsatisfactory Adequate Good
60 60
50 50
category (%)
category (%)
40 40
30 30
20 20
10 10
0 0
Unsatisfactory Adequate Good Unsatisfactory Adequate Good
70 70
category (%)
60 60
category (%)
50 50
40 40
30 30
20 20
10 10
0 0
Unsatisfactory Adequate Good Unsatisfactory Adequate Good
Median (%)
Median (%)
4
8
2 6
4
0
2
2 0
2000 2003 2006 2009 2012 2015 2000 2003 2006 2009 2012 2015
projected projected
Median, % of GDP
6
2
9
3
4 12
5 15
6 18
2000 2003 2006 2009 2012 2015 2000 2003 2006 2009 2012 2015
projected projected
120 120
Median, % of GDP
Median, % of GDP
100 100
80 80
60 60
40 40
20 20
2000 2003 2006 2009 2012 2015 2000 2003 2006 2009 2012 2015
projected projected
FIGURE 3.13 There is a steady income convergence among differ sharply across different country group-
countries from 2000 onward ings. Average annual population growth from
2015 to 2030 in AEs, EMs, and LIDCs is pro-
1.0 jected to be 0.4 percent, 0.7 percent, and 2.0
percent respectively. Looking only at growth in
0.8 the working-age population (15 to 64 years),
the differences across country groupings are
Share of global income
(see box 3.1 and chapter 5). Other reasons FIGURE 3.14 The global per capita income growth in 201530
for why one can expect a slowing of growth is projected to be slightly lower than in 200015
include weaknesses in investments, slower
pace of human capital accumulation, and
600
gradually diminishing growth dividends from
information and communication technology.
Thus, increasing potential output will be
70 60
furthering financial sector development, and U.S. 32 67
building infrastructure that lowers costs and 60 71 85
better connects domestic and global markets. 50
Promoting economic diversification will also 40
be essential. The implementation of these pol- 30
icies will likely require fiscal space to repriori- 32
20 23 27 China 16
tize government spending toward social and
10 12 China 4
infrastructure spending, and still maintain India 3
8
5 China 2 3 India 1 6 India 3
debt sustainability. Flexible and deep labor 0
1950 2000 2015 2030
markets are essential to ensure that workers
Top 20%a Middle 40%a Bottom 40%a
are matched with available jobs efficiently, High-income country threshold
while compensation remains aligned with
productivity. These policy issues are discussed Sources: UN statistical yearbooks and publications, IMF International Financial Statistics, IMF World
Economic Outlook; and IMF staff estimates.
further in subsequent chapters. Note: At market exchange rates. The high-income country threshold indicates the division of the
worlds income pie between the high-income countries on the one hand and middle-income and
low-income countries on the other hand.
a. Of the worlds population.
Conclusion
Global growth remains moderate, with with the end of the commodity prices super-
growth in 2015 expected to be lower than cycle. Growth in 2016 in AEs is expected
in 2014, with stronger growth in AEs off- to continue to recover, and pick up as well
set by overall weaker growth in many EMs in EMs. Geopolitical tensions, tightening of
132 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK GLOBAL MONITORING REPORT 2015/2016
FIGURE 3.16 The share of high-income countries is expected to from increased financial market volatility,
increase from one-fifth in 2000 to one-third in 2030 a further dollar appreciation and its impact
on balance sheet exposures, even lower com-
High-income countries modity prices, an abrupt growth slowdown
countries (%)
Share of
Middle-income countries
strong pace. Together with strong growth,
Low-income countries per capita income differences among coun-
tries were reduced and absolute poverty was
0 10 20 30 40 50 60 70 80
Percent
halved over this period.
2030 2015 2000 1950
For the SDG-monitoring period (201530),
prospects are for global growth to trend
Sources: UN statistical yearbooks and publications; International Financial Statistics, IMF World Eco-
down, mostly because of a decrease in global
nomic Outlook, and IMF staff estimates. population growth. Poorer countries would
Note: Using the World Banks LIC/MIC and MIC/HIC income thresholds of $1,045 and $12,735 respec-
tively (in 2014 prices and exchange rates).
need to address disparate demographic evo-
lutions with an appropriate set of macroeco-
nomic and structural policies to enable fur-
financial conditions, and lower commodity ther reductions in absolute poverty levels
prices weigh on the outlook. While growth in and to further narrow income differences
LIDCs should slow down in 2015 on lower relative to richer countries. Richer countries
growth in oil-exporting LIDCs, it is expected support for a global economic system with
to recover in 2016. open markets for goods, services, and capi-
Downside risks have increased for EMDCs tal, under appropriate safeguards, remains
in the context of slowing growth, including essential.
This boxdrawing on the April 2015 World Eco- broadly. For example, declines in fertility rates slow
nomic Outlook: Uneven Growth Short- and future working-age population growth. The second
Long-term Factorsassesses the effects of demo- demographic dimension is the age composition of the
graphic factors on potential output for 10 advanced working-age population, which affects the aggregate
economies (Australia, Canada, France, Germany, participation rate, since the propensity to participate
Italy, Japan, the Republic of Korea, Spain, the United in the labor force starts declining steeply beyond a
Kingdom, and the United States) and 6 major emerg- particular age threshold, typically in the early 50s.
ing market economies (Brazil, China, India, Mexico, An increased share of older people in the population
Russia, and Turkey). therefore lowers the average participation rate and
Demographic factors can influence potential out- thereby potential employment.
put by affecting working-age population and trend Figure B3.1.1 presents the evolution of potential
labor force participation rates. The former is a func- growth and the effects of demographic factors over
tion of the same variables as population growth more the period 200120. In the aftermath of the crisis,
(box continues next page)
GLOBAL MONITORING REPORT 2015/2016 GLOBAL MACROECONOMIC PERFORMANCE AND OUTLOOK 133
2.0
6
1.5
Percent
Percent
4
1.0
2
0.5
0 0
200107 200814 201520 200107 200814 201520
Other factors Demographic factors Potential output growth
Source: Chapter 3 of the IMFs World Economic Outlook: Uneven GrowthShort- and Long-term Factors. April, 2015. Washington, D.C.
potential growth declined in both advanced and ure B3.1.1a). Working-age population growth is likely
emerging market economies. While the largest part of to decline significantly in most advanced economies,
this decline is associated with the scars of the crisis (in particularly Germany and Japan, where it will reach
particular in advanced economies), demographic fac- about 0.2 percent a year by 2020. At the same time,
tors have also played an important role. In particular, rapid aging is expected to further decrease the average
demographic factors contributed to lower potential trend labor force participation rates.
growth in advanced and emerging market economies In emerging market economies, demographic
by about 0.3 and 0.4 percentage point during 2008 factors are expected to reduce potential growth by
14, respectively. about 0.4 percentage point by 2020 (figure B3.1.1b).
Looking forward, demographic factors are Working-age population growth is likely to slow
expected to be an increasing drag on potential faster, most sharply in China, and to remain negative
growth. In advanced economies, demographic fac- in Russia. Aging is expected to accelerate, lowering
tors are projected to reduce potential growth by trend labor force participation rates. Again, this effect
about 0.2 percentage point in the medium term (fig- is expected to be strongest in China.
market countries. Small states are emerging 3. These coefficients are calculated weighting
market and developing countries with a popu- countries GDP per capita with their popula-
lation of less than 1.5 million. Fragile states are tions; thus they anchor the calculations to the
countries included in the World Banks list of mean global income level but abstract from
fragile and confl ict-affected states as of July inequality within countries (see chapter 5 for
2015. Appendix table C5.2 includes the list of a discussion of income inequality within coun-
all countries and the groupings to which they tries). The weighted averages are naturally
belong. In line with standard WEO practice, influenced by developments in the larger econo-
growth for country aggregates is calculated mies (for example, China, India, and the United
using purchasing power parity weights. States account for 41 percent of global popula-
2. Each low-income country has been assessed tion and 43 percent of global output in 2015).
according to a common set of criteria. For On an equally weighted basis (treating each
example, a countrys quality of fiscal policy country as a single data point), the Gini coef-
is assessed by considering its fiscal deficit and ficient increased from 53 in 1950 to 69 in 2000
the sustainability of its public debt (a country and then fell to 63 percent in 2015.
with a large fiscal deficit and an unsustainable 4. These estimates are based on the medium fertil-
level of public debt would be judged to have an ity scenario in the United Nations World Popula-
unsatisfactory fiscal policy). tion Prospects: The 2015 Revision.
GLOBAL MONITORING REPORT 2015/2016 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S 135
Part II
Development in an
Era of Demographic Change
Profound changes in global demography are expected to aect the development outlook and
policy agenda. The world population is growing more slowly and aging at unprecedented speed.
These trends reect past development successeswomens empowerment; improved educa-
tion; better child, maternal, and reproductive health; and increased longevity. The working-age
share peaked in 2012 and is now on the decline. Aging means that population increases are
reected in larger numbers of older people. The global count of children is already stabilizing at a
plateau of 2 billion. Yet, underneath these global demographic trends lies signicant diversity in
the direction and pace of demographic change. Regional and subregional patterns vary signi-
cantly across and within countries.
Demographic change brings unique opportunities and challenges to centers of global pov-
erty (marked by high fertility) and engines of global growth (marked by rapid aging). More than
90 percent of poverty is concentrated in pre- and early-dividend countries with young popula-
tions that lag in key human development indicators, register rapid population growth, and are
seeing their working-age populations swell. In these countries, the demographic transition to
lower fertility creates a golden opportunity to raise living standards. Over 85 percent of global
economic activity and 78 percent of global growth arises in late- and post-dividend countries
with much lower fertility rates and some of the highest shares of the elderly in the world. In
these countries, population aging may weaken growth prospects. Neither all good nor all bad,
136 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
demographic change presents opportunities and challenges everywhere. In each case, policies
will make a critical dierence in how countries manage their demographic change.
Policies must recognize and respond to demographic change at the country level. To eradi-
cate persistent poverty, the centers of global poverty need to accelerate their demographic tran-
sition, invest in the young in their still-growing populations, and lay the foundations for sustained
growth. Among other policy initiatives, better education and health services are required, as
well as more women empowerment. Facing weakening economic dynamism, the lower-fertility,
richer countries that make up the current engines of global growth need to address headwinds
arising from shrinking labor forces. They also need to adapt their policies and institutions to foster
healthy and productive aging. Selected policy priorities include mobilizing savings for produc-
tive investment in human and physical capital and designing welfare systemspensions, health
care, and long-term carewhile ensuring scal sustainability and protection for the elderly and
vulnerable.
Freer capital ows, migration, and trade can help respond to growing demographic imbal-
ances globally. The extent of demographic diversity across countries is starker than before and
has a large and inevitable impact on the global economy. Returns on capital and labor are
aected. Comparative advantages in trade are altered. Given these implications, ows of capital,
labor, and goods and services will be aected. Mutual benets can be realized: capital can ow to
rising consumer markets; older countries can benet from legal immigration; younger countries
can produce labor-intensive products. But challenges need to be managed, and international
cooperation is key.
With the right set of policies, this era of intense demographic change can be turned into
one of sustained development progress. Global demography is changing and has the poten-
tial to profoundly alter the trajectory of global development. To accelerate progress, countries
need to elevate eorts to sustain broad-based growth, invest in people, and insure the poor
and vulnerable against evolving risks. But they must do so by taking into account demographic
change. Where possible, they must capture demographic dividends. Elsewhere, adaptation is
required. Everywhere, demographic change must be turned into opportunities for development
and improved well-being.
Part II of this report explores the connections between development and demography in the
following sequence:
Chapter 4 characterizes demographic change at the global, regional, and country levels. It also
examines the drivers of demographic change that have shaped the diversity of demographic
patterns and trends.
Chapter 5 examines how demography aects development. It develops a new global typology
that ties demographic change to development potential and analyzes the various pathways
through which demographic change aects the prosperity of nations.
Chapter 6 analyzes how policies can leverage demographic change in support of the develop-
ment goals. It examines policy opportunities at both the country and the global level.
Demographic Change: Disparities,
Divergences, and Drivers
Global demographic trends are at a turning point: population growth is slowing markedly, and
after increasing for five decades, the proportion of people ages 15 to 64the typical working-
age populationpeaked in 2012 and is now starting to fall again. The rise in the number of
dependents per person of working age is driven mainly by an increase in the elderly as a share
of the population. Beneath these global dynamics lie major differences in demographic charac-
teristics and trends at the country level. Some countries continue to experience high levels of
fertility and population growth, while in others fertility rates have fallen below replacement lev-
els, and rapid aging and gradual population contractions are expected in the coming decades.
Demography and development affect each other. Key dimensions of development are drivers
of demography, accounting for much of the variation in demographic features across countries,
and are highlighted in this chapter. The role of demography in shaping development trajectories
is then the focus of chapter 5.
Global demographics are on the cusp of people over 64 accounting for an ever greater
significant change, with the unprecedented proportion of the global population. Most
population growth of past decades slowing of these trends are locked in with a high
sharply and the global age structure shifting degree of certainty, with the pace of declines
dramatically. Since the 1950s, the world as a in fertility in countries with persistent high
whole has experienced substantial improve- fertility rates the main source of uncertainty
ments in life expectancy, accompanied by a (box 4.1). 2
rapid decline in fertility rates and a steady fall Global trends mask wide differences at
in the share of children in the global popula- the country level both in their current demo-
tion. These shifts led to continual increases graphic profiles and in the direction and
in the share of the working-age popula- pace of future change. Many of todays high-
tion (lowering the number of dependents income countries have had decades of low
per worker) until it peaked in 2012.1 With fertility rates and high life expectancies.3 In
the stabilization of the share of the popula- contrast, many developing countries have
tion that is under 15, the fall in the share seen declines in their fertility rates only more
of working-age population over the coming recently, with some of the poorest countries
decades will be driven by rapid aging, with still experiencing persistently high fertility.
137
138 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
Several different national and multilateral institutions FIGURE B4.1.1 Different assumptions about future
estimate historical population data and make projec- fertility rates can lead to vastly different population
tions. Since 1951 the United Nations Population Divi- projections in the long run
sion (UNPD) has been publishing population esti- 30
mates, vital statistics and projections for all countries,
currently running from 1950 to 2100. The World 25
Bank Group (WBG) also prepares population projec-
Population (billions)
tions, which draw upon the UNPD figures but include 20
differences in some countries that are well identified
15
and discussed with the UNPD. Several research insti-
tutions also have demography programs, such as the 10
Wittgenstein Center, affiliated with the International
Institute for Applied Systems Analysis (IIASA). 5
A wide range of methodologies are applied to proj-
ect future populations. The dominant methodology 0
for making projections has been deterministic models 1950 1970 1990 2010 2030 2050 2070 2090
using cohort components based on the age struc- Medium fertility Instant-replacement
ture of the population and components of change: High fertility Constant mortality
Low fertility Constant mortality and fertility
births, deaths, and migration. The uncertainty of
Constant fertility
the future is conveyed using alternative assumptions
on these key variables to develop different scenarios Source: World Bank calculations, based on UN 2015.
(Cohen 2001; Lutz, Sanderson, and Scherbov 2001).
The United Nations World Population Projections
2015 Revision covers different scenarios, with vary- Other projections, such as those from IIASA,
ing assumptions on fertility, mortality, and migra- take a more structural approach by explicitly consid-
tion (figure B4.1.1). With fertility variants labeled ering the effect of education on fertility rate. So, as
high (+ half child), medium, and low (- half child), the populations in high-fertility countries become better
medium variant typically receives the most attention, educated, their fertility rates tend to fall. That is one
with the other two conveying a sense of uncertainty reason why long-term IIASA projections tend to dif-
about the projections, especially in the outer years. fer substantially from UN projections. In the former,
Uncertainty regarding population projections in this global population growth has a high probability to
deterministic approach is related to the assumptions reach a peak by the end of this century, while in the
on fertility, mortality, and migration. latter, global population will keep growing beyond
The United Nations projections are also advanc- 2100 (Gerland et al. 2014; Lutz et al. 2007). The key
ing methodologically by using parametric functions source of this difference is associated with projections
to model demographic change (Wilmoth 2015). Cur- for Asia and Africa, where several countries have high
rently, total fertility rates (TFR) and life expectancy fertility rates and low levels of education.
for a given country are modeled using a Bayesian Hier- Global population projections do not differ much
archical Model that draws on information from other until after 2030 because of the current age struc-
countries to estimate parameters distributed around ture and population size (figure B4.1.2). Even if fer-
the world average. This method yields estimates for tility rates everywhere were to fall immediately to
TFR, for example, where uncertainty grows over time, replacement level (about 2.1), the global popula-
and is higher for countries with higher initial fertil- tion would keep rising to 11 billion by the end of the
ity. The UNPD is now using probabilistic approaches century (population would not stabilize this century).
together with the presentation of alternative scenarios, This population momentum occurs because older
to illustrate uncertainty about future trends. cohorts differ in absolute size from those cohorts
(box continues next page)
GLOBAL MONITORING REPORT 2015/2016 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S 139
FIGURE B4.1.2 World population projections currently bearing children, affecting the immediate
from different sources are relatively similar for fertility and mortality rates that together with migra-
the 201530 time frame tion determine population growth. In high-fertility
10 countries, the population momentum suggests contin-
ued rapid growth, with more uncertainty regarding
the projections than in low-fertility countries, where
8
population size tends to be more stable.
Population (billions)
As a result, half of the worlds population experience falling rates of infant mortality
will be in countries that will experience and fertility and rising life expectancy much
slowdowns in population growth with rising sooner than countries that wereor are
shares of the elderly over the coming decades lagging developmentally.
(albeit at different paces). The other half will
live in countries with relatively young popu- Characteristics of demographic
lations, whose high fertility is driving global change
population growth.
These differences in demographic pat- This section reviews the evolution of key
terns and trends across countries closely demographic features since 1950 and ana-
reflect development progress. Population size lyzes how the demographic landscape is likely
and age structure are determined by three to change through 2050. It describes the wide
fundamental demographic factorsfertil- diversity of trends across regions and groups
ity, mortality, and migration. These fac- of countries with similar levels of economic
tors are driven in large part by income and development, illustrating how changes in fer-
non-income development outcomes, such as tility, mortality, life expectancy, and migra-
improvements in health, education, and gen- tion explain past and future trends at the
der equality. Generally, countries that have global level and how they are changing the
made solid progress in these dimensions population centers of the world.
140 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
Global trends are at a turning point population growth and a perceived need to
control the so-called population bomb
Global demographic trends are going through (World Bank 1984). Then, in the 1990s,
unprecedented shifts, with the rapid growth population growth started to fall: by 2022
observed in the global population over the the average annual growth rate is expected to
past decades slowing dramatically. The global fall below 1 percent, down from more than
population grew by 174 percent between 2 percent in the late 1960s (figure 4.1b). This
1950 and 2015, from 2.5 billion to 6.9 bil- shift in the pace of population growth has
lion, and is almost 7.3 billion today (figure also shifted the policy discussion on the links
4.1a). Population growth was the fastest between development and demography.
from the mid-1950s through the mid-1970s, In parallel with the slowdown in popula-
causing development policy discussions to tion growth, the global age structure is shift-
be marked by concerns about unfettered ing. After rising steadily since the 1960s,
a. The global population has almost tripled since the b. An unprecedented period of global
1950s and is expected to reach over 9 billion by 2050 population growth has ended
10 2.5
Annual global population growth rate (%)
9
8 2.0
Global population (billions)
7
6 1.5
5
4 1.0
3
2 0.5
1
0 0
1950 1970 1990 2010 2030 2050
50
60
70
80
90
00
10
20
30
40
50
19
19
19
19
19
20
20
20
20
20
20
c. The working-age share of the global population d. The aged share of the global population
is estimated to have peaked in 2012 is rising, while the child share is falling
70 40
Share of global population, ages 1564 (%)
35
Share of global population (%)
65 30
25
60 20
15
55 10
50 0
1950 1970 1990 2010 2030 2050 1950 1970 1990 2010 2030 2050
Children ages 014 Adults ages 65+
the working-age population reached a peak FIGURE 4.2 The global total fertility rate
of 65.8 percent of the total population in declined rapidly between the 1960s and 1990s
2012 and is expected to decline to 62.7 per-
6
cent by 2050 (figure 4.1c). At the same time,
childrenthose under age 15represent a 5
in 2050.5
The world has also seen major changes FIGURE 4.3 The global population is living
in other demographic dimensions, includ- longer
ing a halving of total fertility rates and rapid
improvement in life expectancy. In the 1950s 80
total fertility rates were about five births per 75
woman, reaching a peak in the postWorld
Life expectancy at birth (years)
FIGURE 4.4 Infant mortality has fallen significantly in all regions Falling mortality and still-high fertility
led to a child bulge in developing coun-
tries in the 1960s and 1970s, while popula-
250
tion growth slowed in high-income countries.
Infant deaths per 1,000 live births
BOX 4.2 The legacy of the HIV/AIDS pandemic on southern Africas age structure
The HIV/AIDS epidemic in southern Africa well illus- sion of HIV. Thus, the overall effect of the pandemic
trates the negative effects of infectious diseases on life has been to slow down the decline in the dependency
expectancies and mortality. This area has the high- ratio by reducing the size of the working-age popula-
est prevalence of HIV/AIDS in the world. Before the tion and by slowing the growth of the elderly popu-
pandemic, southern Africa experienced starkly differ- lation as the cohorts most affected by the pandemic
ent demographic trends from the rest of Sub-Saharan reach old age.
Africa: both fertility and mortality rates began to The launch of mass-scale antiretroviral (ARV)
decline much earlier and faster and were significantly treatment appears to have reversed the mortality trend
lower than those in the rest of the continent. With the from the middle 2000s (World Bank 2015b). Fortu-
advent of the HIV/AIDS pandemic in the late 1990s nately, the impact on HIV/AIDS on South Africas
and early 2000s, mortality rates surged again and life population dynamics is starting to fade. According
expectancy at birth dropped significantly. In Leso- to the United Nations Spectrum model, prevalence
tho, life expectancy at birth dropped from around 60 among adults of both sexes ages 15 to 49 in South
years in the early 1990s to 45 years in 2005 (Moult- Africa is close to its peak and is expected to decline
rie 2015). Botswana and Swaziland followed similar slowly from 18.7 percent in 2015 to 16.2 percent by
trends. And while life expectancy dropped less in 2050 (Moultrie 2015). The proportion of all deaths
South Africa and Namibia, it is close to the average of attributable to HIV/AIDS (as distinct from all deaths
Sub-Saharan Africa despite the higher wealth of the among those who are HIV-positive) is expected to
two countries. stabilize at around 22 percent of all deaths between
The HIV/AIDS epidemic reduced the size of the 2015 and 2050. Total fertility rates did not rise in
working-age population and has subsequently stalled response to the surge in mortality caused by the pan-
anticipated declines in dependency ratios since 2000. demic. On the contrary, research has suggested that
Half of all deaths in southern Africa in the 200510 HIV/AIDS exerts a downward pressure on fertility in
period were adults ages 20 to 49 years, compared HIV-infected people and, to a lesser extent, on fertil-
with 21 percent in 198593. At the same time, popu- ity in the general population in high-prevalence coun-
lation growth slowed because of the loss of so many tries. The evidence thus suggests that the temporary
women of childbearing age and increased infant and shock might have only slowed the demographic transi-
child mortality related to mother-to-child transmis- tion rather than stopped it (Nair 2010).
population growth, with populations in 15.1 percent, respectively, over this timeframe
some countries even expected to shrink in (map 4.1). Some of the most extreme popula-
the future. On average, fertility rates in many tion contractions, however, will be in develop-
developing regions converged by 2000 to lev- ing countries in Europe and Central Asia. For
els at or below the replacement rate, that is example, Bulgarias population is expected to
the rate at which the population size would shrink by 27.9 percent by 2050, owing to a
be constant in the long run. In many high- combination of low fertility and high rates of
income countries and in developing Europe net migration (World Bank 2013).
and Central Asia, fertility rates have been
below replacement rates since the 1990s. In
Divergences shift population centers
some countries, the combination of a rising
share of the aged, below-replacement fertil- With a large and growing share of the global
ity, and emigration are expected to lead to population living in developing countries,
net contractions in populations between 2015 global demographic trends have been driven
and 2050.11 Among high-income countries, by changes in these countries (map 4.2). In
Germany and Japan are notable in that their 1950, 32 percent of the global population
populations are projected to shrink by 7.7 and lived in high-income economies. Developing
144 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
FIGURE 4.6 Total fertility rates have declined, though less so in high-income countries accounting for only
Sub-Saharan Africa 19 percent of the global population and
Sub-Saharan Africa for 14 percent, while
7
the share in developing East Asia and Pacific
6 has remained about the same. By 2050, Sub-
Number of births per woman
5
Saharan Africa is expected to account for
almost 25 percent of the global population.
4 Population growth within countries, inter-
3 national migration, and urbanization are all
changing where people live. Natural popula-
2 tion growththe difference between crude
1 birth and death ratesis the key determinant
of population growth in most countries. Very
0
High- East Asia Europe Latin Middle South Sub- simply, countries that have higher (lower)
income and and America East and Asia Saharan natural growth rates will have increasingly
countries Pacific Central and the North Africa higher (lower) concentrations of the global
Asia Caribbean Africa
population. International migration can
1950 2015 2050
blunt the impact of natural growth, however.
Migration occurs within countries as well,
Source: World Bank calculations, based on data from UN 2015.
Note: The bars reflect the unweighted average of countries in a given group. The total fertility rate is with rural-urban migration being one of the
the hypothetical number of births each woman in a given country would have, assuming she survives most important because it has indirect effects
to the end of her reproductive life and experiences the age-specific birth rates of the given year.
on national fertility rates as well.
FIGURE 4.7 Population growth in developing countries has been
slowing since the 1970s
Population growth within countries
Shifts in the location of the global population
result from differences in population growth
3.0
across countries, particularly between those
2.5 in Africa and the rest of the world. Of the
Population growth rate (%)
MAP 4.1 The populations of Europe and Central Asia will shrink substantially through 2050, while those in
Sub-Saharan Africa will grow the most
IBRD 41779
AUGUST 2015
MAP 4.2 Developing countries account for most of the global population in 2015
IBRD 41780
Population, 2015
<1 million +
1 million +
10 million +
25 million +
50 million +
100 million +
1 billion +
No data
This map was produced by the Map Design Unit of The World Bank.
The boundaries, colors, denominations and any other information
shown on this map do not imply, on the part of The World Bank
GSDPM
Map Design Unit
Group, any judgment on the legal status of any territory, or any
endorsement or acceptance of such boundaries.
AUGUST 2015
FIGURE 4.8 More than half of global population growth through or below in other parts of the world (figure
2050 will be in Sub-Saharan Africa 4.9). As Africas children age into adulthood,
they will help maintain the regions posi-
60 tion as having the highest growth rate of the
Share of global population growth (%)
a migrant-receiving country can be either FIGURE 4.10 Working-age population growth is slowing globally
raised or reduced.12 Evidence from Europe but will remain high in Sub-Saharan Africa
and the United States suggests that the aver-
age fertility rates of their migrant popula- 3.0
tions, which are predominantly from lower-
Urbanization
Rural-urban migration within countries has
helped reduce country-level fertility rates.
FIGURE 4.11 Sub-Saharan Africa will account for
Urban households tend to have lower fertility more than half of working-age population growth
rates than do rural households (figure 4.12) through 2050
(Jaffe 1942; Kuznets 1974). The gap between
fertility rates in urban and rural areas results 120
in an observed inverse relationship between
Contribution to growth of population,
FIGURE 4.12 Rural households tend to have death ratesreflecting fertility and mortal-
higher fertility rates than urban households ity ratesdetermines the natural growth of
a population. But population growth is also
6 affected by migration (both international
and internal), because it influences age struc-
5
ture directly as people move and indirectly
Average fertility rate
FIGURE 4.13 Neonatal complications and infectious disease drive mortality in developing countries
a. Child deaths account for the vast majority of deaths in low-income countries
6
Deaths (millions) 2010
5
4
3
2
1
0
04 59 1014 1519 2024 2529 3034 3539 4044 4549 5054 5559 6064 6569 7074 7579 80+
Age cohort (years)
b. More than 2 million children under age five died of neonatal complications in lower-middle-income countries in 2010
6
Deaths (millions) 2010
5
4
3
2
1
0
04 59 1014 1519 2024 2529 3034 3539 4044 4549 5054 5559 6064 6569 7074 7579 80+
Age cohort (years)
5
4
3
2
1
0
04 59 1014 1519 2024 2529 3034 3539 4044 4549 5054 5559 6064 6569 7074 7579 80+
Age cohort (years)
d. Almost all deaths in high-income countries are due to cancer, radio or circulatory diseases, or other
6 noncommunicable diseases among the elderly
Deaths (millions) 2010
5
4
3
2
1
0
04 59 1014 1519 2024 2529 3034 3539 4044 4549 5054 5559 6064 6569 7074 7579 80+
Age cohort (years)
Neonatal and common infectious diseases HIV/AIDS and Tuberculosis Other communicable diseases
Cancer, cardiovascular, or circulatory diseases Other noncommunicable diseases Injuries
Source: World Bank calculations, based on data documented in Wang et al. 2013.
150 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
infections are the cause of more than half worse morbidity profile and higher mortality
of deaths in children under age six. In Sub- rate than families in the top 60 percent (T60)
Saharan African countries, neglected tropical (figure 4.14).16 This observation holds across
diseases (NTDs), malaria, HIV, and tubercu- income groupings. In low-income countries,
losis represented about 50 percent of deaths for example, the infant mortality rate is 1.18
between 1990 and 2010. 15 times higher in B40 than in T60 households;
Poorer countries lag behind in achieving in upper-middle-income countries, the B40
the development goals related to reducing rate is 1.45 times higher. In addition to their
infant and child mortality. In countries where disadvantage in terms of wealth, B40 house-
the average income per capita is less than $3 holds face worse access to health facilities
a day, children under 5 accounted for 30.5 than T60 households (figure 4.15).
percent of deaths in 2010. In the same year, Mortality differs across countries at simi-
86 percent of deaths of children under age 15 lar income levels and across the income dis-
occurred in low- and lower-middle-income tribution within countries. The variation
countries. High infant mortality in low- within high-income countries illustrates this
income countries is one reason why many of point. Although the infant mortality rate in
them are still in early stages of demographic the United States is relatively high compared
transition, with high death and birth rates with that in, for example, Western European
(World Bank 2015b). (Box 4.3 presents a countries, infants born to white, college-
model of demographic transition.) educated, married women in the United
As countries move to the later stages of States have similar mortality rates as infants
demographic transition and average life in Western Europe. In the United States,
expectancies rise, chronic and degenera- infant mortality among non-Hispanic black
tive diseases become the primary causes of Americans is 12.2 (deaths per 1,000 infants
death. The epidemiological transition thus born between 2008 and 2010), more than
continues. While noncommunicable dis- double the rate for the non-Hispanic white
eases are challenges for countries across the population of 5.3 (Chen, Oster, and Wil-
development spectrum, high-income country liams 2014; MacDorman et al. 2014). The
populations ages 64 or more accounted for large variation within counties is observed
79 percent of deaths in 2010. These deaths not only at the household level but also in dif-
occurred almost entirely from cancer, car- ferent regions. Seattle (per capita income of
diovascular issues, and other chronic con- $96,400) and San Jose ($86,700), two of the
ditions, and these countries accounted for richest cities in the United States, have two
about 43 percent of global deaths among of the lowest infant mortality rates (3.7 and
individuals above 80 years old. Thus, to 3.0 deaths per 1,000 infants born). Poorer
improve life expectancy, high-income coun- cities, such as Cleveland ($23,400) and
tries must focus on improving health at older Detroit ($20,500), have much higher infant
ages. Addressing the chronic diseases most mortality rates (14.1 and 12.4, respectively).
commonly responsible for morbidity at older Mortality at older ages in the United States
ages is much more costly than addressing the is also higher for people with relatively low
infectious and contagious diseases that afflict long-term incomes and less education, and
young children in low-income countries, the disparity has increased in recent decades
however, especially considering the impact (Waldron 2007; Meara, Richards, and Cutler
on life expectancy. 2008).
Poor households tend to face higher mor- Mortality rates across countries are
tality rates and worse access to health ser- strongly influenced by access to and supply
vices than richer ones, regardless of income of public health services. Different from other
classification of the country. The bottom 40 vital events that are subject to individual
percent (B40) of households in the wealth dis- choice, death can be a consequence of sev-
tribution in a given country tends to have a eral factors that are not under an individuals
GLOBAL MONITORING REPORT 2015/2016 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S 151
The demographic transition model (DTM) describes ure B4.3.1). If mortality rates fall but fertility rates
the transition of populations from high to low fertility remain high, as in the second phase, then population
and mortality rates. This transition generally paral- growth accelerates, with growing numbers of young
lels the economic development of a country (Szreter and rising youth dependency. In the third stage, fertil-
1993). The model consists of at least four distinct ity rates also begin to decline, and population growth
phases, with countries effectively moving from high slows. During this time, the youth dependency ratios
fertility and low life expectancy to low fertility and also fall and the share of the working-age population
high life expectancy as they move through the demo- rises, boosting per capita income growth through
graphic transition. At the same time, they go from the fi rst demographic dividend. After a long period
high proportions of children and few elderly to low of lower fertility, the growth rate of the working-
proportions of children and many elderly. age population slows and the aged dependency ratio
Fertility rates and mortality rates are both high begins to rise. When fertility rates and mortality rates
in the fi rst stage, where the population tends to be reach low levels, population growth also stabilizes at
younger and population growth stable but low (fig- a low rate, in the fourth stage of the DTM.a
FIGURE B4.3.1 During the demographic transition, population growth first accelerates then slows as average
ages rise.
a. Demographic transition b. Population growth and age structure
change over time
Population
growth rate
Birth rate
Death rate
Birth rate
Birth rate minus Share of
Death rate death rate workforce %
Growth
Time Time
Source: Bloom and Williamson 1998.
a. Recently, some developed countries have reported increases in fertility. There is some evidence that when countries pass
a threshold of human development, then fertility declines are reversed, as discussed by Myrskyl, Kohler, and Billari (2009)
in a cross-country analysis of the Human Development Index and total fertility rates. Luci-Greulich and Thvenon (2014)
found that economic development is likely to induce a fertility rebound for OECD members but is not sufficient to lift fertil-
ity to a significantly higher level in all countries.
control (Soares 2005). For example, East for this achievement is widespread access
Asia experienced a particularly fast decline to new public health programs and medi-
in child mortality, and indeed mortality at all cal knowledge and technologies (Bloom and
ages, which led to an increase in life expec- Williamson 1998). Although there is a clear
tancy from 61.5 to 76.6 years between 1960 association between individuals incomes
and 1992. Among the possible explanations and mortality outcomes, the access to new
152 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
FIGURE 4.14 Infant mortality is higher in the Education, income, and health
bottom 40 percent of the wealth distribution than influence fertility
in the top 60 percent
Declining infant mortality rates and increas-
80 ing educational attainment, life expectancy,
and income are all associated with a reduc-
Deaths (per 1,000 live births)
70
60 tion in total fertility (figure 4.16).17 A reduc-
50 tion in infant mortality rates generally has
40 a lagged effect on reducing fertility, largely
30 because of reproductive decisions that are
20 based on replacement of deceased children
10 and the insurance of having children in
0 case some do not survive to adulthood. The
Low-income Lower-middle- Upper-middle- intuition is that with their children more
countries income income likely to survive infancy and childhood, par-
countries countries
ents will reduce their number of births to
Bottom 40% of the population
Top 60% of the population maintain the same net number of children.
Improvements in child health may thus be a
Note: Country groupings follow the standard World Bank Group income- precursor to lower rates of fertility. In con-
based classification. See appendix C.2 for details.
trast, education (especially of females) and
household income are negatively correlated
FIGURE 4.15 The bottom 40 percent also have with fertility.
less access to health facilities There are two potential income-related
mechanisms that underlie the quality ver-
100 sus quantity trade-off that parents face
in deciding how many children to have.
Live births delivered at
80
First, as parents educational attainment
health facilities (%)
60
0.6
Top 60% of the population
0.4
Source: World Bank calculations, using data from Demographic and 0.2
Health Surveys. See appendix C.2 for additional details.
0.0
0.2
0.4
technologies and public health improvements
played a key role in reducing mortality rates. 0.6
Gender equality matters not only in its own right but changing the behavior of men and boys. Progres-
also as an instrument for development. There is vast sive constitutions and legal reforms can support the
potential for growth, poverty reduction, and shared transformation of social norms surrounding agency.
prosperity via improved gender equality in the labor Increased awareness of such regulations has stimu-
market, which can have large impacts on productiv- lated changes in norms and behaviors, for instance
ity. Eliminating employment segregation, as an exam- those regarding gender-based violence. Social protec-
ple, would increase labor productivity by as much tion and education both play major roles for womens
as 325 percent, while equalizing access to inputs agency. Expanding womens economic opportunities
including land and fertilizers would increase agricul- has potentially the largest positive effect for womens
tural output by 2.54 percent (World Bank 2012). agency. For example, in addition to its economic ben-
Gender equality can also help minimize the growth efits, Ugandas Empowerment and Livelihoods for
and fi scal impacts of aging. Gender inequality gen- Adolescents program, which offers girls soft skills
erates an average cumulative income per capita loss and vocational training, has shown positive impli-
of 1415.4 percent in OECD countries, considering cations for the control participants exert over their
both men and women (Cuberes and Teignier 2015). In sexual and reproductive health rights (Klugman et al.
developing countries, the average cumulative income 2014).
loss is 1617.5 percent. A range of specific measures could help address
Social norms and legal restrictions that largely prevailing gender gaps in economic opportunity
shape the agency of women and girls are key fac- throughout the life cycle. For children and youth, pol-
tors underlying gender-based differences in access to icy actions should focus on gender-specific constraints
opportunity. For instance, traditional roles and asso- to schooling and boosting noncognitive and voca-
ciated time-use patterns constrain womens economic tional skills. During the productive years, active labor
opportunities: housework, childrearing, and elderly market policies that combine training, placement, and
care are often considered primarily womens responsi- other support to enable women to enter or reenter the
bility. In 2013, 128 countries had at least one legal dif- workforce can increase their employment and earn-
ference between men and women, ranging from barri- ings in the formal sector. Expanding access to formal
ers to women obtaining official identification cards to child care and elder care services, and removing dis-
restrictions on owning or using property, establishing crimination and disincentives in laws can also help
creditworthiness, and getting a job (Klugman 2014; promote female labor market inclusion in higher pro-
Klugman et al. 2014). In addition, limitations in wom- ductivity areas. In older years, policy actions should
ens and girls agency are often explained by other dis- support equitable old-age labor regulations combined
advantages, particularly in access to education. with appropriate social protection (World Bank
Addressing social norms will thus be critical to 2012). Improving womens financial access by making
development progress. Such effort would entail both it easier to open accounts and obtain lines of credit
enhancing the aspirations of girls and women and would also benefit growth (Sahay et al. 2015).
154 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
FIGURE 4.17 Rising educational attainment has FIGURE 4.18 B40 households have higher rates
had the greatest impact on a fertility rates of teenage parents than T60 households
0.10 ** 5
0.12 ** 0
** Low-income Lower-middle- Upper-middle-
0.14 countries income income
Schooling Primary schooling
countries countries
Source: Murtin 2013. Bottom 40% of the population
Note: Results are based on Murtin (2013) using a system GMM estimator. Top 60% of the population
The estimations use long-distance lags of explanatory variables as instru-
ments and also account for time persistence. Models I and III use lags for Source: World Bank calculations, based on data from Demographic and
the birth rate while models II and IV use lags for the birth and infant mor- Health Surveys. See appendix C.2 for additional details.
tality rates. All specifications control for lag of fertility**. Other covariates Note: Data for B40 refers to households in the bottom 40 percent of the
(secondary and tertiary schooling, infant mortality, death rate, and GDP wealth distribution, while T60 refers to households in the top 60 of the
per working-age adult) are not statistically significant for all specifications. wealth distribution.
** = significant at 5 percent.
with declines in fertility, the importance of delay in the age at fi rst birth has the effect
education (particularly primary education) of reducing lifetime fertility. Women living
in affecting fertility seems to be more robust in households in the top 60 percent of the
in analyses that aim to identify a causal rela- income distribution tend to have a higher
tionship between fertility and education (fig- median age at fi rst birth than households in
ure 4.17). In regions that lag in the access the bottom 40 percent (figure 4.19). Delay-
to and the quality of education, and also to ing the age at fi rst birth also has immediate
human development outcomes, improve- benefits beyond reducing fertility rates, such
ments in education could be especially impo- as improving maternal health (U.S. National
rant for demographic transition.19 Research Council 1989). Child marriage, in
Increasing the educational attainment of particular, can lead to substantially higher
girls also reduces fertility rates by increas- fertility (box 4.5).
ing the age of marriage and first birth. First, Family planning and the availability of
more highly educated girls marry later and contraception vary across countries and
have lower fertility. Second, higher educa- across the income distribution but do influ-
tional enrollment rates may increase the ence fertility rates. Generally, policies that
opportunity cost of children for household facilitate gender empowerment and repro-
work and thereby reduce the desire for large ductive health also empower households to
families. Improvements in female education make their own decisions regarding number
are positively associated with lower rates of of children. Relevant policies include stron-
teenage pregnancy. B40 households, which ger reproductive rights and ensuring ade-
tend to have lower female educational attain- quate access to reproductive health, which
ment than T60 households, are also seen to can reduce the unmet need for family plan-
have higher rates of teenage parents (figure ning (UN 2014). Successful interventions
4.18). Higher education also increases the that include the whole community, includ-
opportunity cost of having a child due to the ing men and community leaders, can change
potential for income from work, and so there gender norms and support the sexual health
is a delay in the fi rst birth and marriage. A and rights of girls and women (Klugman
GLOBAL MONITORING REPORT 2015/2016 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S 155
FIGURE 4.19 Females in B40 households tend to planning programs alone may reduce fertility
have children at a younger age than those in T60 by around 0.5 to 1 birth per woman (Miller
households
et al. 2014). Poor households, however, not
only have higher fertility rates but also tend
23
to have less access to contraceptives (figures
4.20 and 4.21). This relatively lower access
Mothers median age at first birth
22
to contraceptives and contraceptive methods
could thus be a possible explanation for the
21 higher rates of unplanned children in B40
households relative to T60 households, sug-
20 gesting that they may have less ability to
take action to implement their reproductive
19 decisions.
Child marriage, defi ned as marrying before the age communities, and society as a whole. First, child mar-
of 18, is a practice that affects mostly girls and often riage and pregnancies account for a fifth of dropouts
leads to violations of human rights for the girls who among girls in secondary schools. Each additional
have to marry early. UNICEF (2014) estimates that year of delay in the age of marriage increases school-
over the next decade 140 million girls will marry ing by 0.22 years and the likelihood of literacy by
early. Analysis of child marriage trends suggests that 5.6 percentage points, suggesting that reducing child
child marriage is declining, albeit only slowly. In 30 marriage could have a significant impact, particularly
years the incidence of child marriage fell by only 11 in Africa (Field and Ambrus 2008; Lloyd and Mensch
percentage points, and the incidence is still high in 2008; Nguyen and Wodon 2015).
several countries (figure B4.5.1). Ending child marriage could result in substan-
Child marriage has a wide range of negative tially lower fertility rates for women. This, in turn,
impacts on the girls who marry early, their children, would have a large effect on demographic patterns
FIGURE B4.5.1 In some developing countries, women and thereby on income growth. In countries with a
in rural areas still tend to marry in their teens high incidence of child marriage such as Niger, ending
the practice would increase growth in gross domestic
Bangladesh
product per capita by 0.250.35 percentage points
Niger each year until at least 2030, thereby contributing
Ethiopia to faster reductions in extreme poverty. Through its
Guinea impact on education and fertility rates, ending child
Nigeria marriage could increase labor force participation and
India earnings for women, thereby further contributing to
Cameroon the reduction of extreme poverty through the genera-
Nepal tion of higher incomes for households.
Sierra Leone The elimination of child marriage would also have
Burkina Faso
strong intergenerational effects, through a reduction
in child mortality and stunting. Lower prevalence
Uganda
of stunting as well as better educated mothers will
Mali
in turn improve the education of children and their
Malawi
productivity and earnings later in life. Finally, end-
Senegal ing child marriage will generate potentially impor-
Liberia tant budget savings for governments in areas such as
14 15 16 17 18 health and education, owing to the smaller popula-
Median age (years) at first marriage for women in rural areas tion to be served (Nasrullah et al. 2014).
Source: World Bank calculations, based on data from Demographic and Health
Surveys.
Note: The age of first marriage is based on the response provided by women ages
25 to 49 when interviewed.
FIGURE 4.20 Fertility rates are higher in B40 personal freedoms) (Hansen and Spilimbergo
households than in T60 households 1999; Harris and Todaro 1970; Mayda 2010;
Molho 1986).
6
Rural-urban migration flows can be
5
expected to decelerate as rural-urban wage
Average births per woman
FIGURE 4.21 Unmet needs for family planning internally displaced persons (IDPs) if they are
are also higher in B40 households moving within a country. As of 2014, there
were 59.5 million forcibly displaced people
30 in the world. Approximately two-thirds of
these people were IDPs, while one-third were
Share of women who do not want
25
to become pregnant again but
do not use contraception (%)
FIGURE 4.22 Most migrants tend to be from developing countries but living in high-income
countries
140 140
100 100
80 80
60 60
40 40
20 20
0 0
Low- Lower- Upper- High- Low- Lower- Upper- High-
income middle- middle- income income middle- middle- income
countries income income countries countries income income countries
countries countries countries countries
channels is an important first step in harness- databases medium fertility scenario. Box 4.1
ing these differences through chronological explores how these global trends differ across
arbitrage, such as through trade, migration, scenarios and projection sources.
and capital flows between countries in differ- 3. Unless specified otherwise, descriptions of
ent demographic phases. Chapter 6 examines countries as high-income, upper-middle-
how chronological arbitrage through these income, lower-middle-income, low-income,
channels could be facilitated. or developing are based on the World Bank
Groups income classification for 201617.
4. The total dependency ratio is commonly
Notes defi ned as the ratio of the dependent popula-
1. This report considers the working-age popu- tion, composed of children (ages 014) and
lation to be people ages 15 to 64. Recent elderly (ages 65+), to the working age popula-
evidence, however, suggests that in aging tion (ages 1564).
economies, the definition of a dependent may 5. Estimates of elderly dependents are subject to
be changing (Sanderson and Scherbov 2010). uncertainty arising from two sources: popula-
The standard defi nition of the working-age tion projections and the defi nition of the age
population may not apply to rural, informal, boundary for the working-age population.
or poor workers who often have to work Unless stated otherwise, this chapter defi nes
beyond age 64 (World Bank 2015a). The issue the working-age population as individuals
of dependency is taken up in greater detail in ages 1564. Other chapters consider alterna-
chapter 5. tive approaches.
2. Unless specified otherwise, all popula- 6. The postwar increase in fertility is commonly
tion estimates and projections are based on referred to as the baby boom and was most
United Nations data (UN 2015). From 2015 easily recognized in the United States, peak-
onward, the data are projections based on the ing in the mid-1950s (Klein 2004). Other
GLOBAL MONITORING REPORT 2015/2016 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S 159
industrial countries experienced their own China. Chinas implementation of the one-
baby booms at different times before the child policy is often discussed as being the
1970s. main factor responsible for the sharp drop in
7. Espenshade, Guzman, and Westoff (2003) fertility since the 1980s, although its fertility
suggest that the replacement fertility rate rates were already declining before the one-
is about 2.1 in industrial countries and can child policy was in effect.
range slightly higher in developing countries 15. NTDs refer to a group of diseases that thrive
where mortality rates are higher. The replace- mainly among the poorest populations
ment fertility rate is the total fertility rate at (WHO 2015). These diseases mainly result
which there would be no change in population from four pathogens: protozoa, parasites,
size in the long run. bacteria, and viruses.
8. Lee (2003) provides a historical review of the 16. The Demographic and Health Survey data
health transition contributing to the demo- used for these estimates are harmonized
graphic transition. across countries and have extensive data on
9. Falling mortality and infant mortality rates demographic and health variables. See appen-
have a lagged impact on total fertility rates, as dix C.2 for the B40 and T60 definitions.
discussed in Reher (2011). A key factor is that 17. Reher (2011), Soares (2005), and Acemoglu
as more children survive infancy and child- and Johnson (2007) discuss the importance
hood, parents reduce the number of births
of infant mortality for fertility. The empiri-
to maintain the same number of surviving
cal literature testing the suggested three main
children.
determinants of long-term demographic
10. While fertility-rates remain low in most high-
transition does not converge in its conclu-
income countries, there is some evidence from
sions, however. Murtin (2013) finds that
OECD countries that countries with high lev-
education is more robust than infant mortal-
els of human development and family-friendly
ity, income, and other variables in determin-
policies have recently seen improvements in
ing a fertility transition. Herzer, Strulik, and
their fertility rates (Luci-Greulich and Thve-
Vollmer (2012), on the other hand, suggest
non 2013, 2014; Day 2012).
that mortality changes and income growth
11. Transition economies in Europe and Cen-
are the most important drivers of changes
tral Asia are idiosyncratic in that they expe-
in fertility rate, while Angeles (2010) sug-
rienced a sharp drop in life expectancies
from the 1990s until recently and a resulting gests that reductions in fertility rate are
increase in mortality rates (Cornia and Pan- driven mostly by reductions in mortality
icci 2000; Kennedy, Kawachi, and Brainerd rate.
1998; Shkolnikov et al. 1998). 18. This behavior would suggest that parents
12. Hervitz (1985) and Majelantle and Nava- elasticity of demand for quality is higher than
neetham (2013) provide reviews of the alter- for quantity. A large literature covers this
native perspectives on the impact of migration topic, starting with Becker (1960) and Becker
on fertility, including the idea that migration and Lewis (1973).
disrupts reproductive decisions, leading to 19. World Bank (2015b) argues that improve-
lower fertility in the migrant family than in ments in health, particularly child and mater-
their home country. nal health, need to be a priority development
13. The World Bank Groups high-income coun- goal and a precursor to any policy discussion
try grouping includes high-fertility countries regarding fertility. Improving the educational
like Saudi Arabia. If only high-income OECD attainment of girls also helps in reducing
countries were considered, the median fertil- the rate of teenage pregnancies, immediately
ity rate would be lower. improving health outcomes as well.
14. Guo et al. (2012) found the impact of rural- 20. Lewis (1954) discussed the contribution of
urban migration on fertility to be significant migration or surplus rural labor to urban
at both the national and provincial levels in areas driving growth up to a turning point
160 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
(referred to in the literature as the Lewis turn- Bloom, D., and J. Williamson. 1998. Demo-
ing point). graphic Transition and Economic Miracles
21. In the case of China, reaching the Lewis in Emerging Asia. World Bank Economic
turning point may also have implications for Review 12 (3): 41956.
future growth since its urban manufacturing Bongaarts, J., and S. C. Watkins. 1996. Social
sector-led growth has benefited from the rela- Interactions and Contemporary Fertility Tran-
tively low-cost labor supply from rural areas. sitions. Population and Development Review
The implications of reaching this turning 63982.
point are examined more fully in Cai (2010); Bryant, J. 2007. Theories of Fertility Decline
Das and NDiaye (2013); and Zhang, Yang, and the Evidence from Development Indi-
and Whang (2011). cators. Popul ation an d De velopme nt
22. Massey (1988) provides examples of how Review 33 (1): 10127.
economic development characterized by rapid Cai, F. 2010. Demographic Transition, Demo-
structural transformation has the potential graphic Dividend, and Lewis Turning Point
to create unemployment in ruralprimarily in China. China Economic Journal 3 (2):
agriculture-dependentareas, increasing the 10719.
incentives to migrate. Some of this migration Chaturvedi, S., A. De Costa, and J. Raven. 2015.
reflects rural-urban movements as part of the Does the Janani Suraksha Yojana Cash
urbanization process, but the rest reflects eco- Transfer Programme to Promote Facility Births
nomic motives.
in India Ensure Skilled Birth Attendance?
A Qualitative Study of Intrapartum Care in
References Madhya Pradesh. Global Health Action, 8.
Chen, A., E. Oster, and H. Williams. 2014. Why
Acemoglu, D., and S. Johnson. 2007. Disease
Is Infant Mortality Higher in the US than in
and Development: The Effect of Life Expec-
Europe? Working Paper 20525, National
tancy on Economic Growth. Journal of Polit-
Bureau of Economic Research, Cambridge,
ical Economy (115) 6: 92585.
MA.
Andersson, G. 2004. Childbearing after Migra-
Coale, A. J. 1974. The History of Human Popu-
tion: Fertility Patterns of Foreign-Born Women
lation. Scientific American 231 (3): 4051.
in Sweden. International Migration Review
Cohen, J. E. 2001. World Population in 2050:
38 (2): 74774.
Assessing the Projections. In Seismic Shifts:
Angeles, L. 2010. Demographic Transitions:
Analyzing the Effects of Mortality on Fertil- The Economic Impact of Demographic
ity. Journal of Population Economics: Jour- Change, edited by J. S. Little and R. K. Triest.
nal of the European Society for Population Federal Reserve Bank of Boston Conference
Economics (ESPE) 23 (1): 99120. Series 46 (June).
Azevedo, J. P., M. Favara, S. E. Haddock, L. F. Cornia, G. A., and R. Panicci, eds. 2000. The
Lopez-Calva, M. Muller, and E. Elizaveta. Mortality Crisis in Transitional Economies.
2012. Teenage Pregnancy and Opportuni- Oxford, UK: Oxford University Press.
ties in Latin America and the Caribbean: On Cuberes, D., and M. Teignier. 2015. How Costly
Teenage Fertility Decisions, Poverty and Eco- Are Labor Gender Gaps? Estimates for the
nomic Achievement. Washington, DC: World Balkans and Turkey. Policy Research Work-
Bank Group. ing Paper 7319, World Bank, Washington, DC.
Becker, G. S. 1960. An Economic Analysis of Cutler, D., A. Deaton, and A. Lleras-Muney.
Fertility. In Demographic and Economic 2006. The Determinants of Mortality. Jour-
Change in Developed Countries. New York: nal of Economic Perspectives 20 (3): 97120.
Columbia University Press. Das, M., and P. NDiaye. 2013. Chronicle of
Becker, G. S., and H. G. Lewis. 1973. On the a Decline Foretold: Has China Reached
Interaction between the Quantity and Quality the Lewis Turning Point? Working Paper
of Children. Journal of Political Economy 81 WP/13/26, International Monetary Fund,
(2): S279S288. Washington, DC.
GLOBAL MONITORING REPORT 2015/2016 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S 161
Day, C. 2012. Economic Growth, Gender Hypotheses on the Effects on Fertility: The
Wage Gap and Fertility Rebound. Economic Case of Brazil. International Migration
Record, 88(s1), 8899. Review 19 (2): 293317.
Espenshade, T. J., J. C. Guzman, and C. F. West- Herzer, D., H. Strulik, and S. Vollmer. 2012.
off. 2003. The Surprising Global Variation in The Long-Run Determinants of Fertil-
Replacement Fertility. Population Research ity: One Century of Demographic Change,
and Policy Review 22 (5/6): 575. 19001999. Journal of Economic Growth.
EUROSTAT. 2015. Migration and migrant 17 (4): 35785.
population statistics. Brussels: European Jaffe, A. J. 1942. Urbanization and Fertil-
Commission. http://ec.europa.eu/eurostat ity. American Journal of Sociology: 4860.
/statistics-explained/index.php/Migration Kahn, J. 1988. Immigrant Selectivity and Fer-
_and_migrant_population_statistics. tility Adaptation in the United States. Social
Field, E., and A. Ambrus. 2008. Early Mar- Forces 67 (1): 10828.
riage, Age of Menarche, and Female Schooling Kennedy, B. P., I. Kawachi, and E. Brainerd.
Attainment in Bangladesh. Journal of Politi- 1998. The Role of Social Capital in the Rus-
cal Economy 116 (5): 881930. sian Mortality Crisis. World Development 26
Fogel, R. W. 1997. New Findings on Secu- (11): 202943.
lar Trends in Nutrition and Mortality: Some Klein, H. S. 2004. A Population History of the
Implications for Population Theory. Hand- United States. New York: Cambridge Univer-
book of Population and Family Economics 1: sity Press.
43381. Klugman, J. 2014. Womens Health and Human
Galor, O., and D. N. Weil. 1999. From Malthu- Rights: Public Spending on Health and
sian Stagnation to Modern Growth. Ameri- the Military One Decade after the African
can Economic Review 89 (2): 15054. Womens Protocol: Focus: Sexual and Repro-
Galor, O., and D. N. Weil. 2000. Population, ductive Health Rights and the African Wom-
Technology and Growth: From the Malthu- ens Protocol. African Human Rights Law
sian Regime to the Demographic Transition. Journal. 14 (2): 70534.
American Economic Review 90 (4): 80628. Klugman, J., L. Hanmer, S. Twigg, T. Hasan,
Gerland, P., et al. 2014. World Population Sta- J. McCleary-Sills, and J. Santamaria. 2014.
bilization Unlikely This Century. Science 10 Voice and Agency: Empowering Women and
(346): 23437. Girls for Shared Prosperity. Washington, DC:
Gragnolati, M., R. Rofman, I. Apella, and S. World Bank.
Troiano. 2015. As Time Goes By in Argen- Kuznets, S. 1974. Rural-Urban Differences in
tina: Economic Opportunities and Challenges Fertility: An International Comparison. Pro-
of the Demographic Transition. Washington, ceedings of the American Philosophical Soci-
DC: World Bank. ety 118 (1): 129.
Guo, Z., Z. Wu, C. M. Schimmele, and S. Li. Lee, R. 2003. The Demographic Transition:
2012. The Effect of Urbanization on Chinas Three Centuries of Fundamental Change.
Fertility. Population Research and Policy Journal of Economic Perspectives 17 (4):
Review 31 (3): 41734. 16790.
Hanson, G. H., and A. Spilimbergo. 1999. Ille- Lewis, W. A. 1954. Economic Development with
gal Immigration, Border Enforcement, and Unlimited Supplies of Labor. Manchester
Relative Wages: Evidence from Apprehensions School of Economic and Social Studies 22:
at the U.S.Mexico Border. American Eco- 13991.
nomic Review. 89 (05): 133757. Lloyd, C. B., and B. S. Mensch. 2008. Marriage
Harris, J. R., and M. P. Todaro. 1970. Migra- and Childbirth as Factors in Dropping Out
tion, Unemployment and Development: A from School: An Analysis of DHS Data from
Two-Sector Analysis. American Economic Sub-Saharan Africa. Population Studies 62
Review 60 (1): 12642. (1): 113.
Hervitz, H. M. 1985. Selectivity, Adaptation, Luci-Greulich, A., and O. Thvenon. 2013. The
or Disruption? A Comparison of Alternative impact of family policies on fertility trends
162 D I S PA R I T I E S , D I V E R G E N C E S , A N D D R I V E R S GLOBAL MONITORING REPORT 2015/2016
Soares, R. 2005. Mortality Reductions, Edu- Waldron, H. 2007. Trends in Mortality Differen-
cational Attainment, and Fertility Choice. tials and Life Expectancy for Male Social 382
American Economic Review 95 (3): 580601. Security-Covered Workers, by Socioeconomic
Sobotka, T. 2008. The Rising Importance of Status. Social Security Bulletin 67 (3): 128.
Migrants for Childbearing in Europe. Demo- Wang, H., L. Dwyer-Lindgren, K. T. Lofgren,
graphic Research 19 (9): 22548. J. K. Rajaratnam, J. R. Marcus, A. Levin-
Szreter, S. 1993. The Idea of Demographic Tran- Rector, and C. J. Murray. 2013. Age-Specific
sition and the Study of Fertility Change: A and Sex-Specific Mortality in 187 Countries,
Critical Intellectual History. Population and 1970 2010: A Systematic Analysis for the
Development Review 19 (4): 659701. Global Burden of Disease Study 2010. The
U N (United Nations). 2013a. International Lancet, 380 (9859): 207194.
Migration Report 2013. New York: United Wilmoth, J. 2015. Global Demographic Pro-
Nations, Department of Economic and Social jections: Future Trajectories and Associated
Affairs, Population Division. Uncertainty. Presentation (PPT) delivered at
. 2013b. Trends in international migrant a Seminar of the Global Knowledge Partner-
stock: Migrants by destination and origin. ship on Migration and Development, March 4,
United Nations database, POP/ DB/MIG/ 2015.
Stock/Rev.2013, Department of Economic and World Bank. 1984 World Development Report
Social Affairs. 1984. Washington, DC: World Bank.
. 2014. World Contraceptive Use 2014. . 1994 World Population Projections.
New York: United Nations. Washington, DC: World Bank.
. 2015. World Population Prospects: The . 2012. World Development Report: Gen-
2015 Revision, DVD Edition, New York: der Equality and Development. Washington,
United Nations, Department of Economic and DC: World Bank.
Social Affairs, Population Division. . 2013. Mitigating the Economic Impact
UN (United Nations) and UNICEF (United of an Aging Population: Options for Bulgaria.
Nations Childrens Fund). 2014. Migra- Washington, DC: World Bank.
tion Profiles Common Set of Indicators. . 2014. Migration and Remittances:
New York: United Nations. http://esa.un.org Recent Developments and Outlook; Special
/MigGMGProfiles/MPCSI.htm (June 26, Topic: Forced Migration. Migration and
2015). Development Brief 23. Washington, DC:
UNHCR (United Nations High Commissioner for World Bank.
Refugees). 2015. Global Trends: Forced Dis- . 015a. Live Long and Prosper: Aging in
placement in 2014. Geneva: UNHCR. East Asia and Pacific. World Bank, Washing-
UNICEF (United Nations Childrens Fund). ton DC.
2014. Ending Child Marriage: Progress and . 2015b. From Potential to Reality: What
Prospects. New York: United Nations. http:// Will It Take to Harness a Demographic Divi-
www.unicef.org/media/fi les/Child_Marriage dend in Africa? Washington DC: World Bank.
_Report_7_17_LR.pdf (June 26, 2015). WHO (World Health Organization). 2015. Invest-
U.S. National Research Council. 1989. Con- ing to Overcome the Global Impact of
traception and Reproduction: Health Con- Neglected Tropical Diseases. Geneva: WHO.
sequences for Women and Children in the Zhang, X., J. Yang, and S. Wang. 2011. China
Developing World. Washington, DC: National Has Reached the Lewis Turning Point. http://
Academies Press. dx.doi.org/10.1016/j.chieco.2011.07.002.
5
Implications of
Demographic Change:
Pathways to Prosperity
Changing age structures of populations are shaping the trajectories of development in many
countries, bringing both opportunities and challenges. Rapid population growth is set to con-
tinue in the poorest countries over the coming decades, raising the share of the population that
is working-age and bringing strong potential to boost growth and poverty reduction. The chal-
lenge in these centers of global poverty lies in improving human development outcomes and job
creation. In contrast, countries with low fertility rates, including most high-income countries,
have aging population structures. Together with opportunities to consolidate development
gains, these engines of global growth are increasingly facing challenges associated with aging,
including the importance of ensuring fiscal sustainability to support a growing pool of elderly.
Development opportunities and challenges The world can be currently classified into
stemming from demographic change vary four types of countries when viewed through
with country circumstances. Countries with the lens of demographic characteristics and
high fertility rates and low life expectancy future development potential. In the first
tend to have relatively young populations group are high-fertility countries that are
with rising proportions of working-age peo- lagging in many key human development
ple (between 15 and 64 years of age). How- indicators. These are all low-income coun-
ever, these countries tend to have high pov- tries. In the second group are mostly low-
erty rates and face the challenge of providing and lower-middle-income countries where
services for their growing populations and fertility rates have started falling recently
ensuring productive employment for their and where changes in age structure offer tre-
expanding labor force. In countries where mendous opportunity for growth in the fore-
fertility rates have been below replacement seeable future. The third group comprises
level since at least the 1980s, life expectancy mostly upper-middle-income countries that
is typically high, and the elderly account for experienced rapid fertility declines in the
increasing proportions of their populations. 1960s, and where working-age people will
These countries face the challenge of meeting be a shrinking share of the population in the
the increasing demand for pension and health coming decade. The last group is made up
care services, while their overall economic of mostly high-income countries that have
growth may be slowing. some of the highest shares of elderly in the
165
166 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y GLOBAL MONITORING REPORT 2015/2016
world and fertility rates that have been below however, policies and institutions need to be
replacement level since at least the 1980s in place related to the domestic and external
(appendix C.3 discusses the typography in channels through which demography affects
more detail). development. These policies relate to labor
Demographic change can boost prosperity markets, human capital, savings and invest-
when a greater proportion of the population ment, and transfers supporting the dependent
is working and saving. Countries where the population (box 5.1).
share of the working-age population is still Shifts in the population age structure
rising can benefit from more workers and can have welfare implications since the
savers. To capitalize on these opportunities, demand for public services and the patterns
The total dependency ratio (TDR) is the ratio of the provide for the future, and to support others through
dependent population (children and elderly) to the public and private institutions (Lee and Mason 2011;
working-age population that supports total con- UN 2013). To date these accounts have been con-
sumption (working-age). structed for about 40 countries.
For purposes of international comparability, the The NTAs quantify the economic life-cycle pat-
working-age population is commonly defined as tern using consumption and labor income at each age.
those aged 1564. However, these age thresholds do Results suggest that the ages at which people earn
not necessarily capture variations across time and more through their labor than they consume varies
regions on child-labor practices, time in school, or greatly depending on economic conditions and pub-
labor supply at older ages. For example, child labor lic policy. In both high- and low-income countries,
was a common practice in the initial stage of indus- the earnings surplus begins at age 26 and ends at age
trialization in Europe and is still present in several 59, on averagea much shorter span than the tradi-
developing countries (Cunningham and Viazzo tional 1564 age span (figure B5.1.1). Moreover, the
1996). Also, accumulating evidence casts doubts on extent to which those under 26 or over 59 are sup-
a mechanical link between chronological age and the porting themselves through their labor is highly vari-
dependency rate for the elderly, and labor supply at able. Consumption includes both private and public
older ages varies widely, in part reflecting the avail- consumption. Labor income includes the earning of
ability of public pensions and their incentive struc- employees, the self-employed, and estimates of the
tures (Brsch-Supan 2013). Moreover, the 1564 value of labor of unpaid family workers.
defi nition of the working-age does not necessarily The NTA-based approach suggests that rich, low-
identify the age cohorts that effectively support total fertility countries differ from poor, high-fertility
consumption. countries in four important ways:
An alternative approach to defining the depen-
dent population considers the age span when people Children in rich countries have higher consump-
do not earn enough to meet their material needs. tion than children in poor countries, even after
This approach offers a more accurate measure of the controlling for differences in levels of income. The
share of the population that needs support to fund consumption values shown in figure B5.1.1 include
their consumption. It is also useful in shaping public public and private spending on health and educa-
policies, because it takes into account public transfers tion, which accounts for a substantial portion of
(such as spending on health and education). A new the consumption advantage of children in rich, low-
set of economic accounts, called National Transfer fertility countries.
Accounts (NTAs), provides comprehensive informa- The elderly in rich countries consume more than
tion about how those at every age acquire and use they do in poor countries. In rich countries, con-
economic resources to meet their material needs, to sumption patterns are driven noticeably higher at
(box continues next page)
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 167
FIGURE B5.1.1 Consumption and labor income by older ages because of rising spending on health
age for high and low-income countries care. In poor countries, consumption does not
Ages 3049 turn up at older ages. Consumption among adults
1.2 is much flatter in low-income countries, and the
elderly consume less than do prime-age adults.
Ratio of consumption and labor income
of consumption vary dramatically across their fertility rates and working-age popula-
a persons life. Shifting age structures can tion shares. It then discusses the economic
create imbalances between the resources of and development challenges that countries in
working-age people, for whom labor income each of the four groups face, with a particu-
typically exceeds consumption, and the lar focus on poverty and aging populations.
young and old, who often produce less than The analysis illustrates that development
they consume. The magnitude of these imbal- progress varies with key demographic char-
ances depends not only on demography but acteristics. Finally, the chapter examines how
also on the institutions and mechanisms soci- demographics impact economic growth, the
eties rely on to intermediate resources to the achievement of development goals, and the
young and the old, including through family nature of public transfers.
ties, government provision of services, and
financial markets.
Building on the global demographic trends
From demography to
and the country-level differences discussed
development: A global typology
in chapter 4, this chapter examines the links Demographic characteristics can help or hin-
between demography to development. It der economic activity, so understanding a
presents a demographic typology that clas- countrys demographic trends offers insight
sifies countries into four categories based on to its development prospects. Changes in the
168 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y GLOBAL MONITORING REPORT 2015/2016
working-age share of the population can affect As fertility rates decline, child-dependency
growth and savings and, subsequently, income ratios fall both within households and within
per capita. For example, rising working-age a population, while the share of the working-
population shares could lead to proportion- age population rises and remains high for
ally more income earners in the economy and a few generations. If the increasingly larger
thus greater growth per capita. Changes in working-age population is productively
the age structure also affect the resource con- employed, there is potential for an increase in
straints faced by households and the state for economywide living standards. The first divi-
social spending, with potential second-order dend is in large part a consequence of a given
effects. For example, if households have fewer (growing) labor force supporting fewer chil-
children, they would have more resources to dren. For some countries, estimates suggest
spend on human capital and consumption. In that the contribution of the first demographic
contrast, if the share of the aging is increas- dividend explains 9.215.5 percent of their
ing, there would not only be fewer potential per capita economic growth over the 1960
workers but also higher demand for some ser- 2000 period (Mason and Kinugasa 2008).
vices like health care. The exact impact of the The second demographic dividend arises
demographic change depends on how the age- if changes in age structure create space for
structure is changing. A typology based on the higher savings and lead to increased invest-
channels of impact and demographic trends ment in human and physical capital. An
can thus be used to characterize a countrys increase in the share of workers in the
development potential. economy with respect to the total popula-
tion leads to higher production and more
resources available in the economy, which
Demographic trends can produce two
at the same time can facilitate an increase
types of dividends
in savings, investment, and accumulation of
The development impact of changes in physical and human capital. These decisions
age structure occur through two mecha- subsequently influence the productivity of
nisms and can be classified as either a fi rst the workforce. Providing capital for a grow-
or a second demographic dividend (Lee and ing labor force is costly, and as labor force
Mason 2006). The fi rst dividend is a direct growth declines, a given level of investment
and immediate consequence of the rise in will lead to greater capital per worker. Demo-
the working-age share of the population. If graphic change pushes countries toward sup-
a larger share of the population is working, plying more capital, further enhancing labor
average standards of living will be higher.1 productivity (Birdsall, Kelley, and Sinding
The potential benefits for poverty reduction 2003). Because personal assets accumulate
are twofold. First, in low-income households over the lifetime of individuals, per capita
that reduce their fertility, standards of living household wealth rises as a population ages.
will rise by increasing the number of effective Moreover, gains in life expectancy have led
producers per household member. Second, to an extended period of retirement, provid-
improvements in public finances resulting ing a powerful incentive to accumulate assets
from an increase in the number of workers in countries where the elderly rely on funded
in the economy will allow more resources to pensions and other assets to support at least
be devoted to low-income households. The part of their old-age needs.
second dividend arises when faster growth of Countries that are too early in the demo-
the working-age population leads to greater graphic transition face challenges to activat-
savings in the short run and higher invest- ing the first demographic dividend, while
ment in human capital and investment per countries late in the transition face chal-
worker in the long run. lenges in sustaining the second dividend.
The first demographic dividend could per- Where total fertility rates are high, the child-
sist for decades but is ultimately transitory. dependency ratio will likely be too high and
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 169
the working-age population share too low to high dependency ratios are expected to
realize the rst demographic dividend, as in decline as the fertility transition proceeds.
the case of some high-fertility, low-income Early-dividend countries have progressed
countries. In contrast, countries with rapidly further in the fertility transition, with fertility
shrinking working-age population shares rates below four births per woman and the
face the challenge of maintaining the pace working-age share in the population likely to
of physical and human capital accumula- rise considerably in the future. Priorities for
tion needed to maintain labor productiv- these countries are realizing the rst demo-
ity growth. In such countriesas in many graphic dividend and laying the groundwork
low-fertility, high-income countries today for the second dividend. Late-dividend coun-
demographic conditions can strain public ser- tries have shrinking working-age shares, but
vices, especially health and pension. their overall age structures are still favorable
for the rst demographic dividend. However,
they may experience rapid aging in coming
Trends and potential form basis of a
decades, so realizing the second dividend is
new typology
key. Finally, post-dividend countries are those
Viewed through the lens of demography, where fertility transitioned below replace-
the world has four types of countries, each ment levels three decades ago and that have
type with measures it can take to maximize shrinking working-age population shares and
future economic potential (map 5.1). 2 Pre- high shares of elderly. They are too late in the
dividend countries lag in key human devel- transition to gain additional benets from the
opment indicators and have fertility rates rst demographic dividend but could still be
greater than four births per woman. Their realizing the second dividend.
Demographic characteristics
Pre-dividend
Early-dividend
Late-dividend
Post-dividend
This map was produced by the Map Design Unit of The World Bank.
The boundaries, colors, denominations and any other information
shown on this map do not imply, on the part of The World Bank
No data
GSDPM
Map Design Unit
Group, any judgment on the legal status of any territory, or any
endorsement or acceptance of such boundaries.
AUGUST 2015
FIGURE 5.1 The different demographic country determinant of demographic transition (see
types correspond to countries in different stages chapter 4). At the start of demographic tran-
of demographic transition
sition, countries typically have high fertility
and mortality rates. As transition proceeds,
9 the mortality rate begins to decline while
Total fertility rate (number of children)
FIGURE 5.2 Income level is correlated with the stage of demographic transition
a. 70 percent of the global population lives b. Most pre-dividend countries are low income while
in early- and late-dividend countries most post-dividend countries are high income
45 70
40
Share of global population, 2015 (%)
60
35
Number of countries, 2015
50
30
25 40
20 30
15
20
10
5 10
0 0
Pre- Early- Late- Post- Pre- Early- Late- Post-
dividend dividend dividend dividend dividend dividend dividend dividend
countries countries countries countries countries countries countries countries
Low-income countries Lower-middle-income countries
Upper-middle-income countries High-income countries
40
Challenging starting points
Percent
are all pre-dividend countries in Sub-Saharan that have had the most success in reducing
Africa: Angola, Mali, Niger, Uganda, and poverty are those where the working-age
Zambia. These countries are very poor, with share of the population has peaked or is close
2012 poverty rates that ranged from 29 to to peaking and where population growth has
62 percent. Without improvements in their decelerated in parallel to improvements in life
poverty headcount rates, these countries will expectancy, infant mortality, and fertility.
experience even greater concentrations of Progress on other development goals also
poverty in the future. varies across countries at different stages of
Early- and late-dividend countries, where demographic transition. On MDG 4, only
much of the global poverty reduction over 17 and 25 percent of pre- and early-dividend
the past two decades occurred, also experi- countries were able to reduce under-five child
enced a fertility transition over this period. mortality rates by three-fourths from 1990 to
Between 1990 and 2012, the global pov- 2013. Late-dividend countries were slightly
erty headcount rate fell from 37.1 percent to more successful in this regard. On MDG 5,
12.7 percent, representing a reduction in the only 10 percent of the countries succeeded
number of global poor by more than 1.06 in reducing the maternal mortality rate by
billion. By virtue of their large populations three-fourths between 1990 and 2013. Prog-
and high poverty headcount rates, China and ress has been made toward MDG 6 on com-
India accounted for much of the reduction bating HIV/AIDS, especially with the wider
in global poverty. These countries now not access to retrovirals in the new millennium.
only have lower poverty headcounts but also As more and more people live in urban
lower population growth rates, having low- areas, progress in reducing the shares of
ered their fertility rates over time. Bangladesh urban populations living in slums has been
and Indonesia, which together accounted for modest (box 5.2). Overall, the shares of
another 10 percent of global poverty in 2012, populations in pre-, late-, and post-dividend
have also experienced slowing population countries living in urban areas stayed rela-
growth rates. Poverty reduction successes in tively stable between 1990 and 2013 (figure
these countries would thus have a diminish- 5.4). However, early-dividend countries have
ing impact on global poverty reduction. seen rapid urbanization over this period,
Ninety percent of countries that met the a shift that is driving global urbanization
Millennium Development Goal (MDG) tar- trends. Rising urbanization has been paral-
get of halving poverty rates were early- and leled by an increase in the number of those
late-dividend countries. 3 As of 2012, 40 living in slums (figure 5.5). Large cities in
percent of early-dividend and 68 percent of developing countries, such as Baghdad, Cara-
late-dividend countries were able to halve cas, Johannesburg, Karachi, Lagos, Lima,
their poverty headcount rates from their Mumbai, Nairobi, and Rio de Janeiro, have
1990 levels. In contrast, only 2 percent of large slums, some of them with estimated
pre-dividend countries were able to achieve populations of more than 500,000. Lack
similar reductions in their poverty rates. of access to public services in these slums
Given that pre-dividend countries also typi- has the potential to lead new generations
cally have faster population growth rates of urban slum residents into poverty traps
than countries at more advanced stages of (Marx, Stoker, and Suri 2013).
demographic transition, a reduction in the Low educational attainment in pre-
poverty headcount rate may not necessarily dividend countries has implications for the
imply a reduction in the absolute number of future global labor supply. In pre-dividend
poor people (Herrmann 2015). For example, countries, just 35 percent of those enrolled
Mali reduced its poverty headcount rate by a completed lower-secondary education, com-
third between 1990 and 2012, but because pared with 72 percent in early-dividend coun-
of its high population growth, the number of tries and 90 percent in late-dividend coun-
poor still rose by 13 percent. The countries tries.4 These pre-development countries will
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 173
Internal migration and the rise of large urban living conditions can be worse than in rural areas
agglomerations in developing countries are essential (Bradley et al. 1992; Duflo, Galiani, and Mobarek
parts of the story of demographic change. Higher 2012).
population growth in rural areas tends to translate By 2030, around 2 billion people will be living in
into rural-urban migration. Studies suggest that slumstwice as many as today and a direct conse-
about half of the urbanization growth in the world quence of unprecedented urban growth. About 90
results from the internal rural-to-urban migration percent of the urban growth in the next 15 years will
and area reclassifications (UN 2008). People moving be concentrated in Asia and Sub-Saharan Africa.
to cities are attracted by the various job opportuni- Already home to most of the worlds slum population,
ties, higher (real) wages, the many local amenities these two regions are expected to see a significant
such as cultural and recreational offerings, and the increase in those numbers.
availability of public utilities and transportation The presence and persistence of these slums pose
facilities. The existence of very large cities around many challenges to the process of urbanization and
the world suggest that these attractions more than development in general (Marx, Stoker, and Suri
compensate for the congestion that arises in densely 2013). Improving the quality of life of the people liv-
populated areas (Krugman 1991). Urbanization is ing in slums requires policies that cover many dimen-
rising fast in developing countries, where 7 of the sions, from access to potable water and sanitation to
10 largest urban areas in the world are currently continuous access to electricity, transport infrastruc-
located, including Cairo, Jakarta, Karachi, and tures, and job opportunities (Banerjee, Pande, and
Mexico City (UN-Habitat 2003). Walton 2012). An additional challenge is to prevent
In many developing countries, big cities are char- these slums from expanding. Policies to remove or
acterized by the presence of very large slums (figure relocate slums or to upgrade the services available
B5.2.1). About a third of the urban population in have shown limited success in reducing their size or
developing countries lives in slums. These slums can limiting their sprawl. Improving local governance,
be transitory if they are the by-product of rapidly engaging in land reform, and launching major public
growing economies, but many of them are located investments in urban areas may be the most promis-
in countries with slow or stagnant growth. Overall ing policies for limiting the sprawl of slums.
FIGURE B5.2.1 Substantial shares of urban populations in major developing countries still live in slums
a. Brazil b. India c. Nigeria
80 80 80
Share of urban population living in slums (%)
70 70 70
60 60 60
50 50 50
40 40 40
30 30 30
20 20 20
10 10 10
0 0 0
1990 1995 2000 2005 2007 2009 1990 1995 2000 2005 2007 1990 1995 2000 2005 2007
Source: World Bank calculations, based on data from UN-Habitat Urban Data.
174 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y GLOBAL MONITORING REPORT 2015/2016
FIGURE 5.4 Early-dividend countries are FIGURE 5.6 Education expenditure per capita is
urbanizing rapidly
Share of population living in urban areas (%) negatively correlated with child-dependency ratio
70 10
30 7
20
6
0 20 40 60 80 100 120
10
Child-dependency ratio
1990 2013
Developing countries High-income countries
Pre-dividend countries Early-dividend countries
Late-dividend countries Post-dividend countries
Source: World Bank calculations, based on data from UN 2015 and World
Source: World Bank calculations, based on World Bank World Develop- Bank World Development Indicators.
ment Indicators, Millennium Development Goals database, and UN 2015.
Note: Data reflect unweighted averages for the different country groups.
component of early childhood development,
FIGURE 5.5 A large share of the population of with long-term implications not only for
early- and late-dividend countries still lives in human capital accumulation and future
slums income, but also for socialization and health
(Heckman, Pinto, and Savelyev 2013).6 How-
Share of urban population living in slums (%)
FIGURE 5.7 Fertility rates in late-dividend FIGURE 5.9 Late-dividend countries are aging rapidly
countries have converged to those of post-
dividend countries since the 1950s
30
6 20
15
Total fertility rate
10
4
5
3
0
2
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
1 Pre-dividend countries Early-dividend countries
Pre- Early- Late- Post- Late-dividend countries Post-dividend countries
dividend dividend dividend dividend
countries countries countries countries Source: World Bank calculations, based on UN 2015 and World Bank World Development Indicators.
195055 201015
Source: World Bank calculations, based on data from World Bank World factors fed into this faster pace of improve-
Development Indicators, Millennium Development Goals database, and ment, all having to do with the importance
UN 2015.
Note: Data reflect unweighted averages for the different country groups. of these countries in the global economy. As a
The total fertility rate is the average number of births per woman. result, late-dividend countries are expected to
have the same age structure as post-dividend
FIGURE 5.8 Differences in life expectancy across countries by 2050 (figure 5.9).
typologies of countries have narrowed At the same time, late-dividend countries
accounted for 36 percent of global GDP
80
growth in 200014 (figure 5.10). Growth
in many of these countries was rapid. Brazil
70
and China alone, for example, contributed
Life expectancy (years)
60
FIGURE 5.10 Aging countries accounted for most of global growth,
50 200014
40 60
Contributions to global GDP growth (%)
50
30
Pre- Early- Late- Post-
dividend dividend dividend dividend 40
countries countries countries countries
30
195055 201015
20
Source: World Bank calculations, based on data from World Bank World
Development Indicators, Millennium Development Goals database, and
UN 2015.
10
Note: Data reflect unweighted averages for the different country groups.
0
Pre-dividend Early-dividend Late-dividend Post-dividend
expectancies were shorter by nine years (fig- countries countries countries countries
ures 5.7, 5.8). However, late-dividend coun- Low-income countries Upper-middle-income countries
tries have since made substantial improve- Lower-middle-income countries High-income countries
ments in these metrics, with extremely rapid
improvements in life expectancy. Several Source: World Bank calculations, based on UN 2015 and World Bank World Development Indicators.
176 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y GLOBAL MONITORING REPORT 2015/2016
a quarter of global growth over the period. FIGURE 5.11 Health expenditure per capita is
Brazil and China grew at average annual real positively correlated with aged dependency ratio
GDP growth rates of 3.5 and 10 percent,
respectively, over this period. However, in 10
(log; 2013)
7
decades, suggesting demographic change is 6
likely to dampen their contribution to future 5
global growth. 4
Post-dividend countries contributions 3
to global growth have been slowing down, 2
with potential spillovers for other countries 0 10 20 30 40
(chapter 3 of this report; IMF 2015). These Age dependency ratio
countries account for 59.8 percent of global Developing countries High-income countries
economic activity in 2014, and 42 percent Source: World Bank calculations, based on data from UN 2015 and World
of global GDP growth. Post-dividend econo- Bank World Development Indicators.
mies are also the major export destinations
for pre- and early-dividend countries and
account for two-thirds of global import on pensions in 2012, which represents about
demand. While other post-dividend and late- 13.3 percent of its GDP.
dividend countries meet most of this demand, Some high-income countries are expe-
the post-dividend countries are the preemi- riencing a rapid rise in health care costs as
nent markets for exports from pre- and early- their populations age (figure 5.11). Health
dividend countries, mainly textiles, clothing, care spending generally increases with age,
and other light manufactures, as well as com- with a notable jump in spending between
modities. If growth in post-dividend coun- the ages of 55 and 60, reflecting changes in
tries slows, early- and pre-dividend countries morbidity (EC 2015). In Organisation for
will need to fi nd alternative export markets. Economic Co-operation and Development
In addition, as post-dividend economies age, (OECD) countries, health care spending on
their national savings rates are expected to those 65 and older is expected to jump from
fall, leading to a possible slowdown in capital 40 percent in 2010 to 60 percent by 2060 (de
flows to the rest of the world.7 la Maisonneuve and Martins 2013). In the
In some late- and post-dividend countries, United States, health spending is expected
pension systems are increasingly stressed as to rise faster than GDP and account for 19.6
the number of beneficiaries rises relative to the percent of GDP by 2024, up from 17.4 per-
numbers the systems were designed to support cent in 2013 (CMS 2015a). The cost of Medi-
(Bogetic et al. 2015). Late- and post-dividend care (the public health insurance for people
countries will have a combination of shrink- 65 or older) is expected to increase substan-
ing shares of working-age population com- tially, moving from $256.5 billion in 2002
bined with an increase in the share of aged to $489.4 billion in 2010 (CMS 2015b). The
people, potential candidates for public pen- aging of baby boomers in the coming years
sion (Bonoli and Shinkawa 2005). As popu- will lead to an unprecedented increase in the
lations age, pension systems need to adapt size and composition of the elderly popula-
to demographic and occupational changes to tion in the program (Lassman et al. 2014).
avoid generosities and incentives that encour-
age early retirement and thus long retirement
Pathways to future prosperity
periods (World Bank 2015b). In 2012, one-
fourth of the European Unions (EUs) popu- Demographic change can affect future pros-
lation130 million peoplereceived at least perity in three ways. The first way is through
one pension. The EU spent about 1.71 billion changes in the working-age share of the
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 177
population that affect income growth and 5.1).9 While these channels can work simulta-
savings. The second way is through changes neously, the differentiation between the fi rst
in the age structure of households that and second dividends is informed not only by
directly affect poverty, human capital invest- the transmission mechanisms but also by the
ments, and decisions about how dependents time horizon through which they are at work.
will be supported. In poor households with The contribution of the second demo-
high fertility, these changes in age structure graphic dividend to growth is potentially
typically involve behavioral changes that lead greater than the first (Mason 2005). For
to lower fertility. The third way is through the example, for East Asia, during the 1970
changes in the means by which aging popu- 2000 period, the contribution from the sec-
lations support themselves around the world. ond demographic dividend on GDP growth
This section addresses each of these pathways was 2.22 times larger than the fi rst demo-
to future prosperity in further detail. graphic dividend. For some countries, esti-
mates suggest that the contribution of the
first demographic dividend explains between
Rising working-age shares can raise
9.2 and 15.5 percent of their per capita eco-
growth
nomic growth over the 19602000 period
An increase of 1 percentage point in the (Mason and Kinugasa 2008).
working-age population share is estimated to An increase of 1 percentage point in the
boost GDP per capita by 1.1 to 2.0 percent- share of working-age population is associ-
age points, on average (see appendix C.4 for ated with an increase of 0.6 to 0.8 percent-
details). More generally, growth in the work- age point in savings (appendix C.4). National
ing-age share is associated with higher per private-savings rates have been found to
capita income growth (see also figure 5.12).8 depend on the age composition of the popu-
The causality underpinning this association is lation: individuals are typically net savers
complex and occurs through multiple path- when they are working age and continue to
ways, including through an increase in the save in old age, on average, but they tend to
supply of workers relative to the total popu- be predominantly consumers when they are
lation; a rise in the capacity to save, which children. This outcome is associated with the
leads to a higher capital per worker ratio; second demographic dividend, where declin-
and more investment in human capital (table ing dependency ratios, led by a lower share
of children in the population, tend to boost
domestic savings and investment.10
FIGURE 5.12 A rising working-age population Increases in aged dependency ratios do
share is positively correlated with GDP per capita
growth
not necessarily lead to lower savings. Since
people expect to live longer, they tend to save
more during the economically active portion
Average annual percentage point change
8
of their lives (Kinugasa and Mason 2007).
in real GDP per capita, 19602014
Labor force Increase in the support ratio (ratio of eective First Early stage
labor to eective consumers) holding constant (pre- and early-dividend
other factors, including saving and income per countries)
eective worker.
Savings Changes in saving and capital per eective Second Late stage
worker inuence income, from labor and assets, (late- and post-dividend
per eective worker. countries)
Human capital Lower fertility and the quantity-quality Second Late stage
trade-o lead to greater spending on health (late- and post-dividend
and education for children. countries)
the most widely confirmed linkages between form of both improving coverage of children,
population and economic decision mak- as well as increasing spending per child.
ing (Becker 1960; Becker and Lewis 1973). The correlates between demography and
People who have fewer children spend more development are strong, but favorable demo-
per child. The quantity-quality trade-off is graphic change does not guarantee improve-
particularly strong when it comes to human- ment in development conditions. A rising
capital spending. Moreover, the quantity- working-age population share, for instance,
quality trade-off was found to be as strong for has the potential to improve the welfare of
public spending as for private spending. The the poorest members of society (box 5.3).
increased spending on education can take the Early- and pre-dividend countries, where
An increase in the share of the working-age popu- productive employment and that facilitate invest-
lation has the potential to boost economic growth ments in human and physical capital. Under a base-
through a range of channels and to help a country reap line scenario that considers the impact of projected
demographic dividends. First, a rising working-age demographic change on the working-age population
population has the potential to increase the number of and on savings and investment, simulation results
people employed as a share of the population. Second, suggest an average annual GDP per capita growth
it has the potential to increase national savings and rate for the global economy of 2.1 percentage points
hence the investment rate, since income-earners would over 201530 (figure B5.3.1).
become a greater share of the population. Third, it can Demographic change can boost per capita income
lead to faster productivity growth since households growth in pre- and early-dividend countries, but it
might have more resources to invest in fewer children, may dampen growth prospects in aging countries and
and it might be easier for mothers with lighter child- for the global economy. In pre- and early-dividend
rearing responsibilities to enter the labor market. countries, where the share of working-age population
However, certain enabling conditions are neces- will increase, demographic change could account for
sary for an increase in the share of the working-age 0.5 to 0.8 percentage point of annual GDP per capita
population to boost economic growth (Barro 2003; growth, over 201530 given the right enabling condi-
Kremer 1993; Lucas 1988). These conditions include tions. At the same time, even though per capita growth
measures that help new labor market entrants fi nd is expected to be high in late-dividend countries,
(box continues next page)
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 179
including China, demographic change in the absence of people in pre-dividend countries and 24.4 million peo-
countervailing policies could reduce annual growth by ple in early-dividend countries out of poverty by 2030.
0.2 to 0.4 percentage point in late- and post-dividend Added together, the extreme poverty headcount would
countries, where working-age population shares are be 16.2 percent lower in 2030 than it would have been
expected to decline.a Aging in post-dividend countries without changes in age structure and the benefits of
is expected to slow both their own growth and global enabling conditions (figure B5.3.3).
growth, because post-dividend countries account for
such a high share of global economic activity.
Global poverty could thus drop from 11.4 per- FIGURE B5.3.2 Global poverty rate could fall
cent in 2015 to 4.4 percent in 2030 if potential ben- substantially but not enough to reach the 3 percent
efits from demographic change are realized (figure global World Bank target
B5.3.2). This reduction is equivalent to a drop in the 50
5
4.2 0
demographic change on poverty
4 3.2 5
Potential contribution of
2.8
3 10
1.6 2.1
2 15
1 20
25
0
0.8 0.5 0.2 0.3 30
1 0.6
Pre- Early- Late- Post- World 35
dividend dividend dividend dividend Pre-dividend Early-dividend World
countries countries countries countries countries countries
Net impact of demographic dividend Age-structure effect
Other sources of growth Contribution of enabling conditions
fertility rates are still falling to replace- had a higher average poverty headcount than
ment levels and where working-age popula- South Asia (figure 5.15). As it reduced its
tion shares are still rising, are in precisely child-dependency ratio, it was able to reduce
this position. They will experience the fi rst its poverty more than the other regions. Evi-
demographic dividend, however, only if they dence from Bangladesh suggests that demo-
are able to successfully absorb new entrants graphic factors, including age structure,
to the labor forcethat is, if growth in the gender, and regional distributions of popu-
number of jobs is at least as high as growth in lations, accounted for a quarter of the rapid
labor supply, and if people with the necessary reductions in poverty that occurred between
skills for available jobs are able to find those 2000 and 2010 (World Bank 2013b). Ban-
jobs. Similarly, the second demographic divi- gladesh halved its fertility rate between 1971
dend can be obtained by post-dividend coun- and 2004, going from more than six chil-
tries only if they are able to mobilize savings dren per woman to about three, and is on
that their current cohorts of elderly had saved track to reach replacement rates in the com-
and invested when they were younger. ing decades. Bangladesh has also managed
to reverse the infamous gender inequality
in infant mortality that characterizes most
Changing demographics can step up
South Asian countries.
development
As fertility rates fall, the demographic struc-
Aging populations are changing what it
tures of households change and directly affect
means to be dependent
poverty and shared prosperity, particularly
in poor households. Because of the associa- While childrens consumption relies most on
tion between fertility and education, income, transfers from within the household, elderly
and life expectancy, households in the top 60 peoples consumption is supported by trans-
percent (T60) of the income distribution tend fers from a range of sources, including their
to have lower child-dependency ratios and own income (box 5.4). Aged individuals can
to pass through the demographic transition support their consumption by dissaving or
before households in the bottom 40 percent extending their working life. The capacity
(B40) in almost all countries (figure 5.13). to generate savings is associated with their
A reduction of 1 percentage point in the productivity during their working life. Indi-
child dependency ratio is associated with a viduals with low human capital who have (or
reduction of 0.38 percentage point in the had) low-paid jobs, or who experienced long
poverty rate (figure 5.14).12 An increase in periods of unemployment during their work-
the share of working-age population can also ing life, would have challenges in supporting
lead to a decline in the poverty rate. If fertility their own consumption in later years. The
declines are concentrated among the B40, the greater the investment in human capital, and
economic benefits of lower dependency rates the earlier that investment begins, the higher
and more income earners as a share of the return to society throughout a workers pro-
population will accrue to the poorest. As the ductive life (Heckman 2008).
households child-dependency ratio falls and It is not unusual for labor income to sup-
the share of working-age people increases, port half or more of a persons consumption
per capita income is likely to increase, which at age 65 (figure 5.16).13 That is not the case
relaxes the social and household budget con- in high-income economies such as Germany,
straints. Families who have fewer children will Hungary, Japan, Slovenia, and Taiwan,
have more per capita resources at their dis- China. But low reliance on labor income does
posal for consumption, as well as investment. not necessarily mean that those over 65 have
The realization of the fi rst demographic left the labor market. In Japan, for example,
dividend, led by a reduction in the child- labor force participation among the 65-year-
dependency ratio, could facilitate the eradi- old population is quite high, although labor
cation of global poverty. In 1990, East Asia income per worker is low. By age 75 labor
Child-dependency ratio Child-dependency ratio Child-dependency ratio Child-dependency ratio
Ca
m
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Ice An
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
la er Ni
go M oo ge
Sw nd la au n
e Ira
rit
a
Ug r
Ur den an
ug q Se nia da
Ga ne
No uay bo
n Ye gal Ch
Ar rw
g ay
Bo
tsw m Bu ad
Su en rk
Se enti an da in
Ne ych na a n M aF
as
th ell Jo Sw Ken oz o
er es rd
az ya a m
De land an bi
nm s Pa Gu ila
at nd M qu
na ad
a Do m em ag e
Fin rk m Pa a Pa ala as
in ra ca
countries in all income categories
lan
Fr d ica gu S Co kis r
an n ay oT ng tan
Ire ce
Re
pu om oR M
Un lan a G ep. al
bl
ite i nd ha Bu i
d C d
Ki hi M c n ru
ng le So exic C Prn a nd
d o M i
GLOBAL MONITORING REPORT 2015/2016
ut te cip
B o h d e ala
Sw elg m Af Iv Af
i ric gh wi
Lu itzer um Co a Dj oire
ib an
xe la lo o
m nd m Ni uti
ist
an
bi
bo a ge
Ec r
Au urg ua B ia To
d. High-income countries
a. Low-income countries
Co zil a Zi Ver in
Cr aly m d e
oa sta e Rw a
El bab
c. Upper-middle-income countries
b. Lower-middle-income countries
Cy tia Ri
c Sa we
lva
an
d
Slo prus Tu a
v ni do Et a
sia hi
Hu eni
Al In r op
ng a Le dia Co ia
Ru ar M ban
on i so m
t or
Gu
ss L Spa y te a Bh ho os
in
ian it in ne u
ea
-
Fe hua gr
M o Ko tan
Bis
Note: The sample covers 34 high-income; 24 upper-middle-income; 32 lower-middle-income; and 22 low-income countries.
de nia Bo au s
ra
sa
rit Sr ovo
Po tio ia iu iL
rtu n an an
d B s
Ne
g M ka
pa
or
l
Po al He elar
l rze us Ar occo Li
Source: World Bank calculations, based on data from household surveys, circa 2012, but including the latest available data from 200413.
Es and
to go m Sie ber
Slo vin M enia
va L nia ol rra ia
k R at Ro a d Le
m
FIGURE 5.13 T60 households tend to have lower child-dependency ratios than B40 households in
ep via Ge ova on
u an or e
Gr blic Bu ia Uk gia
ee lg ra Ha
ce ar in iti
ia e
D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y
181
182 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y GLOBAL MONITORING REPORT 2015/2016
FIGURE 5.14 Demographic change can have in only a few early- and late-dividend coun-
substantial impacts on poverty tries, including China, India, Indonesia,
Mexico, and the Philippines. Increases in life
0.5
expectancy in these countries would require
Changes in poverty headcount rate
50
their consumption. Asset-based realloca-
40
tions tend to be more important in the early-
30
dividend countries where on average they
20
support almost 60 percent of consumption.
10
In late-dividend countries, asset-based flows
0
East Asia South Sub- East Asia South Sub-
amount, on average, to 40 percent of con-
and the Asia Saharan and the Asia Saharan sumption by the elderly, and in post-dividend
Pacific Africa Pacific Africa countries to approximately 25 percent. At
Poverty headcount Child-dependency ratio age 75, asset-based inflows are nearly as high
1990 2012 in early-dividend countries as they are at
age 65. In late- and post-dividend countries,
Source: World Bank calculations.
these flows are equal to about 30 percent of
consumption.
income as a share of consumption drops sub- Because the elderly support their consump-
stantially across countries for which data are tion through multiple sources and at different
available. Labor income at age 75 is close to shares of those sources, the growing cohort
or greater than 20 percent of consumption of elderly will have diverse fiscal impacts
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 183
BOX 5.4 Funding the difference between consumption and production over the life cycle
The life-cycle deficit, the gap between what is con- transfers to the elderly are very small and often nega-
sumed and what is produced, must be funded. For tivethe elderly as a group provide more to their
children, the support system is dominated by public descendants than they receive. The key trade-off for
and private transfers. Public transfers to children rise the elderly is between relying on net public transfers
with the level of a countrys income (figure B5.4.1 and relying on assets. In some European countries,
compares public transfers in Germany and the Philip- such as Finland, Germany, and Sweden, net public
pines). The identification of the sources of transfer to transfers are sufficient to fund all or nearly all of their
support the consumption of the dependent population old-age life-cycle deficits. The elderly in other rich
across the life cycle is a key information to analyze countries, such as Japan, the United Kingdom, and the
the potential effect of demographic change on public United States rely much less on public transfers and
finance (Lee et al. 2014). much more on assets to fund their old-age needs.
Support systems are generally more complex for Variation is also great among low- and middle-
the elderly than for children. The elderly rely on assets income countries. The elderly in developing countries
in addition to public and private transfers to fund in Asia, such as India, the Republic of Korea, the Phil-
their life-cycle deficits. The elderly may own their ippines, and Thailand, are more likely to depend on
own home, a farm, or business, or participate in a private transfers and on assets than on public trans-
funded pension system. fers. The elderly in many Latin American countries
Old-age support systems are highly varied around rely much more heavily on public transfers and less on
the world. Among high-income countries, net private private transfers and assets.
FIGURE B5.4.1 Public transfers to dependents are greater in Germany than in the Philippines
a. Support for the elderly in the Philippines b. Support for the elderly in Germany
1.0 1.0
0.8 0.8
income by age and source relative to the
Ratio of per capita net tranfers and asset
0.6 0.6
0.4 0.4
0.2 0.2
0 0
0.2 0.2
0.4 0.4
0.6 0.6
0.8 0.8
0 10 20 30 40 50 60 70 80 90 0 10 20 30 40 50 60 70 80 90
Age (years) Age (years)
Private transfers Asset-based reallocations Public transfers Life-cycle deficit
Source: National Transfer Accounts.
Note: Philippines, 1999; Germany: 2003. Positive transfers suggest that a person of a given age is a net recipient of transfers. Positive life-cycle deficit suggests that
consumption at a given age is supported mostly by transfers and asset income. Values all expressed relative to the average labor income of persons ages 3049.
from country to country. In countries with consumption by the elderly, while in Japan,
generous public pension systems, such as the United Kingdom, and the United States,
Finland, Germany, and Sweden, net public the elderly rely more on private assets to fund
transfers are sufficient to fund all or nearly all their old-age needs. In Asian countries like
184 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y GLOBAL MONITORING REPORT 2015/2016
FIGURE 5.16 Labor income still supports substantial consumption for 65-year olds, while 75-year-olds
rely mostly on public transfers or asset-based flows
a. Age 65 b. Age 75
United States
Taiwan, China
Sweden
Spain
Korea, Rep.
Slovenia
Japan
Hungary
Germany
Uruguay
Thailand
Costa Rica
China
Chile
Brazil
South Africa
Philippines
Peru
Mexico
Indonesia
India
Argentina
Source: World Bank calculations, based on the National Transfer Accounts database.
China, the Republic of Korea, and Thailand, the demand for public services. Slow prog-
private transfers are the major source of fund- ress in human development in pre-dividend
ing for old-age support.16 In these latter two countries has contributed to persistently high
groups of countries where old-age support fertility rates, which in turn limit these coun-
is fi nanced privately, the growing shares of tries to increase investment in human capital.
elderly place a smaller burden on fiscal bal- Pre- and early-dividend countries also face
ances than they do in other countries with the challenge of creating enough jobs for the
more mature public-pension systems. growing working-age population share and
in investing sufficiently in raising their skill
levels. Late- and post-dividend countries face
Conclusion possible growth slowdowns as a growing
Demographic change presents both oppor- share of the working-age progresses to retire-
tunities and challenges to development. ment, requiring an increasingly large share of
Although demography is by no means the only capital simply to maintain or improve their
force that shapes the economy, it has direct welfare.
effects on the availability of key resources for Demographic transition in large econo-
development and, at the same time, impacts mies can have substantial spillovers to the
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 185
global economy. There is evidence that aging just by a larger share of working-age popula-
in late- and post-dividend countries could tion but also by deeper integration into the
slow potential future growth, leading to neg- global economy through trade links.
ative global spillovers through channels such The realization of demographic dividends
as the demand for imports and foreign direct stands to have global environmental exter-
investment (see chapter 3). At the same time, nalities, another critical spillover (box 5.5).
the realization of demographic dividends in An increase in the consumption per capita
large economies can have positive spillovers associated with the realization of demo-
to other economies. For example, Chinas graphic dividends will lead to an increase of
rapid GDP growth has been supported not carbon dioxide emissions, keeping constant
BOX 5.5 Current demographic trends could lead to greater greenhouse gas emissions in
some countries
Population growth is a central factor that affects 2010; Lutz and Striessing 2015). It has been found,
greenhouse gas emissions and subsequently climate for instance, that shifts in the age and cohort compo-
change. The relevance of population trends for envi- sition of the population drove some of the observed
ronmental policy has been increasingly acknowl- increase in carbon emissions in high-income coun-
edged, and empirical research on these interactions tries in the past (Menz and Welsch 2012). China,
has grown in recent years (Harper 2013). Models India, and other developing countries are expected
used in climate-change studies are based on the prem- to experience the most pronounced shift toward
ise that greenhouse gas emissions growth is the prod- urbanization, while countries in the European Union
uct of population growth, economic growth, and the and Latin America will undergo significant changes
carbon intensity of energy consumption in the econ- in the age composition of households (ONeill et al.
omy (Pachauri and Reisinger 2007). 2010).
Various statistical analyses confi rm that popula- In the future, population trends will largely shape
tion growth has driven emissions growth over the each countrys contribution to global greenhouse gas
past several decades (ONeill et al. 2010). A 1 per- emissions. As an example, and based on the expected
centage point increase in population has been asso- demographic trends highlighted above, projections
ciated with a similar increase in carbon emissions show that aging could reduce emissions in the long
(ONeill 2009). As a result, and based on UN projec- term by up to 20 percent, particularly in industrial-
tions, if the worlds population follows a low, rather ized country regions. At the same time, urbanization
than a medium, growth path, global emissions could could increase projected emissions by more than 25
be expected to fall by 15 percent in 2050 and by 40 percent, particularly in developing countries (ONeill
percent in 2100. On the other hand, a high popula- et al. 2010). However, urbanization is also associ-
tion growth path could increase emissions by 17 per- ated with higher income growth, which in turn may
cent in 2050 and by 60 percent in 2100 (ONeill et al. lead to a reduction in emissions. Thus a better under-
2012). Other estimates show that slower population standing of possible changes in consumption prefer-
growth could account for as much as 1629 percent ences associated with income growth and the urban-
of the reduction in emissions that would be necessary ization process, as two potentially offsetting forces,
to avoid dangerous climate change by 2050 (ONeill will be required to adequately assess future global
et al. 2010). and country patterns in greenhouse gas emissions
Demographic characteristics beyond population (ONeill et al. 2012).
size will also play a more relevant role for future car- The emission intensity of growth varies across
bon emissions in the future. These include the age, countries and explains differential contributions to
education, and sex distribution of the population; the global environmental changes moving forward (map
place of residence; and household size (ONeill et al. B5.5.1). Countries with low population growth can
BOX 5.5 Current demographic trends could lead to greater greenhouse gas emissions
in some countries (continued)
still account for increasing shares of emissions if their Indicators). However, in general, environmental deg-
economic growth model is highly dependent on fos- radation is associated with the development stage of
sil fuelsbased energy consumption. For instance, countries, following a U-shaped inverted curve. In
annual emissions per capita were much higher in the largely agricultural economies and highly developed
United States (17.6 tons in 201014) than in China countries, environmental damage is minimal, while in
(slightly above 6 tons), and above the world average industrializing countries pollutant emissions are high-
of 4.5 tons per person annually (World Development est (Aznar-Marquez and Ruiz-Tamarit 2005).
MAP B5.5.1 High-income countries with slower population growth have higher greenhouse gas emissions
intensities
World CO2 emissions per capita, metric tons per capita
IBRD 41782
AUGUST 2015
technology and consumers behavior. The developed countries, then there may be chal-
growth in per capita consumption in large, lenges to the sustainability of global growth.
fast-growing, emerging-market economies Countries can take advantage of not just
has increased the global demand for goods their own demographic contexts but also
and services, with subsequent implications demographic disparities across countries. The
for environmentally sustainable growth. opportunities to be realized depend on the
If per capita consumption of renewable demographic stage of the country, however.
and nonrenewable resources (such as fossil Whatever the stage of transition, policies will
fuels, water, forest resources) in developing be needed to provide the necessary conditions
countries follows the same pro le as that in for an effective and productive allocation of
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 187
these resources. Chapter 6 focuses on policy savers when they are working age but tend to
recommendations that will be useful in this be predominantly consumers when they are
regard. young or old. Empirically, declining depen-
dency ratios tend to boost domestic savings
and investment (Loayza, Schmitt-Hebel, and
Notes Servn 2000).
1. Assuming a constant output per worker, if 10. An extensive literature on this includes Kelley
the effective number of producers (work- and Schmidt (2005), Higgins (1998), Higgins
ers) grows at the same rate as the number of and Williamson (1997), and Kinugasa and
effective consumers (total population), there Mason (2007).
would be no change in welfare in per capita 11. Several studies suggest that declining depen-
terms. For example, pre-dividend countries dency ratios tend to boost domestic savings
with very high fertility rates might have a and investment (Loayza, Schmitt-Hebel, and
positive growth in their GDP that does not Servn 2000), but others suggest that some
lead to improvements in their welfare per of these fi ndings are not plausible within the
capita, because the dependent population life-cycle savings model on which this empiri-
could be growing faster than the working-age cal analysis relies. Lee, Mason, and Miller
population. (2003) and Kinugasa and Mason (2007) sug-
2. Appendix C3 discusses the specifics of how gest that some impact of the dependency ratio
the typology is constructed. on saving is most pronounced in countries
3. Based on the $1.90 a day poverty line data experiencing rapid fertility decline, rapid eco-
from Povcalnet. The sample of countries nomic growth, and shifts away from reliance
included 31 pre-dividend countries, 48 early- on family transfers for old-age support.
dividend countries, 34 late-dividend coun- 12. Due to the potential endogeneity issues
tries, and 4 post-dividend countries. described in appendix C.4, the economet-
4. Based on data for 191 countries from World ric results showing the association between
Development Indicators; the data are for the demographic change and the poverty rate
latest year available between 2011 and 2012. should be interpreted cautiously, as correla-
5. This projection is equivalent to the constant tions may not reflect causality.
enrollment rate assumption in the most pes- 13. The analysis in this section is based on data
simistic education projection scenarios of from the National Transfer Accounts (NTAs).
KC et al. (2010). 14. Net public transfers are defi ned in NTAs as
6. Early childhood development consists of mea- public transfer inflows less public transfer
sures beyond education with clear implica- outflows. Public transfer inflows are broadly
tions for multidimensional poverty reduction defi ned to include cash and all in-kind trans-
(World Bank 2015a). fers, such as education, publicly funded health
7. Brsch-Supan, Ludwig, and Winter (2002) care, and other forms of public consump-
and the World Bank (2013a) suggest that capi- tion. Public transfer outflows are defined as
tal flows from fast-aging economies to younger the taxes imposed, including indirect taxes,
economies could be substantial in the future. to fund public transfer inflows. Inflows and
8. The extensive literature on this includes but outflows are assigned to age groups using
is not restricted to Bloom and Williamson administrative records, household surveys, and
(1998), Bloom et al. (2009), Bloom and Can- tax-incidence rules that are described in more
ning (2004), Higgins and Williamson (1997), detail in Lee and Mason (2011) and UN (2013)
Eastwood and Lipton (2011), Kelley and 15. Employment-based pensions paid to retirees,
Schmidt (1995, 2005, 2007), and Rosenzweig including payments to public sector retir-
(1990). ees, are not transfers. They are a form of
9. National private-savings rates have been deferred compensation. To the extent that
found to depend on the age composition of the elderly are supported through transfers,
the population: individuals are typically net it is in the form of health and other in-kind
188 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y GLOBAL MONITORING REPORT 2015/2016
transfers. Taxes assessed on pension income Jackson Hole, Wyoming, August 26 28,
may be small in a country, but transfer out- pp 926.
flows include taxes on profits, rent, inter- Bloom, D., D. Canning, G. Fink, and J. E. Finlay.
est, and consumption including value added 2009. Fertility, Female Labor Force Participa-
taxes. tion, and the Demographic Dividend. Journal
16. Based on these differences, World Bank of Economic Growth 14 (2): 79101.
(2015b and Bussolo, Koettle, and Sinnott Bloom, D., and J. Williamson. 1998. Demo-
(2015) argue that countries with less mature graphic Transition and Economic Miracles
public-pension systems have an opportunity in Emerging Asia. World Bank Economic
to reform these systems before the beneficia- Review 12 (3): 41956.
ries grow old. Bogetic, Z., H. Onder, A. Onal, E. Skrok, E.
Schwartz, and H. Winkler. 2015. Fiscal
Policy Issues in the Aging Societies. MFM
References Discussion Paper 1, World Bank, Washington,
Aznar-Marquez, J., and J. R. Ruiz-Tamarit. 2005. DC.
Democratic Transition, Environmental Con- Bonoli, G., and T. Shinkawa. 2005. Aging and
cern and the Kuznets Curve. Dpartement Pension Reform around the World: Evi-
des Sciences conomiques de lUniversit dence from Eleven Countries. Edward Elgar
catholique de Louvain, Belgium. Publishing.
Banerjee, A., R. Pande, and M. Walton. 2012. Brsch-Supan, A. 2013. Myths, Scientifi c Evi-
Delhis Slum Dwellers: Deprivation, Prefer- dence and Economic Policy in an Aging
ences and Political Engagement among the World. Journal of the Economics of Ageing
Urban Poor. Working Paper, International 12: 315.
Growth Centre, London. Brsch-Supan, A., A. Ludwig, and J. Winter.
Barro, R. J. 2003. Determinants of Economic 2002. Ageing and International Capital
Growth in a Panel of Countries. Annals of Flows. In Ageing, Financial Markets and
Economics and Finance 4 (2): 23174. Monetary Policy, edited by A.J. Auerback and
Batini, N., T. Callen, and W. McKibbin. 2006. H. Herrmann, chapter 2. Berlin: Springer.
The Global Impact of Demographic Change. Bradley, D., C. Stephens, T. Harpham, and S.
IMF Working Paper, WP 06/09. International Cairncross. 1992. A Review of the Environ-
Monetary Fund, Washington, DC. mental Health Impacts in Developing Country
Becker, G. S. 1960. An Economic Analysis of Cities. Urban Management Program Discus-
Fertility. In Demographic and Economic sion Paper 11101, World Bank, Washington,
Change in Developed Countries. New York: DC.
Columbia University Press. Bussolo, M., J. Koettl, and E. Sinnott. 2015.
Becker, G. S., and H. G. Lewis. 1973. On the Golden Aging: Prospects for Healthy, Active,
Interaction between the Quantity and Qual- and Prosperous Aging in Europe and Central
ity of Children. Journal of Political Economy Asia. Washington, DC: World Bank.
81 (2). CMS (Centers for Medicare and Medicaid Ser-
Birdsall, N., A. Kelley, and S. Sinding, eds. 2003. vices). 2015a. Health Expenditure Projections
Demographic Change, Economic Growth, 2014 2024 Forecast Summary. Washing-
and Poverty in the Developing World. Oxford, ton, DC: Centers for Medicare and Medicaid
U.K.: Oxford University Press. Services.
Bloom, D., and D. Canning. 2004. Global . 2015b. Health Expenditures by Age and
Demographic Change: Dimensions and Eco- Gender. Washington, DC: Centers for Medi-
nomic Significance in Global Demographic care and Medicaid Services.
Change: Economic Impacts and Policy Chal- Cunningham, H., and P. Viazzo. 1996. Child
lenges, proceedings, Federal Reserve Bank of Labor in Historical Perspective19801985:
Kansas City, Economic Policy Symposium C a se Studies from Europe, Japan and
GLOBAL MONITORING REPORT 2015/2016 D E M O G R A P H I C C H A N G E : PAT H WAY S TO P R O S P E R I T Y 189
Loayza, N., K. Schmitt-Hebel, and L. Servn. of the United St ates of A m e ric a 107:
2000. What Drives Private Saving across the 1752126.
World? Review of Economics and Statistics Pachauri, R. K., and A. Reisinger, eds. 2007. Cli-
82 (2): 16581. mate Change 2007 Synthesis Report: Sum-
Lucas Jr., R. 1988. On the Mechanics of Eco- mary for Policymakers. IPCC Secretariat.
nomic Development. Journal of Monetary Rosenzweig, Mark R. 1990. Population Growth
Economics 22(1): 342. and Human Capital Investments: Theory and
Lutz, W., and E. Striessing. 2015. Demographic Evidence. Journal of Political Economy 98
Aspects of Climate Change Mitigation and (5): 3870.
Adaptation. Population Studies 69 (supp 1): Saez, E., and G. Zucman. 2014. Wealth Inequal-
S69S76. ity in the United States since 1913: Evidence
Manyika, J., J.Woetzel, R. Dobbs, J. Remes, E. from Capitalized Income Tax Data. Working
Labaye, and A. Jordan. 2015. Global Growth: Paper, National Bureau of Economic Research,
Can Productivity Save the Day in an Aging Cambridge, MA.
World? New York: McKinsey Global Institute. Towers Watson. 2012. Global Pension Assets
Marx, B., T. Stoker, and T. Suri. 2013. The Eco- Study 2012. London: Towers Watson.
nomics of Slums in the Developing World. Tyers, R., and Q. Shi. 2007. Demographic
Journal of Economic Perspectives 27 (4): Change and Policy Responses: Implications for
187210. the Global Economy. World Economy 30 (4):
Mason, A. 2005. Demographic Transition and 53766.
Demographic Dividends in Developed and U N (United Nations). 2008. Urbanization,
Developing Countries. In United Nations Internal Migration and Development: An
Expert Group Meeting on Social and Eco- International Perspective. New York: United
nomic Implications of Changing Population Nations.
Age Sstructures, vol. 31. . 2013. National Transfer Accounts Man-
Mason, A., and T. Kinugasa. 2008. East Asian ual: Measuring and Analysing the Genera-
Economic Development: Two Demographic tional Economy. New York, United Nations.
Dividends. Journal of Asian Economics 19 . 2015. World Population Prospects: The
(5): 38999. 2015 Revision, New York: United Nations,
McKibbin, W. J. 2006. The Global Macroeco- Department of Economic and Social Affairs,
nomic Consequences of a Demographic Transi- Population Division.
tion. Asian Economic Papers 5 (1): 92134. UN-Habitat. 2003. The Challenges of Slums:
Menz, T., and H. Welsch. 2012. Population Global Re por t on Hum an Set tle me nts
Aging and Carbon Emissions in OECD Coun- 2003. London and Sterling, VA: Earthscan
tries: Accounting for Life-cycle and Cohort Publications.
Effects. Energy Economics 34 (3): 84249. World Bank. 2013a. Global Development Hori-
ONeill, B. C. 2009. Climate Change and Popu- zons: Capital for the Future. Washington, DC:
lation Growth. In Population, Justice and the World Bank.
Environmental Challenge, edited by L. Mazur. . 2013b. Poverty Assessment: Assessing
Washington, DC: Island Press. a Decade of Progress in Reducing Poverty
ONeill, B. C., X. Ren, L. Jiang, et al. 2012. The 20002010. Washington, DC: World Bank.
Effect of Urbanization on Energy Use in India . 2015a. World Bank Support to Early
and China in the Ipets Model. Energy Eco- Childhood Development: An Independent
nomics 34 (Supplement 3): S339S345. Evaluation. Washington, DC: World Bank.
ONeill, B. C., et al. 2010. Global Demographic . 2015b. Aging in East Asia and Pacifi c:
Trends and Future Carbon Emissions. Pro- Capitalizing on the Demographic Transition.
ceedings of the National Academy of Sciences Washington, DC: World Bank.
6
Policy Priorities in an
Era of Demographic Change
Demographic change is a major factor shaping the trajectory of development for countries at
all income levels. It offers opportunities where the share of working-age people in the popu-
lation is rising. It can pose challenges where fertility rates are persistently high or where the
population is aging rapidly. Navigating these dynamics will require sound policies informed
by a long-run perspective and tailored to a nations demographic context. Effective policies
will leverage demographic transitions both within a country and across borders. Demography-
informed policies can cover a wide range of areas, including human, private sector, financial
development, and governance. Such policies can play important parts in achieving the devel-
opment goals.
Demographic change can support develop- dwindling. In these countries, policies will
ment if governments implement demography- need to be adapted to these demographic
informed policies. As detailed in chapter 5, changes if welfare is to be maintained or
countries moving from high to low fertil- improved. It is worth noting that demo-
ity can benefit from a growing working- graphic change has significant implications
age population share. These countries have for the political economy of policy making
the potential to realize the fi rst and second because changing age structures affect both
demographic dividends beneficial to poverty political pressures and preferences (box 6.1).
reduction and shared prosperity, as well as to Country-level priorities will depend on the
overall growth and development. Half of the countrys stage of demographic transition.
worlds populationand most of the worlds In terms of the country typology set out in
poorlives in countries where the working- chapter 5, policies in pre-dividend countries
age population share is rising. Whether a ris- need to spark demographic transition by
ing working-age share is beneficial depends addressing human development challenges
on the extent to which governments ensure and speeding up the fertility declines neces-
that policies and institutions take advantage sary to raise the working-age share of the
of these trends. The other half of the worlds population and boost economic growth. In
population lives in countries where the popu- early-dividend countries, the priority is to
lation is aging, and the working-age share is accelerate job creation by investing in human
191
192 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
Demographic change may exert a powerful impact Populations with higher median ages tend to press
on political forces. The nascent fields of political for more political openness. Political demography
demography and political economy of demog- suggests that, when the median age of the popula-
raphy seek to deepen the understanding of these tion reaches 2535, the tolerance for authoritarian-
impacts, and how policy choices, especially those that ism to ensure stability falls, and the demand for lib-
have distributional implications, will be affected by eral democracy and more openness grows (Cincotta
changes in demographic patterns (Null 2015). At the 2011). The focus shifts to improving the investment
country level, three channels of impact are salient: the climate and increasing openness, enabling business,
impact of a youth bulge on politics, the effect of an and boosting employment creation.
increase in the age of the median voter on demands The evidence on the impact of aging on political
for more open democratic representation, and the role pressures for generous pensions is mixed. Rapid aging
of aging in shaping the prospects for pension reform. of populations in many countries is heightening con-
At the international level, cross-border spillovers cerns about the sustainability of pension and social
from country-level effects of demographic change protection systems, especially if a graying of the
can be significant, and global economic and security median voter bolsters political preferences for more
arrangements may become less stable because of the pension spending at the expense of other priorities.
aging and anticipated declines in the populations of The evidence for this is mixed. For example, older
countries that have played a pivotal role in uphold- age cohorts in Europe tend to prefer more spending
ing these frameworks in the past. Finally, the effect on pensions and less on education (Bussolo, Koettl,
of demographic change on political preferences also and Sinnott 2015). In the United States, this prefer-
plays a role in shaping the prospects for implement- ence for lower spending extends to lower spending on
ing policies that will be central to making the most a per child basis (Cattaneo and Wolter 2007; Ober-
of opportunities while mitigating the risks associated ndorfer and Steiner 2006; Poterba 1996). While the
with evolving demography. success of gray interest political parties across
Europe has been mixed, older people are also more
likely to vote and may increasingly frustrate pen-
Impact on political economy at the
sion reforms aimed at ensuring sustainability. Other
country level
evidence from OECD countries, however, suggests
Ensuring that the youth bulgerelatively large that an aging median voter does not lead to higher
cohorts of youth entering the labor forceis pro- benefits per retiree, including health benefits (Hol-
ductively employed is essential for political stability. landers and Koster 2012). Well-designed systems can
While accelerating demographic transitions to low also be implemented that cut across particular politi-
fertility and mortality give rise to potential demo- cal interest groups (Gra 2013). In developing East
graphic dividends, these can be realized only if the Asia and Pacific, aging does not pose insurmountable
youth bulge can fi nd gainful employment. If employ- challenges for public spending, especially where it is
ment opportunities are limited because of labor addressed through proactive public policy and politi-
market rigidities or other factors, the risk of discon- cal leadership (World Bank 2015b).
tent grows. In countries within the demographic
arc of instability, defi ned as having a population
Impact on political economy at the
with a median age of less than 25, the chances of
global level
confl ict are 2.5 times higher than for other countries
(Cincotta 2010). Based on the projection of popula- The contributions of demographic change to conflict,
tion age structures to 2030, elevated risks of fragility pressure for liberal democracy, or increased pension
and confl ict become concentrated in Sub-Saharan spending can lead to significant international spill-
Africa (where the median age remains low), poten- overs. The potential for such spillovers is more pro-
tially jeopardizing decades of hard-won development nounced than ever before given increasing intercon-
gains. nectedness and the accelerating pace of globalization
(box continues next page)
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 193
in recent decades. For example, whether stemming eral development banks led by the largest emerging
from countries with low median ages in conflict, market economies.
or countries with intermediate median ages in the
throes of establishing more open political systems,
Implications for policy implementation
the instability in the Middle East and North Africa
has prompted a large influx of migrants and refugees The feasibility of implementing policies informed
to Western Europe. Similarly, increased demands for by demography is affected by demographic change,
pension spendingin countries with aging popula- but as noted, the fi ndings are mixed. With the aging
tions that are typically higher incomeaffect the sav- of the median voter, there are concerns that imple-
ings available for investment in emerging markets and menting key policies to reflect demographic change
sharpens the competition official development assis- may become more difficult, locking in unsustain-
tance faces for public funds. able pension systems, for example. However, in some
Demographic change may have implications for cases the maturing median age voter appears to prefer
international trade and security arrangements. Popu- the needed policies, such as investing in human capi-
lation aging may be weakening support for interna- tal, ensuring labor market flexibility, and promoting
tional systems in many countries that traditionally job creation in early-dividend countries. The role of
played an important role in upholding these arrange- demographic change is mixed even regarding politi-
ments. For example, the workforces of Germany, cally charged issues like immigration. For example,
Japan, and the Russian Federation are shrinking there is strong evidence that todays elderly hold less
and the demands for entitlement spending are ris- favorable views of immigration than the average sur-
ing, helping reduce their relative economic heft and vey respondent in much of Europe; however, there
shift national spending priorities. These trends will is no strong reason to think that todays younger
affect their capacity to bolster international political cohorts will become less supportive of migration in
and economic systems (Goldstone, Kauffman, and the future when they become the elderly (Bussolo,
Toft 2012). The shift in influence and responsibil- Koettl, and Sinnott 2015). Hence, with leadership
ity toward developing countries for ensuring strong and a strong evidence base, sound policies that reflect
global economic and political relationships is already demographic considerations may fi nd the necessary
evident with the establishment of additional multilat- political support to move forward.
chapters 4 and 5, this chapter highlights key case of the first demographic dividend and
policy priorities tailored to demographic fea- to facilitate investment in human and physi-
tures. The chapter fi rst identifies policies to cal capital in the case of the second dividend.
realize opportunities and mitigate risks from For example, in the 1960s, policies in support
demographic change at the country level. It of investment in human capital along with
then discusses those interventions that can openness to trade and foreign direct invest-
help make the most of the varieties of demo- ment (FDI) helped East Asia take advantage
graphic change around the world. of its rapid demographic transition (Bloom
and Williamson 1998).
Leveraging demographic change
within countries Sparking demographic transition in
pre-dividend countries
Analytical work and evidence from country
experiences show that demographic change Pre-dividend countries are characterized by
can inform the policies countries implement deprivations in human development that have
to boost growth and reduce poverty.1 A brief contributed to their slow demographic transi-
summary of policy priorities within countries tion. Most pre-dividend countries are in Sub-
is presented in table 6.1. These policies enable Saharan Africa (see appendix C.3 for a list of
countries to absorb additional labor in the countries by typology). For these countries,
TABLE 6.1 Policy priorities for leveraging demographic change at the country level
Country type Issues Recommendations
Pre-dividend Sparking demographic transition Improve maternal and child health by strengthening provision of basic
Improving human development outcomes to health care services.
reduce fertility rates. Expand education without letting girls fall behind.
Empower women, and give them access to comprehensive family
planning services.
Early-dividend Accelerating job creation Invest in human capital, including vocational and technical training.
Creating productive jobs for the growing share Enhance labor market mobility.
of the population in working age to reap the rst Reduce barriers to female labor force participation.
demographic dividend.
Strengthen conditions conducive to savings and job creation (public
services underpinning private sector activity, contract enforcement,
nancial inclusion, protection of labor rights).
Late-dividend Sustaining productivity growth Continue mobilization of savings for productive investment.
Creating conditions necessary to reap the Ensure that public policies across the board encourage labor-force
second demographic dividend and beginning participation of both sexes.
to prepare for aging. Design cost-eective and sustainable systems for welfare and human
development that address current needs (including health, child
care, education, and support to vulnerable elderly) and that can be
adapted to meet the needs that emerge as aging proceeds.
Post-dividend Adapting to aging Complete reforms of welfare systemsincluding pensions, health care,
Maintaining and improving welfare in the and long-term carethat ensure scal sustainability and, as part
context of a declining working-age share and of integrated approaches, protection of the vulnerable, elderly and
growing old-age share. others, and encouragement of work among those who are able.
Raise labor force participation and productivity (including incentives
for participation targeted at women and older cohorts; and lifelong
learning for all).
Pursue policies that encourage a rebound of fertility, among other
things by making it easier for men and women to combine child
rearing and participation in the labor market.
Source: GMR team elaboration.
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 195
current outcomes are discouraging accord- and after giving birth. 2 Several multilat-
ing to most development indicators, includ- eral initiatives embrace such a multipronged
ing poverty, infant mortality, educational approach, as illustrated by the multilateral
attainment, health, and labor productivity. African Road Map for reducing maternal
Because of high youth-dependency ratios, and newborn mortality. A number of coun-
high fertility rates, and other factors, their tries are strengthening the newborn compo-
projected population growth is high (World nents of existing child health plans as part
Bank 2015a). of the World Health Organizations Every
Policy action focused on human develop- Newborn Action Plan (WHO and UNICEF
ment may help pre-dividend countries prog- 2015). Immunization coverage can also be
ress to the next stage in the demographic expanded by taking advantage of multilat-
transition. Fertility (and child mortality) eral initiatives, such as the Global Vaccine
rates are influenced by policies that improve Action Plan, and public-private partnerships
maternal and child health services, expand such as the Global Alliance for Vaccines and
education coverage (particularly to girls), Immunizations.
and empower women in the household and A second area of policy focus is to improve
in the labor force (Bloom et al. 2009; Soares educational outcomes, paying particular
and Falco 2008; World Bank 2015a). Given attention so that girls do not fall behind.
their potential to reduce total fertility rates Given low levels of educational attainment in
and lower child mortality, these policy areas pre-dividend countries, gains in educational
can be considered interactive accelerators attainment yield a future labor force that bet-
of demographic transition, in addition to ter contributes to accelerated growth by being
being important development goals in their more productive in a wider range of sectors.
own right. Concluding the unfi nished Mil- Schooling of girls is particularly important
lennium Development Goals (MDGs) agenda since improvements in their educational
related to these policies should be considered attainments are also associated with lower
a priority for pre-dividend countries. Simula- fertility rates. For example, in Ethiopia, a
tions for Niger, a pre-dividend country, point country that recently proceeded to the early-
to the costs of inaction that stalls fertility dividend stage, women with more education
decline: if total fertility remains at the 2015 have lower fertility rates than women who
rate of around 7 children per woman through are less educated. The scope for improving
2050 instead of gradually declining to 4.7, female education, reducing fertility, and low-
the extreme poverty rate in 2050 would be ering child-dependency ratios is particularly
substantially higher, 20 percent instead of large among poorer households, thus offering
14 percent. (Additional analysis of Niger is a path toward accelerated poverty reduction
found in the Country Spotlights at the end of for these groups and faster per capita growth
this chapter.) overall as the working-age share of the popu-
A first area of policy focus for pre- lation is increased.
dividend countries is the improvement of A third area of policy focus is that of giv-
health outcomes, particularly for women and ing females greater agency and voice. These
children. The exact mechanisms by which are valuable development goals on their own,
maternal and child health can be improved and they can also contribute to lower fertil-
depend on the country context. Broadly, ity. Surveys often fi nd that women in Africa
they include measures to strengthen national would prefer to have fewer children than their
health systems, including improvements in male partners (Voas 2003). Access to compre-
their human resource and infrastructure hensive family-planning services is important
capacity for service delivery. Priority ser- for women to achieve their desired fertility
vices areas include immunization programs, levels (World Bank 2014d). Yet imbalances
enhanced growth monitoring of children, and in household bargaining power reduce use
services targeted at women during pregnancy of contraceptives and family planning,
196 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
raising fertility rates above levels preferred socioeconomic groups to benefit from favor-
by women. These power imbalances are also able population dynamics (Fox and Sohnesen
linked to the incidence of child marriage. 2012; Lee and Mason 2006; Troiano 2015).
For example, about 75 percent of girls ages Policies that improve labor mobility, for
18 or younger are married in Niger, 68 per- example, will make it easier for workers to
cent in Central African Republic and Chad, fi nd jobs where they are most needed, con-
and more than 50 percent in Burkina Faso, tributing to rural-urban migration and relo-
Guinea, Malawi, Mali, and South Sudan cation from regions with labor surpluses to
(World Bank 2014a). Since early marriage is regions with shortages (World Bank 2009).
associated with, and most likely contributes Policies and institutions also need to
to, weaker educational outcomes, delayed ensure that supply and demand for work-
marriage may help improve education of girls, ers are consistent with rapid employment
with potential growth and poverty reduction growth. Scenario analysis for Ethiopia, an
payoffs (see the section on Niger in the Coun- early-dividend country, was used to assess
try Spotlights at the end of this chapter). the likely effects of a policy package aimed
at making better use of the countrys rap-
idly growing labor force through improved
Accelerating job creation in early-
education, higher private savings, and more
dividend countries
rapid total factor productivity (TFP) growth
Early-dividend countries have growing during the period 201530 (see the section
working-age population shares, and their on Ethiopia in the Country Spotlights at the
total fertility rates have been steadily declin- end of this chapter). The results indicate that,
ing in recent decades. These countries cur- over a 15-year horizon, higher private savings
rently have average fertility rates of under 4 (channeled into higher private investment)
births per woman, and many are expected to and more rapid TFP growth can make a sig-
approach the replacement fertility rate of 2.1 nificant difference.
births per woman by 2030. These predomi- In many countries, persistent low female
nantly middle-income countriesincluding labor-force participation is an obstacle to the
several large economies, such as India and realization of the first demographic dividend.
Mexicoare home to a third of the global Gender gaps in labor force participation have
population. Declining fertility and mortal- generally persisted (based on figure 6.1, the
ity rates and growing working-age popula- gender gap in labor-force participation is
tion shares in early-dividend countries cre- smaller in 2013 than in 1990), especially in
ate the conditions needed to realize the fi rst some demographic types and in some regions.
demographic dividend: a transitory boost to In the Middle East and North Africa region,
growth as labor supply, labor participation, for example, the average female participa-
and per capita savings increase. tion rate is 32 percent, and several countries
To realize and maximize demographic have rates below 20 percent, including Alge-
dividends, early-dividend countries need to ria, the Islamic Republic of Iran, Iraq, and
focus on interventions that help absorb new Jordan. Facilitating the access of females to
workers into productive jobs. The first demo- the labor market has simultaneous effects
graphic dividend arises only to the extent on demography, human capital, and growth,
that the economy is able to create productive and is needed to realize the first demographic
jobs at a rate that exceeds the rate of popula- dividend (Galor 2012). Causality may also
tion growth. Such job creation may be sped go in other directions because high fertility
up by progress in several areas: investments rates may limit female education and labor-
in human capital (including vocational and force participation: studies suggest that a
technical training), maintenance of mac- single birth reduces a womans labor supply
roeconomic stability, financial inclusion, by almost 2 years during her reproductive life
and labor-market policies that allow all (Bloom et al. 2009).
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 197
FIGURE 6.1 Gender gaps in labor-force participation have persisted since the 1990s across all countries
a. 1990 b. 2010
100 100
80 80
Labor-force participation (%)
40 40
20 20
0 0
Pre- Early- Late- Post- Pre- Early- Late- Post-
dividend dividend dividend dividend dividend dividend dividend dividend
countries countries countries countries countries countries countries countries
Female Male
Source: World Bank calculations, based on UN 2015 and the World Banks World Development Indicators database for 2015.
Note: Labor-force participation includes both men and women ages 1564.
is not inevitable if countries boost produc- workers despite increased aging and labor
tivity growth through the second demo- scarcity, many policies that make it attrac-
graphic dividend. Because of their still sizable tive for women and elderly to work may
working-age shares, high aggregate savings also, to the extent that they involve a general
and investment are feasible. The fact that lon- improvement in work incentives, discour-
gevity typically is increasing in these coun- age emigration and encourage immigration
tries adds to the incentives for people to save by returning nationals and others (Bussolo,
for their retirement (Lee and Mason 2006). Koettl, and Sinnott 2015).
Policies in support of higher aggregate sav- Population aging will also generate grow-
ings to facilitate greater investments in human ing demands for pensions, health care, long-
and physical capital is a top priority for late- term care, and social protection (for the vul-
dividend countries. A financial sector that is nerable), long-term care, and health services.
inclusive, reaching across regions and income Given that the share of the elderly is still
groups, and that provides adequate incentives relatively small, the short-run repercussions
is needed to raise savings and channel them of the specific policy choices in this area are
to productive investments in physical capital. relatively limited. Given that the share of the
Investments in human capital may similarly old will grow, however, the initial design of
be facilitated by incentives in the form of wage policies in this area is extremely important
gains in a well-functioning labor market and considering their fiscal consequences and the
the presence of a financial sector that encour- difficulty of changing behavioral and institu-
ages savings for future education; however, tional patterns. The lessons from countries
the latter would need to be underpinned by a that currently have reached the post-dividend
strong educational sector, typically including stage suggest that it may be particularly
a mix of public and private services. The real- important to ensure that long-term care is, as
ization of the second dividend is particularly much as possible, offered at home or within
important since it may add to the future pro- the community, rather than in nursing homes
ductivity of an increasingly scarce labor force and hospitals, which tend to be costlier. In
in at least two ways: by directly adding to its addition, rules for pension systems should be
skills and flexibility and by reducing the ratio consistent with working at an older age as life
of labor to physical capital. expectancy increases (raising overall living
The long-run benefit of increased physi- standards) (World Bank 2015a).
cal and human capital accumulation may be Policies that influence savings, labor force
reinforced by complementary labor and com- participation, and labor productivity may
mercial policies. The policies that most effec- also yield substantial long-run gains. Brazil,
tively support growth are context specific. for example, faces the challenge of finding
However, increased education for females ways to increase output per worker while
often may boost female labor-force participa- protecting the living standards of its rapidly
tion. So too can improved access to formal growing elderly population and maintaining
child and elderly health care, given the typical sustainable fi scal balances. Scenario analy-
role of women as family caregivers (Bussolo, sis suggests that, by boosting savings to the
Koettl, and Sinnott 2015). For the growing levels of comparable countries, ensuring
old-age population, labor-force participation increased labor-force participation and mod-
may be encouraged by policies that contribute erately raising labor-specific productivity, the
to better health (enabling them to work) and country could raise average annual GDP per-
by supportive incentives (encouraging them capita growth between 2016 and 2050 by 1
to work, for example by carefully designed percentage point (doubling the growth rate)
pension systems) (World Bank 2015a). For and improving other development outcomes
countries (especially in Eastern Europe) that (see the section on Brazil in the Country
experience significant emigration by young Spotlights at the end of this chapter).
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 199
Population aging, driven by increasing longev- age of men and women. The majority of the legislated
ity and low fertility, poses a persistent long-term increases are phased in over several years and often
challenge.a Many European countries, already facing apply to future cohorts of workers.
an increased debt burden resulting from the economic Some countries, including France and Luxem-
crisis, have adopted reforms to deal with this chal- bourg, have increased the minimum periods workers
lenge and, as a result, public pension spending as a must contribute to a pension plan before being per-
share of GDP is expected to remain more or less sta- mitted to draw benefits. Other countries have opted
ble in Europe (EU28) until 2060. for automatic adjustment of pension systems based
Many of the reforms lengthened working lives so on gains in life expectancy, or in some cases on eco-
that individuals contribute more to improve the sus- nomic developments. Automatic adjustments can be
tainability of the system. Some countries implemented politically appealing, but their design benefits can be
increases in minimum contributory periods while a challenge if fi nancial sustainability is enhanced at
limiting the effect of career breaks and part-time the expense of lower benefits for already fi nancially
work. Most pension reforms, however, are focused precarious population groups.
on prolonging working lives at the end of the career Austria, Belgium, Denmark, Portugal, and Spain
through increases in the statutory retirement age; a have all made access to early retirement more restric-
tightening of early retirement provisions, including tive. Access to disability pensions has been tightened
higher penalties for early benefit withdrawals; and in Finland, Hungary, and Poland. Financial incen-
greater fi nancial incentives to work beyond the pen- tives to encourage people to work longer have been
sionable age. strengthened in the Netherlands, Portugal, and Swe-
Retirement age is probably the most contentious den and have often been accompanied by increasing
pension parameter. Increasing it is a politically sensi- flexibility to combine pension benefit withdrawal
tive issue in many countries, and winning approval for with work. In contrast, full pension benefits (without
it has generally been difficult. Still, Hungary, Ireland, penalties) will be awarded below the legal retirement
the Netherlands, Portugal, Spain, and the United age to people who started their career early in France
Kingdom have all raised retirement ages, sometimes and Germany.
beyond 65, generally the norm in most countries
for the past decade. A few countriesGreece, Italy, a. This box was contributed by the OECD, and is based
Slovenia, and Polandhave equalized the retirement on OECD 2014.
of the policy interventions discussed here. Japan in the Country Spotlights at the end of
Japans experience exemplifies the difficul- this chapter).
ties of raising fertility rates; evaluations of its While higher labor force participation
pronatalist initiatives since the early 1990s may have a lasting impact on GDP per capita
found that they had almost no effect on fer- and total GDP, greater legal migration and
tility.6 Nevertheless, learning from experi- fertility primarily affect total GDP and not
ence and continuing the pursuit of policies GDP per capita, since they result in increases
in this area are critical given that Japan must in total population. One way to alleviate
raise fertility in the very long run if it wants the labor market pressures is to a focus on a
to avoid a constantly shrinking population. better allocation of skills by fostering inter-
Scenario analysis analyzes effects of a com- nal mobility (an issue that may be especially
bination of policy interventions, including important within Europe); a better use of
increases in fertility, migration, and labor- migrants skills; and the development of
force participation up to 2100, indicating migrants skills (box 6.3).
that they may increase both total and per The age composition of the population is
capita GDP substantially (see the section on not the only determinant of living conditions
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 201
BOX 6.3 Migration and labor-market-policy reform from the perspective of high-income
countries
All the members of the Organisation for Economic pean countries (which were further amplified dur-
Co-operation and Development (OECD) are con- ing the financial crisis), internal labor mobility could
fronted with the effects of population aging, but the make a significant contribution to overall employ-
European Union (EU) and Japan will be affected first ment growth. To improve the use of the potential
and most severely.a The EU28 working-age population of intra-EU migration, efforts to reduce barriers to
(1564) is projected to decline by 2.2 percent between mobility need to be stepped up. As part of a broader
2013 and 2020. Without migration, the working- mobility strategy, skills-matching tools within the EU
age population of the 28 EU countries is expected to need to be strengthened and the learning of relevant
decline by more than 11 million by 2020 (80 million languages promoted.
by 2050). Under this scenario, the working-age popu- Immigrants tend to be overrepresented on both
lation in Germany, Italy, and Poland will shrink by ends of the qualification scale, but on average they
more than 1.5 million by 2020. Similar trends will be have slightly fewer years of education than the native-
observed in Japan (-8 million) and, to a lesser extent, born. Labor market disparities between the foreign-
Canada (1 million). In the United States and Austra- born and their native-born peers widen with educa-
lia, the working-age population will remain stable. tional attainment, however, and returns to foreign
The short- and medium-term effects of demographic qualifications are lower than returns to host-country
changes on the labor force are not clear-cut however, qualifications, in terms of employment, job quality,
because of changes in labor-participation rates by and earnings.
gender, age, and education level. Further progress in Not only are the skills of immigrants often under-
tackling the gender gap in employment, addressing utilized but so too are those of their children who
the problems of disadvantaged youth, and increasing have been raised and trained in the host country.
the employment rates of older workers would signifi- Strengthening integration and antidiscrimination pol-
cantly increase the labor force. icies will be necessary to address this issue. Efficient
Taking migration into account transforms the pic- use of the skills of immigrants and development of
ture. At current projected levels of net migration and their potential requires a series of measures, including
participation, the European labor force will increase increasing the availability of information and recog-
slightly by 1.2 percent between 2010 and 2020. More- nition of foreign qualifications; ensuring that immi-
over, if immigrants participated at the same rates as grants have access to effective, active, labor-market
their native-born counterparts with similar charac- programs; putting immigrants more directly in con-
teristics, an additional 1 million workers would be tact with employers; making sure that children of
added to the rolls in the EU. immigrants have access to early childhood education
To reap the full potential of migration, a three- and care; and providing language training adapted to
pronged approach is needed: a focus on a better allo- migrants skills in destination countries.
cation of skills by fostering internal mobility, notably
within Europe; a better use of migrants skills; and
the development of migrants skills. Given the large a. This box was contributed by the OECD and is based
differences in labor-market conditions across Euro- on OECD-EU 2014.
for post-dividend countries. The policies changing roles of women in the labor mar-
that determine how countries adapt to aging ket in recent decades show that gender dif-
may in fact be far more important. With ferences need not be signifi cant. Contrary
proper incentives and good health at higher to common perceptions, the share of the
ages (already experienced by many in post- population in different age cohorts is not a
dividend countries), nothing prevents people good predictor of health costs. In fact, the
from working and saving beyond the age highest annual costs are incurred during the
limits that have been observed to date. The last few years (especially the last year) in the
202 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
TABLE 6.2 Policy priorities for leveraging the differences in demographic change across countries
Area of focus Issues Recommendations
International Promoting foreign provision of education services Ease visa requirements for the free ow of international students
trade to boost educational opportunities in countries and academics; address qualication recognition issues; reduce
with a high share of young population or to limits on foreign ownership; and increase transparency of
facilitate lifelong learning for aging countries. government education regulations.
Using foreign providers to meet demand for health Address restrictions aecting the physical presence of foreign
services in aging countries. suppliers, foreign equity ceilings, or barriers on the movement of
Supporting comparative advantage in producing health care professionals across borders.
labor-intensive products in labor-abundant Streamline customs, border, and transit performance; improve
countries. logistics and transport services and extend physical
infrastructure; tackle remaining tari and nontari barriers on
goods trade.
Migration Promoting legal migration ows to counteract the Formulate clear migration policies; enforce minimum wage laws;
decline in working-age populations in aging provide adequate information to migrants about their rights
countries and to mitigate labor market pressures and obligations; facilitate their contribution to and benets from
in labor-abundant countries. social protection schemes and public services; sanction potential
Reducing the burden of brain drain in sending abuses by rms.
countries. Develop comprehensive and targeted policies to retain, and attract
talent; encourage return migration.
International Attracting international capital ows to young, Create favorable investment climate; strengthen macroeconomic
nance labor-abundant countries. stability, the nancial sector, and governance.
Addressing challenges posed by large and volatile Undertake measures to relax investment barriers at the domestic,
capital ows to developing countries. regional, and global level.
Supporting opportunities for capital-abundant Introduce macroeconomic policies to address risks from volatile
countries to increase returns and diversify capital inows, supervision, regulation, and strong institutions.
investment portfolios. Provide investment guarantees or technical assistance.
Source: GMR team elaboration.
The global demographic transition under way has Urbanization and aging deserve greater attention
been influenced by a parallel environmental transition in emissions projections. Population aging, urbaniza-
that may slow down development progress. Changes tion, household size, land and energy use, technology,
in the size, composition, density, and distribution of and climate policy may have a more significant impact
the population over the past three centuries in com- on emissions in the future than population growth
bination with the associated shift toward industri- per se.c Urbanization and aging may be especially
alization, urbanization, and higher consumption important in China, India, the United States and the
throughout the world have important implications European Union.d Urbanization will also become
for environmental sustainability. For instance, it has increasingly important in Sub-Saharan Africa, where
been shown that greenhouse gas emissions increase almost half of the population is expected to live in cit-
with population size, and that these emissions vary ies by 2030.e Projections suggest that household size
depending on the stage of a countrys development.a decreases as populations age, a change that leads to
In turn, environmental changes can slow development higher emissions due to a loss in economies of scale
progress through a wide range of channels including in energy consumption.f The effects of urbanization,
health, water supply, food security and agriculture, however, are less clear. This trend increases economic
infrastructure, and services provision, thus affecting activity through a higher concentration of production
demographics, especially migration patterns. Such and consumption but also allows for economies of
negative effects already can be observed in different scale and greater energy efficiency.g
parts of the world, including countries in Asia and
Central America.b (box continues next page)
204 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
In short, demographic trends and related policies ments on the best way forward is challenging, how-
will have implications for the global environment ever; outcomes that are seen as equitable may have
and for the effectiveness of adaptation and mitiga- the highest potential to be adopted. Developing coun-
tion strategies. Family planning and reproductive tries that have high fertility rates or undergo rapid
health policies may help mitigate the negative effects urbanization and industrialization, or both, have con-
of climate change by reducing population growth, tributed least to climate change and are dispropor-
especially in pre- and early-dividend countries. Edu- tionately affected by its negative consequences. They
cation is not only likely to lower fertility, it can also often have limited capacity to develop and implement
have a major impact on the effectiveness of measures adaptation and mitigation strategies. Indeed, poor
aimed at tackling the negative effects of climate and vulnerable populations are particularly exposed
change. Among other things, it may improve the to climate risks through higher temperatures, water
adaptive capacity of individuals and raise awareness stress, rising sea levels, loss of agricultural produc-
of the implications of consumption patterns, lead- tion, and the spread of diseases.
ing to changes in lifestyles and behaviors. In rapidly
urbanizing areas, the next decades offer a window
of opportunity for mitigation through policies that a. Liddle 2011, 2013; Liddle and Lung 2010; ONeill
improve access to public transport and consider envi- et al. 2012; Zagheni 2011.
ronmental aspects of the location of high-density resi- b. Harper 2013.
c. IPCC 2014; Jiang and Hardee 2009; Stephenson et al.
dential and employment areas.
2013.
The links between demography, environmental d. ONeill 2009; ONeill et al. 2012.
sustainability, and development goals raise complex e. Black et al. 2008.
issues that have to be taken into account in policy f. Dalton et al. 2008; Jiang and ONeill 2007; Zeng
making. Global efforts may be the only way to ade- et al. 2008.
quately address most of these issues. Reaching agree- g. Sadorsky 2013.
trade, which can boost incomes if supported of their demographic transition. The average
by appropriate policies. Facilitating and annual economic growth rates of pre- and
enabling trade in products and services that early-dividend countries are expected to be
are growing in importance, especially those higher than those of late- and post-dividend
that are most closely related to demographic countries, which will contribute to a further
change, such as health care and education, decline in the importance of the latter groups
can play an important role. Knowledge trans- as global export destinations. Post-dividend
fers from trade in health and education prod- countries share of global exports is expected
ucts and services contribute significantly to to decline from 61 percent in 2015 to 52 per-
the achievement of development goals, while cent in 2030, with the bulk of the matching
medical imports are systematically associated increases shared evenly between early- and
with lower mortality rates (Papageorgiou, Sav- late-dividend countries (figure 6.2).10 How-
vides, and Zachariadis 2007; World Bank and ever, post-dividend countries are expected to
WTO 2015). Trade openness in general is pos- remain the most important export market in
itively linked with faster mortality reduction the world, in part reflecting the fact they will
in developing countries (Jamison, Sandbu, still account for more than half of global eco-
and Wang 2001; Owen and Wu 2007). nomic activity in the future.
Differences in demographic change among
How does trade relate to demography? countries contribute to changes in compara-
Global trade flows are projected to shift tive advantages that, in turn, influence trade
toward countries that are in the early stages patterns. Countries with relatively slow
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 205
FIGURE 6.2 Pre-, early-, and late-dividend a result, pre-dividend countries exports
countries become more important export are mainly concentrated in agricultural and
markets
natural resource products, which accounted
for 75 percent of their total exports in 2015.
65
By 2030, their specialization in agricultural
60
55
goods and labor-intensive manufacturing is
Destination of global exports (%)
FIGURE 6.3 Labor-intensive goods will continue to account for greater shares of exports from pre- and
early-dividend countries
a. 201530 b. 2030
20 100
Percentage point change in export shares
15
Share of exports by sector (%)
80
10
60
5
40
0
20
5
10 0
Pre- Early- Late- Post- Pre- Early- Late- Post-
dividend dividend dividend dividend dividend dividend dividend dividend
countries countries countries countries countries countries countries countries
Agriculture Low-skilled labor-intensive manufacturing Low-skilled labor-intensive services
Natural resources High-skilled labor-intensive manufacturing High-skilled labor-intensive services
Source: World Bank classifications, based on simulations with the LINKAGE model (see appendix D).
206 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
their competitiveness and reducing the prices countries, covering policy recommendations
they receive in international markets (Ander- in each of the above areas, this section has
son, Ivanic, and Martin 2013). While aver- a narrow focus on policy recommendation
age tariffs on manufactured goods have been in health and education services as they are
declining over time, significant tariff and directly linked to the changing demographic
nontariff barriers continue to slow or block structure of the world population.
the free flow of goods between countries Trade can help meet the demand for health
(UNCTAD 2013; WTO 2012). Out of non- services in aging countries and the demand
tariff measures, technical barriers to trade for education services in young countries.
and sanitary and phytosanitary measures are Both health care and education are only
the most commonly used, affecting on aver- lightly traded across borders, in part because
age about 30 and 15 percent of trade, respec- of policy constraints on service providers
tively. The high incidence of such barriers and on the movement of people across bor-
affects the exports of developing countries ders. Cross-border supply of health services
disproportionally more because the cost of (Mode 1 of the General Agreement on Trade
compliance is higher (UNCTAD 2013). in Services) is still quite small, although
Demographic change is expected to affect increasing numbers of people are seeking
capital-labor ratios across the globe, helping medical treatment abroad (Mode 2), and sig-
developing countries to specialize in labor- nificant numbers of health professionals are
intensive goods. Reductions of trade barri- practicing somewhere other than their home
ers, coupled with policy measures to improve country (Mode 4) (Blouin, Drager, and Smith
trade facilitation, could create incentives 2006; Smith, Chanda, and Tangcharoen-
for fi rms to relocate production to relatively sathien 2009). Given the links with other
more labor-abundant countries and allow service sectors, such as telecommunications
developing countries to take full advantage of and audiovisual services, as well as with the
their growing labor forces. Rising wages and movement of people across borders, the lib-
product upgrading in China that could lead eralization of education services should be
to the relocation of labor-intensive produc- addressed as part of an effort to liberalize
tion create opportunities for African coun- services more generally.
tries to double employment in manufacturing Domestic services liberalization and inter-
(Chandra, Lin, and Wang 2012). By reducing national law regulating health and education
the cost of trade in pre- and early-dividend services are needed to ensure further expan-
countries, substantial potential improve- sion of international trade. In the case of
ments in trade flows, income, and poverty health services, efforts are urgently needed to
reduction can be achieved (box 6.5). lower barriers affecting the physical presence
Countries that take steps to reduce the of foreign suppliers, the maximum share of
costs of trade may be able to achieve substan- equity that can be owned by foreigners, and
tial increases in exports and income. Improv- the movement of health professionals across
ing connectivity, making trade-related institu- borders. International agreements on vari-
tions and policy frameworks more effective, ous regulations, such as those pertaining to
and providing a supportive enabling environ- licensing and qualification requirements,
ment can help improve gains from trade for could play a key role in enabling interna-
the poor, especially in rural areas. Efforts to tional providers to supply health services in
integrate markets are critical, using measures domestic markets. The most significant mea-
in key areas, such as tariff and nontariff bar- sures affecting trade in education services
riers, infrastructure and trade facilitation, are barriers to using the Internet and restric-
access to trade-related technology, and trade tions on the import of educational mate-
finance (World Bank and WTO 2015). 11 rials (Mode 1); visa requirements against
While there is a vast empirical literature on the free flow of international students and
supporting international trade in developing qualification recognition issues (Mode 2);
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 207
Simplifying and harmonizing international trade pro- driven by substantially higher values of trade and
cedures can help countries take greater advantage of some production upgrading. In pre-dividend coun-
their demographic differences through trade. In both tries, the share of low-skilled and high-skilled labor-
developed and developing countries, there is substan- intensive manufacturing products in total exports
tial scope for this simplification and harmonization could increase, at the expense of agriculture and
(trade facilitation) to reduce costs. In developed coun- natural resources, by an additional 8 and 3 percent-
tries, simplification of procedures could account for age points, respectively. In early-dividend countries,
5.4 percent of potential trade cost savings, followed reduced trade costs could boost the share of these
by advance rulings (3.7 percent), automation (2.7 per- products in total exports by 5 and 10 percentage
cent), and fees and charges (1.7 percent). In developing points, respectively.
countries, the contribution of each indicator varies, Trade facilitation entails streamlining customs,
but total trade cost reduction amounts to 14.5 per- border, and transit procedures; improving logistics
cent for low-income countries, 15.5 percent for lower- and transport services; and extending physical infra-
middle-income countries, and 13.2 percent for upper- structure. In developed countries, the policy areas
middle-income countries (Mos, Orliac, and Minor that could have the greatest impact on trade perfor-
2011; Mos and Sorescu 2013). This box explores the mance are related to advanced rulings in determining
growth and poverty impacts of reducing trade costs by classification and value of goods, fees and charges,
15 percent in pre- and early-dividend countries. processes, and procedures. Low-income countries
By reducing the costs of trade for pre- and early- would benefit most from simplifying documentation
dividend countries, substantial potential increases in requirements, automating processes, and making
trade flows and expansion of labor-intensive manu- trade-related information available. Lower-middle-
facturing can be achieved. Lower trade costs result income countries are expected to gain the most from
in additional income gains in pre- and early-dividend the simplification of documentation formalities,
countries, amounting, respectively, to 3.6 percent streamlining of procedures, and automation. Finally,
and 2.5 percent of GDP in 2030 (figure b6.5.1). The upper-middle-income countries would benefit most
benefits could lift an additional 13 million people out from streamlining procedures, automation, and
of poverty (figure b6.5.2).a Faster income growth is advance rulings.
FIGURE B6.5.1 Trade facilitation can boost income FIGURE B6.5.2 Lowering trade costs can contribute
growth in pre- and early-dividend countries to poverty reduction
Poverty rate at $1.25 per day (%)
3.8 50
Net impact of trade facilitation on
3.4
3.0
2.6
GDP in 2030 (%)
30
2.2
1.8
1.4
10
1.0
0.6
0.2 Pre-dividend Early-dividend World
0.2 countries countries
Pre- Early- Late- Post- World
dividend dividend dividend dividend 2011 2030 trade facilitation
countries countries countries countries 2030 baseline WB poverty target
Source: UN 2013a; Medium Fertility Scenario; and World Bank calculations (see appendix D).
Note: Pre-, early-, late- and post-dividend refer to stages of demographic transition of countries.
limits on foreign ownership and lack of FIGURE 6.4 Post-dividend countries tend to
transparency of government education regu- receive the most migrants
lations (Mode 3); and visa requirements on
140
conditions, demography, and political con- of newly acquired skills from abroad, and
texts (OECD 2013a). Different types of poli- the development of networks that facilitate
cies affect different stages of the migration trade and political links between countries.
process (before departure, during migration, The benefits of remittances are not auto-
and return), as well as different aspects under matic, however, and outward migration can
each stage (fi nancial and social protection, have negative effects, especially in countries
employment, and remittances). Pre-departure where large numbers of high-skilled work-
orientation and training programs, measures ers emigrate. In these cases, a combination
that protect the rights and prevent the abuse of comprehensive and targeted polices may
of migrants, integration and language pro- be able to retain, attract, or reattract talent.
grams, and policies that lower remittance Comprehensive policies that boost productiv-
costs or remove regulatory and bureaucratic ity and growth are critical, especially educa-
barriers against return migration are all tion policies that foster the supply of skills
important in enhancing the development and growth policies that boost the demand
benefits and reducing the potential costs for skills.15
associated with international migration. Sev-
eral developed countries have implemented
Encouraging global capital flows
temporary migration programs with varying
degrees of success (UN 2013b). International capital flows benefit countries
Policies have the potential to make migra- in different ways, depending where they are
tion more beneficial for all parties involved.13 on the demographic dividend continuum.
These include the formulation of clear migra- Countries in the early stages of their demo-
tion policies in consultation with all relevant graphic transition need to boost investment,
parties, foreign-worker levies paid by com- while those in the later stages seek higher
panies rather than workers, enforcement of returns on investment than may be available
minimum wage laws, provision of adequate domestically, creating a potential win-win
information to migrants about their rights situation. The benefits of these flows will not
and obligations, facilitation of their contri- be automatic. Appropriate policies, includ-
bution to and benefits from social protec- ing efforts to enhance institutional quality,
tion schemes and public services, and sanc- deepen the financial sector, and introduce
tions against abuses by employers (Ahsan sound fi nancial supervision and regulation,
et al. 2014). Measures aiming to reduce the along with making greater use of interna-
transfer cost of remittances are motivated tional investment agreements can all help
by mounting empirical evidence on the posi- ensure the full realization of benefits of capi-
tive impacts remittances have on develop- tal flows. Together, such policies could help
ment (Adams and Page 2005).14 Financial catalyze FDI and other forms of financing
education can also reduce the risk of using that are essential for reaching development
or switching to costlier remittance products goals.
(Gibson, McKenzie, and Zia 2014). Bilat-
eral or multilateral migration agreements How do capital flows relate to demography?
between countries of origin, transit, and des- Facilitating international capital flows would
tination can help achieve policy coherence allow young, labor-abundant countries to
across countries (Naik, Koehler, and Laczko attract much-needed capital. In the initial
2008; World Bank 2006). stages of demographic transition, countries
Migration benefits sending countries with relatively high dependency ratios tend
through social as well as financial remit- to have excess demand for investment rela-
tances, but policy actions are needed to help tive to savings, stimulating current account
reduce the burden of brain drain. Social deficits. In countries in more advanced stages
remittances include transfers of knowledge of demographic transition, higher life expec-
back to the home country, the application tancy increases savings for retirement, while
210 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
FIGURE 6.5 Countries with low working-age and improvements in the business environ-
population shares tend to run current account ment (World Bank 2013a).17 With rapid
deficits
improvements in the business environment,
the net capital flows to pre-, early- and late-
60
Current account balance as a share
percent and 3.2 percent of GDP, respectively, necessary to address the challenges posed by
over 201530 (World Bank 2013a). These large and volatile capital flows. 20 Financial
capital inflows will likely come from post- and institutional development can reduce
dividend countries, but the contributions the riskiness of financial liberalization (Sahay
from early- and late-dividend East Asian et al. 2015), although a sequenced approach
countries, most notably China, are likely to that builds resilience to large and volatile cap-
continue to rise. ital flows through macroeconomic policies
Countries early in their demographic tran- and regulation is preferred (IMF 2012). Fur-
sition could promote foreign direct invest- thermore, international regulatory coordina-
ment by reducing the economic, political, and tion would be beneficial both at the bilateral
legal risks facing investors. To attract FDI, and multilateral levels, including measures
host countries need to relax investment bar- such as strengthening and institutionalizing
riers. These come in many forms: the exclu- the swap lines that provide liquidity for less
sion of foreign investors from certain eco- commonly traded currencies.
nomic activities, quantitative limitations in As pre-, early-, and late-dividend countries
the form of quotas, foreign ownership caps, are expected to account for a growing share
joint venture requirements, and discrimina- of capital flows, their policies on exchange
tory tax treatment. Home countries can fur- rates and capital flows will become more
ther promote outflows of FDI with policies important. Reliance on fi xed exchange rates
such as investment guarantees or technical pegged to a single currency could pose dif-
assistance. ficult choices for countries with increasing
At the global level, reforms are needed to inflows, whereas an exchange rate pegged to
take full advantage of international invest- a basket of currencies may be better able to
ment agreements. Although an estimated smooth currency volatility. In addition, the
3,271 international investment agreements accumulation of reserves among developing
were in place in 2015, many of these required countries is expected to decelerate as more
additional reforms (UNCTAD 2015). Other adapt floating exchange rate regimes and
important areas for policy making include capital markets become more open (World
protections of a countrys right to regulate Bank 2013a).
investment (such as clarifying most-favored-
nation treatment provisions); more efficient
dispute-settlement procedures; greater com-
Conclusion
pliance with domestic laws and corporate Demographic change can shape development
social responsibility requirements; improving trajectories, and policies that reflect a coun-
the consistency of the international invest- trys specific circumstances can help it to
ment agreements; and linking reforms of the benefit from opportunities that are offered.
agreements with the domestic policy agenda Policies also need to respond to the significant
would also be useful. Measures in these areas differences across countries in the direction
could be further complemented with the con- and speed of demographic change. The chal-
solidation and harmonization of multilateral lenge, at both the country and global levels,
investment rules. is to prepare for the demographic landscape
In addition to sound financial supervision of the future. At the country level, policy
and regulation and strong institutions, mac- makers and stakeholders need to address
roeconomic policies need to play a key role in expected demographic advantages and chal-
addressing risks from volatile capital inflows. lenges, depending on whether their countries
Under certain circumstances, capital flow are pre-dividend, early-dividend, late-divi-
management measures can be useful. They dend, or post-dividend. Collectively, all coun-
should not, however, be a substitute for war- triesfrom low- to high-incomecan benefit
ranted macroeconomic adjustment. In addi- from pronounced differences in demographic
tion, macroprudential measures are at times change through enhanced trade, migration,
212 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
and capital flows across borders. Collective health, pensions and other social transfers,
action is also needed to meet the global envi- international migration, trade, and capital
ronmental sustainability challenge. flows. A number of policy interventions have
Policies can improve development out- significant fiscal costs, requiring that atten-
comes by taking advantage of demographic tion be paid to fiscal sustainability. Getting
factors. Strong economic growth that is eco- policies right in light of demographic trends
nomically, socially, and environmentally sus- could well be the difference between eliminat-
tainable is a prerequisite for achieving devel- ing extreme poverty, boosting shared pros-
opment goals. Demographically informed perity, and reaching broader development
policy can both add to and take advantage goals by 2030 and falling short and leaving
of economic growth through policies in sev- major gaps in the development agenda for the
eral critical areas: labor markets, education, next generation.
Country Spotlights: Policy challenges at different
stages of demographic transition
This spotlight presents analyses of major poli- of around 2 percent a year; for the indica-
cy challenges facing four countries, each repre- tor most directly affected by child marriage,
sentative of the demographic group to which it the fertility rate (FR) of women ages 1519,
belongs: Niger (pre-dividend), Ethiopia (early- the United Nations (UN) medium-variant
dividend), Brazil (late-dividend), and Japan projection of a decline is used (from around
(post-dividend). The analysis is based on simu- 0.20 births a year per woman ages 1519 in
lations with a computable general equilibrium 2015 to 0.08 in 2050). Three non-base simu-
(CGE) model, applied to country databases lations are used to test effects of alternative
developed for this report.a trajectories to the base for the 1519 FR: a
gradual cut to zero by 2050 (f-), an immedi-
ate cut (in 2016) to zero (f--), and no cut (the
Sparking demographic transition 2015 rates stay in place up to 2050; fconst).
in Niger: Child marriage and The case of a gradual cut is combined with
fertility a 10 percentage point increase in the rates of
As indicated by its low per-capita income, high labor force participation for women who de-
poverty, low human development, and fragile lay their marriages (f-l+), and a 10 percentage
environment (physical, political, and military), point increase in the share within this group
Niger, a pre-dividend country faces a long list of women who achieve 9 or more years of
of challenges. Between 1991 and 2015, its education (f-l+e+).b
population more than doubled (from 8 to 19 Reducing the fertility rates for women ages
million) and is expected to reach 69 million 1519 can lead to improvements in several
by 2050. Its current total fertility rate (TFR)
of 7 (average births per woman) is among FIGURE 6.7 Fertility and dependency rates in
the highest in the world and is expected to Niger, 201550
fall to 4.7 by 2050. This current high rate is 120 11
both a cause and a consequence of Nigers
low scores on most development indicators. 110 10
It is partly driven by one of the highest rates 100
EDR (%) and TFR (level)
9
of child marriage in the world74 percent of
TDR and YDR (%)
90
Nigerien girls marry before turning 18 (World 8
Bank 2014b)high adolescent fertility rates, 80
7
low per-capita incomes, and low levels of 70
education (including high female school drop- 6
60
out rates). Figure 6.7 illustrates the dramatic
trends in total fertility and dependency rates 50 5
facing Niger. 40 4
To determine the effects of reduced child 1990 2000 2010 2020 2030 2040 2050
marriage on fertility, female labor-force par- Total-dependency rate Elderly-dependency rate
ticipation, and female education in Niger, a (TDR, left axis) (EDR, right axis)
set of scenarios was analyzed for the period Youth-dependency rate Total fertility rate
(YDR, left axis) (TFR, right axis)
201550. Under the base scenario, GDP per
capita is projected to grow at an average rate Source: World Bank calculations, based on medium variant in UN (2013b).
213
214 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
FIGURE 6.8 Nigers GDP per capita growth under cation outcomes for girls at the primary and
alternative scenarios, 201650 secondary levels and greater access to repro-
2.5 ductive health services (ICRW 2007; World
2.15 2.21 2.21 2.22 Bank 2014d). Irrespective of concerns related
Annual growth of GDP per capita (%)
0.5
Accelerating job creation in
Ethiopia: Education, savings,
0
and productivity
Base f- f-- fconst f-l+ f-l+e+ Over the past decade, Ethiopia has managed
Source: World Bank estimates using MAMS simulation results. to maintain rapid per capita growth, delivered
Note: Base = benchmark (no change), f- = gradual elimination of 1519
year fertility, f-- = immediate elimination of 1519 year fertility, fconst =
by appropriate policies and facilitated by a
constant 1519 year fertility (2015 rate), f-l+ = f- plus increased labor-force strong fertility decline. For 200413, Ethio-
participation, f-l+e+ = f-l+ plus increased education.
pias average annual GDP per capita growth
was very high, at 8.1 percent. Since 2000,
per-capita growth has likely been boosted by
human development indicators, such as health a strong decline in the total dependency rate
and education, while also benefiting overall (TDR), driven by a declining total fertility
income. Compared with the base scenario, rate; these demographic trends will continue
gradual and immediate cuts in FR (f- and f--) up to 2030 and beyond (Ahmed et al. 2014;
raise average growth in GDP per capita by 0.2 figure 6.9). Growth has been driven to a large
and 0.3 percentage point respectively, while a extent by public investment while private in-
constant FR reduces this growth rate by 0.2 vestment has been low (Moller and Wacker
percentage point (fconst) (figure 6.8). Per- 2015). Judging from the record of other suc-
capita household consumption in 2050 is 15 cessful countries, Ethiopia faces the structural
percent higher for f-- compared with fconst.
The main reason for the gain is that a lower
FIGURE 6.9 Fertility and dependency rates in
FR accelerates growth in per capita labor and Ethiopia, 19902030
capital endowments; for example, for f-- the
100
percentage point increases are 0.2 for labor
and 0.4 for capital. By comparison, the likely 90 10
8
70
rates due to reduced fertility is minor from
the perspective of the economy as a whole, 60
6
but likely very important for the individuals 50
who are able to have fewer children. Extreme 40 4
poverty declines from 49 percent in 2015: by
30
2030, poverty rates fall to 29 percent under
the base scenario, compared with 23, 26, and 20 2
30 percent for f--, f-, and fconst, respectively. 1990 2000 2010 2020 2030
The policies needed to speed up the decline Total-dependency rate (TDR, left axis)
Youth-dependency rate (YDR, left axis)
in child marriage and adolescent fertility in Elderly-dependency rate (EDR, right axis)
Niger and other countries in a similar situa- Total fertility rate (TFR, right axis)
tion include actions aimed at improved edu- Source: World Bank calculations, based on medium variant in UN (2013b).
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 215
challenge of finding a prominent role for FIGURE 6.10 Ethiopias GDP per capita growth under alternative
the private sector.c The World Banks Doing scenarios, 201630
Business Indicators show that Ethiopia does 5.5 5.3
well in general but lags in the areas of credit
business climate for the private sector, making force participation, and labor productivity to
continued productivity gains feasible; togeth- test how growth might be sustained for the
er, such steps could make it easier to absorb period 201550. The benchmark base scenar-
the growing labor force at improving wages. io assumes relatively unchanged GDP shares
for private investment, taxation, and govern-
ment spending, the latter requiring pension
Sustaining productivity growth reform given rapid aging. A GDP per capita
in Brazil: Savings, labor, and growth rate of 1 percent is imposed for this
pensions scenario, an improvement from growth rates
Brazil, a country in the late-dividend group, near zero during the past few years. In the al-
faces the challenge of increasing output per ternative scenarios, the private savings rate is
worker while protecting the living standards raised gradually to match the GDP shares of
of its rapidly growing elderly population. peer country comparators starting by 2030
Around 2020, Brazils total dependency rate (sav+); the labor force participation rate (la-
is expected to end more than 50 years of de- bor force as a share of population ages 1564)
cline as the increase in the elderly dependency is raised from 77 to 87 percent, enough to per-
rate begins to exceed the decline in the youth mit labor force growth to match population
dependency rate. After a longer period of de- growth (lfp+); and a moderate increase of 0.5
cline, the total fertility rate is expected to sta- percent in labor-specific productivity growth
bilize well below the replacement level (figure is imposed (lprd+), sufficient to bring about a
6.11). The population ages 1564 is expected moderate increase in TFP growth of 0.3 per-
to peak around 2020, and the total popula- centage point (to 0.8 percent a year). The sce-
tion some time before 2050 (at around 230 nario combo+ combines all of these changes.
million). To improve living standards, output The results suggest that changes in savings,
per worker will have to rise. That will re- labor force participation, and labor produc-
quire increases in the private capital stock per tivity combine to raise the annual GDP per
worker and improved worker skills. capita growth rate by 1 percentage point in
The scenarios for Brazil use a policy pack- the 201650 period. The results show levels
age that helps increase private savings, labor for 201550 and growth for 201650 (since
growth by definition is compared to a preced-
ing year). An increase in private savings and
FIGURE 6.11 Fertility and dependency rates in
investment of around 7 percent of GDP, suffi-
Brazil, 19902030
cient to close Brazils savings gap (IMF 2013),
70 3.5 generates an increase in annual GDP growth
60 3.0 of 0.3 percentage point (sav+; figure 6.12).
Similar growth gains follow from increases
EDR, TDR, and YDR (%)
40 2.0
tion increase could be almost fully realized
30 1.5
if female participation rose to the male level
20 1.0 (which already is close to 87 percent), but a
10 0.5
delayed retirement age could also contribute.
The impact of combining the three shocks is
0 0 a doubling of GDP per capita growth from 1
1990 2000 2010 2020 2030 2040 2050
to 2 percent, with two-thirds of the gain due
Total-dependency rate (TDR, left axis)
Youth-dependency rate (YDR, left axis) to increased factor employment and one-third
Elderly-dependency rate (EDR, left axis) due to increases in TFP. In the base scenario,
Total fertility rate (TFR, right axis) population in extreme poverty declines from
Source: World Bank calculations, based on medium variant in UN (2013b). 4.8 percent in 2015 to 3.6 in 2030 and to 2.2
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 217
FIGURE 6.12 Brazils per capita GDP growth Adapting to aging in Japan:
under alternative scenarios, 201630
Labor force participation and
2.1 2.03 immigration
Annual growth in GDP per capita (%)
1.8
The demography of Japan, a post-dividend
1.5
1.29 1.27
1.37 country that has reached an advanced stage of
1.2 aging, imposes severe challenges to maintain-
0.97 ing its high living standards. Japans total fer-
0.9
tility rate is 1.3 percent, one of the lowest in the
0.6 world, and its aging population (65 and over)
0.3 stands at 26 percent, the largest in the world.
0
Although fertility is projected to increase, Ja-
pans population is expected to shrink from a
se
pa High av+ s
Lfp ce
pr or
n
(s ing
tio
(L lab
Ba
n ( or
)
+)
)
d+
na
v
io r f
ity er
at bo
bi
tiv gh
er
m
cip la
gh
uc Hi
Co
rti er
TFR is increased to the replacement level of FIGURE 6.15 Combined, higher fertility rates and
2.1 percent (fert+), and labor force participa- immigration could raise Japans population
tion is raised by bringing females to the male 140
level and delaying by a decade the decline
that starts at age 55 (lfp+); both fertility and 130
labor force changes are introduced gradu-
Population (millions)
ally from 2016 to 2035. During the same 120
of new immigrants declines gradually, becom- 2015 2032 2049 2066 2083 2100
Base Increased immigration
ing insignificant by 2100. The immigrants are Increased fertility Combination
evenly split between men and women, and
Source: World Bank estimates based on MAMS simulation results.
they take on the demographic and economic Note: Base = benchmark (no change); fert+ = increased fertility rate;
characteristics of the resident population ex- migr+ = increased immigration; and combo+ = combination of the two.
0.6
90
Percent
85 0.2
80 0.2
75
0.6
70
1.0
65 Base Increased Increased Increased Combination
2015 2032 2049 2066 2083 2100 fertility immigration labor force
participation
Base Increased immigration
Increased fertility Combination Labor force Population GDP GDP per capita
Source: World Bank calculations, based on MAMS simulation results. Source: World Bank calculations, based on MAMS simulation results.
Note: base = benchmark (no change); fert+ = increased fertility; migr+ = Note: base = benchmark (no change); fert+ = increased fertility rate;
increased immigration; and combo+ = combination of the two. migr+ = increased immigration; and combo+ = combination of the two.
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 219
raising GDP per capita. In the background, c. In 2011, Ethiopia had the 3rd highest public
the changes in age composition and labor investment level in the world and the 6th lowest
force participation raise savings and capital private investment rate in the world, 18.6 and
accumulation, with the strongest impact for 6.9 percent of GDP, respectively; these figures
the scenario lfp+. reflect the pursuit, since the late 1990s, of a
The changes in fertility, labor force par- development strategy based on a big push in
ticipation, and migration that underpin these public infrastructure investment as the engine of
simulations may be difficult to realize and growth (World Bank 2013c).
depend on changes in behavior and policy. d. The International Institute for Applied Systems
Japans demographic challenges are a long- Analysis has produced alternative projections
standing concern. Policy measures tend to for educational attainment up to 2050 for 120
stress the need to encourage work, reduce countries, including Ethiopia with a scenario
financial and career-related burdens of child that reflects current trends (part of base) and
rearing, and facilitate integration of immi- a fast-track scenario with accelerated but still
grants into Japanese society.f Limited success plausible gains in educational attainments (part
to date in bringing about these changes sug- of educ+); see KC et al. (2010).
gests that the issues are difficult and depend e. Research is not settled in these areas and there
on attitudes and social processes that respond may be trade-offs between growth and equity.
to policy only very slowly. For different findings on savings in Brazil, com-
pare Rocha 2010 and Jorgenson 2011; for a
cross-country perspective on taxes, see Ostry,
Notes for Country Spotlights Berg, and Tsangarides 2014.
a. The model that is used, MAMS, is described in f. Among international institutions, the IMF and
appendix D. For a basic reference, see Lofgren, the OECD have produced an extensive body of
Cicowiez, and Diaz-Bonilla 2013. research on issues related to growth, the labor
b. The parametric changes in labor force participa- market, and gender issues in Japan. For an up-
tion and educational attainment are based on to-date perspective, see for example Botman,
findings from ongoing research (Wodon 2015). Danninger, and Schiff 2015.
220 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
2030 reaches the level of fi nancial develop- Acosta, P., E. Lartey, and F. Mandelman, 2009.
ment in the United States in the 1980s. Remittances and the Dutch Disease. Journal
18. The simulation results do not distinguish of International Economics Volume 79 (1):
between FDI and portfolio flows. Full details 10216.
of these simulations are provided in Bussolo Adams, R. H., and J. Page. 2005. Do Interna-
et al. 2014. tional Migration and Remittances Reduce Pov-
19. In the absence of frictions, most theoreti- erty in Developing Countries? World Devel-
cal models will render net capital flows in a opment 33 (10): 164569.
North-South direction, a result of the higher Ahmed, S. A., M. Cruz, D. S. Go, M. Malisze-
marginal product of capital in developing wska, and I. Osorio-Rodarte. 2014. How Sig-
countries. In reality, capital has, somewhat nificant Is Africas Demographic Dividend for
paradoxically, been flowing from the South its Future Growth? Policy Research Working
to the North (Lucas 1990). This paradox is Paper 7134, World Bank, Washington, DC.
explained by the differences in fundamentals A hsan, A h mad, M anolo Abella, A nd rew
affecting the production structure of the econ- Beath, and Hua. 2014. International Miti-
omy on the one hand and international capi- gation and Development in East Asia and
tal market imperfections on the other. The the Pacific. World, Bank, Washington, DC.
http://documents.worldbank.org /curated
rapid convergence scenario leads to a reversal
/ e n / 2 0 14 / 0 1 / 2 0 3 0 6 8 1 3 / i n t e r n a t i o n a l
of the deficit (surplus) position of high-income
-mitigation-development-east-asia-pacific.
(developing) countries, which suggests a mod-
Anderson, K., M. Ivanic, and W. Martin. 2013.
est reversal of the Lucas paradox.
Food Price Spikes, Price Insulation, and Pov-
20. Macroprudential measures include tools to
erty. Policy Research Working Paper 6535,
address threats to fi nancial stability arising
World Bank, Washington DC.
from excessive credit expansion and asset
Anderson, K., and L. A. Winters. 2008. The
price booms, to address key amplification
Challenge of Reducing International Trade and
mechanisms of systemic risk linked to lever-
Migration Barriers. Policy Research Working
age and maturity mismatches, and to miti-
Paper 4598, World Bank, Washington DC.
gate structural vulnerabilities in the system Attanasio, O. P., and G. L. Violante. 2000. The
and limit systemic spillovers in times of stress Demographic Transition in Closed and Open
(Financial Stability Board 2011; IMF 2014). Economy: A Tale of Two Regions. Work-
Capital flow management policies can be ing Paper 412, Research Department, Inter-
residency-based (capital controls), or they American Development Bank, Washington,
can be structured not to discriminate based DC.
on residency but still aim to influence cross- Black, R., D. Kniveton, R. Skeldon, D. Coppard,
border capital flows (such as reserve require- A. Murata, and K. Schmidt-Verkerk. 2008.
ments on foreign exchange deposits). Demographics and Climate Change: Future
21. The business-as-usual scenario is calibrated Trends and Their Policy Implications for
to replicate IMF growth projections up to Migration. Working Paper T-27. Development
2020, after which annual per capita growth Research Centre on Migration, Globalisation
continues at a rate of 0.8 percent. and Poverty.
Bloom, D. E., D. Canning, G. Fink, and J. E. Fin-
lay. 2009. Fertility, Female Labor Force Par-
References
ticipation, and the Demographic Dividend.
Abbasi-Shavazi, M. J., and B. Gubhaju. 2014. Journal of Economic Growth 14 (2): 79101.
Different Pathways to Low Fertility in Asia: Bloom, D. E., and J. G. Williamson. 1998.
Consequences and Policy Implications. Popu- Demographic Transitions and Economic
lation Division Expert Paper 2014/1. United Miracles in Emerging Asia. World Bank Eco-
Nations, Geneva. nomic Review 12 (3): 41956.
222 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
Blouin, C., N. Drager, and R. Smith, eds. 2006. Journal of Economic Perspectives 25 (3):
International Trade in Health Services and the 83106.
GATS: Current Issues and Debates. Washing- Cotlear, C., ed. 2011. Population Aging: Is Latin
ton, DC: World Bank. America Ready. Washington, DC: World
Borgy, V., X. Chojnicki, G. Le Garrec, and C. Bank.
Schwellnus. 2010. Macroeconomic Conse- Dalton, M., B. ONeill, A. Prskawetz, L. Jiang,
quences of Global Endogenous Migration: and J. Pitkin. 2008. Population Aging and
A General Equilibrium Analysis. Annals of Future Carbon Emissions in the United States.
Economics and Statistics 97/98: 1339. Energy Economics 30 (2): 64275.
Botman, D., S. Danninger, and J. A. Schiff, eds. EC (European Commission). 2015. The 2015
2015. Can Abenomics Succeed? Overcoming Aging Report. Economic and Budgetary Pro-
the Legacy of Japans Lost Decades. Washing- jections for the 28 EU Member States (2013-
ton, DC: International Monetary Fund. 2060). Brussels: European Commission.
Bruns, B., D. Evans, and J. Luque. 2012. Achiev- Economist, The. 2012. Brazils Pension System
ing World-Class Education in Brazil: The Tick, Tock. March 24.
Next Agenda. Directions in Development. . 2014. Japans Demography: The Incred-
Washington, DC: World Bank. ible Shrinking Country. For the First Time, a
Bussolo, M., J. Koettl, and E. Sinnott. 2015. Proper Debate is Starting about Immigration.
Golden Aging: Prospects for Healthy, Active,
May 31.
and Prosperous Aging in Europe and Central
Eden, M., and A. Kraay. 2014. Crowding In
Asia. Washington, DC: World Bank
and the Returns to Government Investment
Bussolo, M., J. Lim, M. Maliszewska, H. Tim-
in Low-Income Countries: Policy Implications
mer. 2014. Capital Will Not Become More
for Ethiopia. World Bank, Washington, DC,
Expensive as the World Ages. Policy Research
February 14.
Working Paper 6989. World Bank, Washing-
Feroli, M. 2003. Capital Flows among the G-7
ton, DC.
Nations: A Demographic Perspective. Finance
Cattaneo, A., and S. C. Wolter. 2007. Are the
and Economics Discussion Series 200354,
Elderly a Threat to Educational Expendi-
Federal Reserve Board, Washington, DC.
tures? Economics of Education Working
Financial Stability Board. 2011. Macropruden-
Paper 0003, University of Zurich, Institute for
Strategy and Business Economics . tial Policy Tools and Frameworks: Progress
Chandra, U., J. Y. Lin, and Y. Wang. 2012. Report to G20. Financial Stability Board,
Leading Dragons Phenomenon: New Oppor- International Monetary Fund, and Bank for
tunities for Catch-up in Low Income Coun- International Settlements.
tries. Policy Research Working Paper, World Fox, L., and T. P. Sohnesen. 2012. Household
Bank, Washington, DC. Enterprises in Sub-Saharan Africa: Why They
Chinn, M. D., and E. S. Prasad. 2003. Medium- Matter for Growth, Jobs, and Livelihoods.
Term Determinants of Current Accounts in Policy Research Working Paper 6184. World
Industrial and Developing Countries: An Bank, Washington, DC.
Empirical Exploration. Journal of Interna- Frejka, T., G. W. Jones, J.-P. Sardon. 2010. East
tional Economics 59 (January): 4776. Asian Childbearing Patterns and Policy Devel-
Cincotta, R. 2010. Whither the Demographic opments. Population and Development
Arc of Instability? New Security Beat Blog, Review 36 (3): 579606.
December 14. Gable, S., H. Lofgren, and I. Osorio-Rodarte.
. 2011. Tunisias Shot at Democracy: 2015. Country Development Diagnostics
What Demographics and Recent History Tell Post-2015: Ethiopia at a Glance. Background
Us. New Security Beat Blog, January 25. document for the Third International Financ-
Clemens, M. A. 2011. Economics and Emigra- ing for Development Conference in Addis
tion: Trillion-Dollar Bills on the Sidewalk? Ababa, July. World Bank, Washington, DC.
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 223
Galor, O. 2012. The Demographic Transition: . 2012. The Liberalization and Manage-
Causes and Consequences. Cliometrica 6 (1): ment of Capital Flows: An Institutional View.
128. International Monetary Fund, Washington,
Gibson, J., D. McKenzie, and B. Zia. 2014. The DC.
Impact of Financial Literacy Training For . 2013. Brazil 2013 Article IV Consulta-
Migrants. World Bank Economic Review 28 tion. Selected Issues. IMF Country Report
(1): 13061. 13/313. International Monetary Fund, Wash-
Goldstone, J. A., E. Kauffman, and M. D. Toft, ington, DC.
eds. 2012. Political Demography: How Popu- . 2014. Staff Guidance Note on Macro-
lation Changes are Reshaping International prudential PolicyConsiderations for Low
Security and National Politics. Boulder, CO: Income Countries. International Monetary
Paradigm Publishers. Fund, Washington, DC.
Gra, M. 2013. Political Economy of Pension . 2015. Sub-Saharan Africa: Navigating
Reforms: Selected General Issues and the Pol- Headwinds. Regional Economic Outlook
ish Pension Reform Case. IZA Journal of Series. International Monetary Fund, Wash-
Labor & Development 2 (2). ington, DC (April).
Gragnolati, M., O. H. Jorgensen, R. Rocha, and IPCC (Intergovernmental Panel on Climate
A. Fruttero. 2011. Growing Old in an Older Change). 2014. Climate Change 2014: Synthe-
Brazil: Implications of Population Aging on sis Report. Contribution of Working Groups
Growth, Poverty, Public Finance, and Service I, II and III to the Fifth Assessment Report
Delivery. Washington, DC: World Bank. of the Intergovernmental Panel on Climate
Gragnolati, M., R. Rofman, I. Apella, and S. Change. Geneva.
Troiano. 2015. As Time Goes By in Argen- Jamison, D. T., M. Sandbu, and J. Wang. 2001.
tina: Economic Opportunities and Challenges Cross-country Variation in Mortality Decline,
of the Demographic Transition. Washington, 196287: The Role of Country-Specific Tech-
DC: World Bank. nical Progress. CMH Working Paper Series,
Hanusch, M. 2012. The Doing Business Indi- Paper WG1:4.
cators, Economic Growth and Regulatory Japan Times. 2014. Japan May Boost Immigrant
Reform. Policy Research Working Paper Numbers. March 14.
6176, August. World Bank, Washington, DC. Jiang, L., and K. Hardee. 2009. How Do
Harper, S. 2013. PopulationEnvironment Recent Population Trends Matter to Climate
Interactions: European Migration, Population Change? Population Action International.
Composition and Climate Change. Envi- Jiang, L., and B. C. ONeill. 2007. Impacts of
ronmental and Resource Economics 55 (4): Demographic Trends on U.S. Household Size
52541. and Structure. Population and Development
Higgins, M. 1998. Demography, National Sav- Review 33 (3): 567591.
ings, and International Capital Flows. Inter- Jorgensen, O. H. 2011. Macroeconomic and
national Economic Review 39 (2): 34369. Policy Implications of Population Aging in
Hollanders, D., and F. Koster. 2012. The Grey- Brazil. Policy Research Working Paper 5519.
ing of the Median Voter. CentER Discussion World Bank, Washington, DC.
Paper Series 2012-061, July. Joshi, S., and T. P. Schultz. 2013. Family Plan-
ICRW (International Center for Research on ning and Womens and Childrens Health:
Women). 2007. How to End Child Marriage: Long-Term Consequences of an Outreach Pro-
Action Strategies for Prevention and Protec- gram in Matlab, Bangladesh. Demography
tion. Washington, DC. 50 (1): 14980.
IMF (International Monetary Fund). 2004. WEO. KC, S., B. Barakat, A. Goujon, V. Skirbekk, W.
How Will Demographic Change Affect the Sanderson, and W. Lutz. 2010. Projection of
Global Economy? International Monetary Populations by Level of Educational Attain-
Fund, Washington, DC. ment, Age, and Sex for 120 Countries for
224 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
20052050. Demographic Research 22 (15): Costs. OECD Trade Policy Papers 118,
383472. OECD Publishing, Paris.
Lartey, E., F. Mandelman, and P. Acosta. 2012. Mos, E., and S. Sorescu. 2013. Trade Facilita-
Remittances, Exchange Rate Regimes and tion Indicators: The Potential Impact of Trade
the Dutch Disease: A Panel Data Analysis. Facilitation on Developing Countries Trade.
Review of International Economics 20 (2): OECD Trade Policy Papers 144, OECD Pub-
37795. lishing, Paris.
Lee, R., and A. Mason. 2006. What Is the Moller, L. C., and K. M. Wacker. 2015. Ethio-
Demographic Dividend? Finance and Devel- pias Growth Acceleration and How to Sustain
opment 43 (3). It: Insights from a Cross-Country Regression
Liddle, B. 2011. Consumption-Driven Environ- Model. Policy Research Working Paper 7292,
mental Impact and Age Structure Change in World Bank, Washington, DC.
OECD Countries: A Cointegration-STIRPAT Myrskyl, M., H. P. Kohler, and F. C. Billari.
Analysis. Demographic Research 24 (30): 2009. Advances in Development Reverse Fer-
74970. tility Declines. Nature 460 (7256): 74143.
. 2013. Population, Affluence, and Envi- Naik, A., J. Koehler, and F. Laczko. 2008.
ronmental Impact across Development: Evi- Migration and Development: Achieving Pol-
dence from Panel Cointegration Modeling. icy Coherence. No. 34. International Organi-
Environmental Modelling and Software 40: zation for Migration, Geneva.
25566. Null, S. 2015. The Future of Political Demogra-
Liddle, B., and S. Lung. 2010. Age-Structure, phy and Its Impact on Policy. New Security
Urbanization, and Climate Change in Devel- Beat Blog, March 9.
oped Countries: Revisiting STIRPAT for Oberndorfer, U., and V. Steiner. 2006. Inter-
Disaggregated Population and Consumption- generational Conflict, Partisan Politics,
Related Environmental Impacts. Population a nd P ubl ic H ig her E duc at ion Sp end -
and Environment 31 (5): 31743. ing: Evidence from the German States.
Lofgren, H., M. Cicowiez, and C. Diaz-Bonilla. IZA Discussion Papers 2417, Institute for the
2013. M A MS A Computable General Study of Labor, Bonn.
Equilibrium Model for Developing Country OECD (Organisation for Economic Co-operation
Strategy Analysis. In Handbook of Comput- and Development). 2012. Brazil Country
able General Equilibrium Modeling. Vol. 1A, NoteProgramme for International Student
edited by P. B. Dixon and D. W. Jorgenson. Assessment (PISA): Results from PISA 2012.
North Holland, Elsevier B.V. OECD Publishing, Paris.
Lucas, Robert E., Jr. 1990. Why Doesnt Capital . 2013a. International Migration Outlook
Flow from Rich to Poor Countries? American 2013. Paris: OECD Publishing.
Economic Review 80(2): 9296. . 2013b. Pensions at a Glance 2013:
Luhrmann, M. 2003. Demographic Change, OECD and G20 Indicators. Paris: OECD
Foresight, and International Capital Flows. Publishing.
Mannheim University, Mannheim, Germany. . 2014. OECD Pensions Outlook 2014.
Massey, D. S. 1988. Economic Development Paris: OECD Publishing.
and International Migration in Comparative OECD EU (Organisation for Economic Devel-
Perspective. Population and Development opment and Co-operation and European
Review 14 (3): 383 414. Union). 2014. Matching Economic Migration
McKenzie, D., and D. Yang. 2015. Evidence on with Labour Market Needs. Paris: OECD
Policies to Increase the Development Impacts Publishing.
of International Migration. World Bank ONeill, B. C. 2009. Climate Change and Popu-
Research Observer. World Bank, Washington, lation Growth. In A Pivotal Moment: Popu-
DC. lation, Justice and the Environmental Chal-
Mos, E., T. Orliac, and P. Minor. 2011. Trade lenge, edited by L. Mazur. Washington, DC:
Facilitation Indicators: The Impact on Trade Island Press.
GLOBAL MONITORING REPORT 2015/2016 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE 225
ONeill, B. C., X. Ren, L. Jiang, and M. Dalton. Stephenson, J., S. F. Crane, C. Levy, and M.
2012. The Effect of Urbanization on Energy Maslin. 2013. Population, Development, and
Use in India and China in the iPETS Model. Climate Change: Links and Effects on Human
Energy Economist 34 (S3): 33945. Health. The Lancet 382 (9905): 166573.
Ostry, J. D., A. Berg, and C. G. Tsangarides. 2014. Troiano, S. 2015. Population Dynamics and the
Redistribution, Inequality, and Growth. Implications for Economic Growth, Poverty
IMF Staff Discussion Note, International and InequalityWhat Is Relevant for South-
Monetary Fund, Washington, DC. ern Africa. World Bank, Washington, DC.
Owen, A. L., and S. Wu. 2007. Is Trade Good Tyers R., and Q. Shi. 2007. Demographic
for Your Health? Review of International Change and Policy Responses: Implications for
Economics 15 (4): 66082. the Global Economy. World Economy 30 (4):
Papageorgiou, C., A. Savvides, and M. Zacharia- 53766.
dis. 2007. International Medical Technology United Nations. 2013a. World Population Pros-
Diffusion. Journal of International Econom- pects: 2013 Revision. Geneva: United Nations.
ics 72 (2): 40927. . 2013b. Global Migration: Demographic
Poterba, J. 1996. Demographic Structure and Aspects and Its Relevance for Development.
the Political Economy of Public Education. Technical Paper 2013/6. Department of Eco-
NBER Working Paper 5677, National Bureau nomic and Social Affairs Population Division,
of Economic Research, Cambridge, MA (July). United Nations, Geneva.
Ratha D., and W. Shaw. 2014. South-South . 2013c. Trends in International Migrant
Migration and Remittances. Policy Research Stock: Migrants by Destination and Origin.
Working Paper 102. World Bank, Washington, United Nations database, POP/ DB/MIG/
DC. Stock/Rev.2013, Department of Economic
Rocha, R. 2010. Savings, Poverty and Lifecycle and Social Affairs.
in Brazil. Quarterly Knowledge Report. . 2015. World Population Prospects; The
World Bank, Brasilia (August). 2015 Revision. Geneva: United Nations.
Sadorsky, P. 2013. Do Urbanization and Indus- UNCTAD (United Nations Conference on Trade
trialization Affect Energy Intensity in Develop- and Development). 2013. Non-Tariff Mea-
ing Countries? Energy Economics 37 (May): sures to Trade: Economic and Policy Issues
5259. for Developing Countries. Geneva: United
Sahay, Ratna, Martin C ihk, Papa NDiaye, Nations.
Adolfo Barajas, Ran Bi, Diana Ayala, Yuan . 2015. World Investment Report 2015:
Gao, Annette Kyobe, Lam Nguyen, Chris- Reforming International Investment Gover-
tian Saborowski, Katsiaryna Svirydzenka, nance. Geneva: United Nations.
and Seyed Reza Yousefi. 2015. Rethinking Voas, D. 2003. Confl icting Preferences: A Rea-
Financial Deepening: Stability and Growth son Fertility Tends to Be Too High or Too
in Emerging Markets. IMF Staff Discussion Low. Population and Development Review
Note 15/08, International Monetary Fund, 29 (4): 62746.
Washington, DC (May). Walmsley, T. L., L. A. Winters, and S. A. Ahmed.
Smith, R. D., R. Chanda, and V. Tangcharoen- 2007. Measuring the Impact of the Move-
sathien. 2009. Trade in Health-Related ment of Labor Using a Model of Bilateral
Services. The Lancet 373.9663: 593601. Migration Flows. GTAP Technical Paper
Soares, Rodrigo R., and B. L. S. Falco. 2008. 28. Center for Global Trade Analysis, Purdue
The Demographic Transition and the Sexual University.
Division of Labor. Journal of Political Econ- Wodon, Q. 2015. Personal communication of
omy 116 (6): 1058104. results from ongoing research on child mar-
Solimano A., and N. Watts. 2005. International riage in Niger.
Migration, Capital Flows and the Global Econ- World Bank. 2006. Global Economic Prospects
omy: A Long Run View. UN CEPAL, Eco- 2006: Economic Implications of Remittances
nomic Development Division, Santiago, Chile. and Migration. Washington DC: World Bank.
226 POLICY PRIORITIES IN AN ERA OF DEMOGRAPHIC CHANGE GLOBAL MONITORING REPORT 2015/2016
Since the Millennium Development Goals (such as targets related to child malnutrition,
(MDGs) were articulated in the United primary completion, child mortality, and
Nations Millennium Declaration in 2000, maternal mortality), the population growth
substantial progress has been made, but a within the age groups can make it more diffi-
large unfinished agenda remains. The global cult to achieve the target. The growth in pop-
target on poverty was met five years ahead of ulations of school-age children and women
the 2015 deadline, and several other MDGs of child-bearing age has been significant in
have been met or are likely to be met, such the past quarter century, especially in Sub-
as gender parity in primary and secondary Saharan Africa.
school enrollment. MDGs covering other The MDGs have been instrumental in
areas like maternal mortality, however, are spurring a push for better data and enhanced
out of reach and will not be met this year, nor monitoring. One important aspect of the
are they expected to be met globally in the MDGs has been their focus on measuring
near future. Progress has also been uneven and monitoring progress; this focus has pre-
across countries and regions (Sub-Saharan sented a clear challenge to improve the qual-
Africa is the only region that will not meet ity, frequency, and availability of relevant sta-
any of the targets by 2015) and socioeco- tistics. Much has been done to strengthen the
nomic boundaries. national statistical systems where most data
In many developing countries, popula- originate, but weaknesses remain in the cov-
tion growth has made it more difficult to erage and quality of many indicators in the
achieve some goals and targets. Many targets poorest countries, where resources are scarce
are specified as proportions or rates, using and careful measurement of progress may
the ratio of two numbers. The population, matter the most. Based on the most recent
or a subgroup of the population, is often data available, the MDG Report Card in this
the denominatorso when the population appendix presents a goal-by-goal analysis
grows, achieving a fall in the rate will require on the progress toward the MDGs, which is
a correspondingly large fall in the numerator. complemented by online progress charts at
If a target is mainly for specific age groups http://data.worldbank.org/mdgs.
229
MDG 1
Evaluated at $1.25 a day in 2005 purchasing power from 60.7 percent in 1990 to 6.3 percent in 2011.
parity (PPP), the world met the MDG target of halv- Still, it had 8.3 percent of the worlds extremely poor
ing the proportion of the population in extreme pov- in 2011, the worlds third-largest share. India more
erty five years ahead of the 2015 deadline (World than halved its extreme poverty rate, reducing it from
Bank 2015). The proportion of people in the world 51.4 percent in 1990 to 24.7 percent in 2011. Still,
living on less than $1.25 a day fell from 36.4 percent it was home to nearly a third of the worlds total of
in 1990 to 14.5 percent in 2011. Forecasts based on extremely poor people in 2011. While these countries
country-specific growth rates over the past 10 years have achieved the poverty target, their task of eradi-
indicate a fall in the global extreme poverty rate to cating extreme poverty remains critical, especially
11.5 percent by 2015 (figure A.1), a drop of more when confounded by population growth.
than two-thirds from the baseline. Based on current trends, nearly half of the 145
Progress toward reducing poverty across regions developing countries have already achieved the pov-
has been uneven. East Asia and the Pacific experi- erty target of MDG 1. However, 27 countries are
enced the fastest rate of poverty reduction, slashing seriously off track, meaning that at the current pace
its share of people living on less than $1.25 a day of progress, they will not be able to halve their 1990
from 58.2 percent in 1990 to 7.9 percent in 2011 and extreme poverty rates even by 2030. All but six of
reaching the target well ahead of the deadline. Europe these 27 countries are in Sub-Saharan Africa (World
and Central Asia, Latin America and the Caribbean, Bank MDG Data Dashboard).1
and the Middle East and North Africa all reached MDG 1 also aims to halve hunger and malnutri-
the target by 2010. South Asia achieved the target tion rates by 2015. The prevalence of malnutrition
by 2011, following a strong acceleration after 2008. among children under age five in developing coun-
This reduction was mainly brought about by popu- tries has dropped substantially, falling from 25
lous India, whose poverty trajectory strongly influ- percent in 1990 to 16 percent in 2014. However,
enced the trend for the whole South Asian region. By developing countries as a whole may not be able to
contrast, Sub-Saharan Africa still lags behind and is meet the target by 2015, nor will South Asia or Sub-
not expected to meet the target by 2015. Saharan Africa (figure A.3). In part, the target will
Progress in reducing the absolute number of poor be missed because of the significant growth in the
people was weaker, especially in regions and coun- under-five population in Sub-Saharan Africa, which
tries with rapid population growth. In Sub-Saharan grew nearly 75 percent between 1990 and 2014.
Africa, the number of extremely poor people actually In other developing regions, the under-five popula-
increased from 290 million in 1990 to 415 million in tion either dropped considerably (East Asia and the
2011, as a result of a very fast-growing population Pacific, Europe and Central Asia, and Latin America
(figure A.2). and the Caribbean) or grew only moderately (Middle
The global achievement of the MDG 1 poverty East and North Africa and South Asia). Sub-Saharan
target was aided by the strong performance of China Africa is also the only developing region that has
and India, the two countries in the world in 1990 seen a steady upward trend in the number of under-
with the highest population and also the largest weight children under the age of five, from 27.5 mil-
number of extremely poor. China has been a driving lion in 1990 to 31.4 million in 2014 (one-third of
force for poverty reduction worldwide as well as in the developing worlds underweight children under
its own region. Chinas extreme poverty rate declined age five).
230
FIGURE A.1 Share of people living on less than $1.25 a day, by region, 19902015
70
Forecast
G L O B A L M O N I 60
TORING REPORT 2015 R U R A L - U R B A N D I S PA R I T I E S A N D DYN A M I C S 231
40
30
20
10
0
1990 1993 1996 1999 2002 2005 2008 2011 2015 2015
targets
East Asia and Pacific Middle East and North Africa Developing countries
Europe and Central Asia South Asia World
Latin America and the Caribbean Sub-Saharan Africa
Source: World Bank PovcalNet (http://iresearch.worldbank.org/PovcalNet).
Note: Based on 2005 purchasing power parity.
2,000
Forecast
Population (millions)
1,500
1,000
500
0
1990 1993 1996 1999 2002 2005 2008 2011 2015
East Asia and Pacific Europe and Central Asia
Latin America and the Caribbean Middle East and North Africa
South Asia Sub-Saharan Africa
Source: World Bank PovcalNet (http://iresearch.worldbank.org/PovcalNet).
Note: Based on purchasing power parity.
FIGURE A.3 Percentage of children under five who are underweight, by region,
19902015
60
Forecast
Share of children under age five (%)
50
40
30
20
10
0
2015
1990 1995 2000 2005 2010 target
East Asia and Pacific Middle East and North Africa Developing countries
Europe and Central Asia South Asia
Latin America and the Caribbean Sub-Saharan Africa
MDG 2 focuses solely on the effort to ensure that and Latin America and the Caribbean have achieved
all children, boys and girls alike, can complete a full the MDG 2 target, 18 countries in these regions are
course of primary education by 2015. This target is seriously off track and are unlikely to achieve the tar-
measured by the primary school completion rate get even by 2030. On the other hand, the target has
the proportion of children completing the last grade been achieved in 9 countries in Sub-Saharan Africa,
of primary education, regardless of ageand is not although the region as a whole has lagged (World
likely to be met by developing countries as a whole Bank MDG Data Dashboard).
by 2015. Variations are captured not only across countries
The primary completion rate in developing coun- but also within countriesbetween the rich and the
tries increased from about 79 percent in 1990 to 91 poor and between urban and rural residents. Chil-
percent in 2013 (figure A.4). This is an impressive dren in poor families and those living in rural areas
gain, especially when considering that the number are less likely to enroll or remain in school. In Sen-
of students in the last grade of primary education in egal, for example, 73 percent of children from house-
developing countries grew from 88 million in 1990 holds whose incomes were in the richest quintile com-
to 103 million in 2013. This increase means that, pleted primary education in 2012, compared with 51
during the past two decades or so, nearly 25 million percent of children from the poorest quintile. While
more children were able to complete a full course of 83 percent of children in urban areas completed pri-
primary education. Even though the primary comple- mary school, only 57 percent of children in rural
tion rate has remained at 91 percent since 2009 for areas did so (figure A.5). Ensuring equitable access
developing countries, 1 million more children were to education is a key challenge in achieving universal
added to the group of primary school graduates over primary education.
the past five years. To complete a course of education, children need
Among the six developing regions, East Asia and to enroll and stay in school. However, many children
the Pacific, Europe and Central Asia, and Latin either never attend school, start school but attend
America and the Caribbean have reached the tar- intermittently, or drop out before completion. The
get. However, the other regions are not expected number of primary-school-age children not attending
to reach the target. The challenge faced by Sub- school has been halved to 56 million since peaking in
Saharan Africa is especially daunting: despite a sub- 1997. South Asia substantially reduced the number
stantial increase in the primary completion rate, from of primary-school-age children not in school, driven
54 percent in 1990 to 69 percent in 2013, it is still by significant progress in India. Sub-Saharan Africa
the lowest among all regions; in 2013 it was nearly decreased the number of out-of-school children by
20 percentage points below the average rate for all about 8 million between 1990 and 2013. But the
developing countries. At the same time, Sub-Saharan population growth of primary-school-age children in
Africa has the fastest-growing population of pri- the regiona 77 percent increase from 87 million to
mary-school-age children among all regions, placing 153 million during the same periodmade it all the
more pressure on its education system. more challenging for countries in the region to make
Regional averages often conceal variations in per- a larger reduction. Consequently, about 60 percent of
formance across countries. For example, although the developing worlds out-of-school children live in
East Asia and the Pacific, Europe and Central Asia, Sub-Saharan Africa (figure A.6).
232
FIGURE A.4 Primary school completion rate, by region, 19902013 FIGURE A.5 Primary completion rate by income
quintile and residence, Senegal, 2012
120
90
100 80
Share of relevant age group (%)
40 30
20
20
10
0
0
Richest Poorest Urban Rural
1990 1995 2000 2005 2010 2015
quintile quintile
target
East Asia and Pacific South Asia
Source: World Bank EdStats Database. World Bank calculations, based on
Europe and Central Asia Sub-Saharan Africa
Demographic and Health Surveys.
Latin America and the Caribbean Developing countries
Middle East and North Africa
Source: United Nations Educational, Scientific and Cultural Organization Institute for Statistics.
100
Primary schoolage children
out of school (millions)
80
60
40
20
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
East Asia and Pacific Middle East and North Africa
Europe and Central Asia South Asia
Latin America and the Caribbean Sub-Saharan Africa
Source: United Nations Educational, Scientific and Cultural Organization Institute for Statistics.
233
MDG 3
MDG 3 is aimed at promoting gender equality and school-age population since the early 2000s, which
empowering women by enhancing womens social, may have enabled them to make more resources
economic, and political participation. Expanding available for children. Sub-Saharan Africa and the
opportunities for girls and women in these areas ben- Middle East and North Africa saw fast progress, but
efits them directly as well as society as a whole. they continue to have the largest gender disparities in
The target associated with MDG 3 is to eliminate primary and secondary enrollment rates among all
gender disparity at all levels of education by 2015. developing regions and are unlikely to meet the tar-
Developing countries as a whole are likely to reach get of eliminating these disparities by 2015. The task
gender parity in primary and secondary enrollment, has been more challenging for Sub-Saharan Africa
defined as having a ratio of girls to boys in primary because its school-age population has grown steadily
and secondary education at 97103 percent, accord- since 1990, imposing increased pressure on its educa-
ing to UNESCO (2004). The ratio of girls to boys tional systems.
enrolled in primary and secondary schools increased While tremendous progress was made regard-
from 83 percent in 1990 to 97 percent in 2013 (figure ing gender parity in tertiary education (figure A.8),
A.7). The ratio in tertiary education has increased regional disparities are quite stark. Four of the six
even more, from 72 percent to 103 percent in the regions have achieved gender parity in tertiary edu-
same period. cation, including the Middle East and North Africa,
Nearly half of the 145 countries have achieved which is struggling to achieve gender parity in pri-
gender parity in primary and secondary enroll- mary and secondary education. South Asia has made
ment. However, 25 countries are seriously off target. accelerated progress since 2010 and is on track to
While 11 countries are in the Middle East and North reach gender parity in tertiary enrollment. As of 2013,
Africa and Sub-Saharan Africa, 12 are in Europe however, the female-to-male tertiary enrollment ratio
and Central Asia and Latin America and the Carib- remained very low in Sub-Saharan Africa (73 percent).
bean, regions that have achieved gender parity on the Gender disparities in the labor market and in the
whole (World Bank MDG Data Dashboard). political arena are also critical, and associated indica-
Across developing regions, there are substantial tors are used for monitoring progress there as well.
differences in progress. Besides economic and policy Women work long hours and contribute consider-
factors that influence gender parity in education (such ably to their families economic well-being, but many
as economic growth, investment in infrastructure engage in low-paying and less productive jobs. The
and education, and more direct policy interventions), share of womens paid employment in the nonagricul-
demography and the evolution of school-age popula- tural sector is less than 20 percent in the Middle East
tions in each region may also underlie some of the and North Africa, having risen only marginally over
uneven progress. South Asia made the most remark- the years. The share of women in wage employment is
able progress among regions, closing the gender gap the highest in Europe and Central Asia, almost equal
in primary and secondary enrollment by more than to mens at 45 percent (figure A.9).
30 percentage points between 1990 and 2013 to Women also lag men in participating in public life
reach gender parity. In 1990, South Asias ratio of and decision making at the highest levels, as mea-
girls to boys in school enrollment was only 68, 12 sured by the proportion of parliamentary seats held
percentage points lower than in the Middle East and by women. As of 2014, Latin America and the Carib-
North Africa (the next lowest region). South Asia bean led developing-country regions, with 29 per-
achieved parity even though the region added 47 mil- cent of the seats held by women, followed closely by
lion school-age boys and 41 million school-age girls Sub-Saharan Africa at 22 percent. Overall, womens
in the period, pressuring school systems to educate presence has improved compared with 1990 levels.
more children. East Asia and the Pacific and Europe The biggest change has occurred in the Middle East
and Central Asia had already reached gender par- and North Africa, where the proportion of seats held
ity in primary and secondary school enrollment by by women more than quadrupled between 1990 and
2013. These regions have experienced a decline in the 2014 (figure A.10).
FIGURE A.7 Ratio of girls to boys in primary and secondary FIGURE A.8 Ratio of girls to boys in tertiary education,
education, by region, 19902013 by region, 19902013
110 130
120
100 110
Ratio of girls to boys (%)
80
80
70
70 60
50
60 40
1990 1995 2000 2005 2010 2015 1990 1995 2000 2005 2010 2015
target target
East Asia and Pacific Sub-Saharan Africa East Asia and Pacific Sub-Saharan Africa
Europe and Central Asia Developing countries Europe and Central Asia Developing countries
Latin America and the Caribbean World Latin America and the Caribbean World
Middle East and North Africa 2015 target Middle East and North Africa 2015 target
South Asia South Asia
Source: United Nations Educational, Scientific and Cultural Organization Institute for Statistics. Source: United Nations Educational, Scientific and Cultural Organization Institute for Statistics.
FIGURE A.9 Share of women in wage employment in the FIGURE A.10 Proportion of seats held by women in national
nonagricultural sector, 200913 parliaments, by region, 200014
50 30
25
40
Share of female employees (%)
20
30
15
20
10
10 5
0 0
Europe Latin East Asia Sub- South Middle 2000 2002 2004 2006 2008 2010 2012 2014
and America and Saharan Asia East and
Central and the Pacific Africa North East Asia and Pacific Middle East and North Africa
Asia Caribbean Africa Europe and Central Asia South Asia
Latin America and the Caribbean Sub-Saharan Africa
Source: International Labour Organization.
Note: The percentage for each region is the median for the regions countries for the most Source: Inter-Parliamentary Union.
recent year available between 2009 and 2013.
235
MDG 4
In the past two decades, the number of children recent trends, 35 countries are seriously off track,
across the globe who die each year before their fifth and more than one-third of these countries are
birthday has been cut by more than half, falling from in Sub-Saharan Africa (World Bank MDG Data
13 million in 1990 to 6 million in 2015. At the end Dashboard).
point of the MDGs, at least 16,000 fewer children In 2015 around 4.3 million under-five deaths,
die each day compared with 1990. or about 73 percent of all such deaths worldwide,
In 2015, the global average rate of child mortal- occurred in 20 developing countries. Most of these
ity declined to 43 deaths per 1,000 live births, about countries are characterized by large populations,
half its 1990 level of 91 deaths per 1,000 live births. often with high birthrates. Many have substantially
Although a significant achievement, based on the reduced mortality rates over the past two decades.
current trend, the world as a whole fell short of the Of these 20 countries, Bangladesh, Brazil, China,
MDG 4 target of reducing the under-five mortal- the Arab Republic of Egypt, Ethiopia, Indonesia,
ity rate by two-thirds between 1990 and 2015. The Malawi, Mozambique, Niger, Tanzania and Uganda
average annual rate of decline of the global under- achieved a two-thirds reduction in their under-five
five mortality rate accelerated from 1.8 percent over mortality rate by 2015. Had the mortality rates of
19902000 to 3.9 percent over 200515. If the more 1990 prevailed in 2015, 4.2 million more children
recent rate of decline had started in 1990, the target would have died in these 11 countries, and another
for MDG 4 would likely have been achieved by 2015. 6.9 million would have died in the remaining 9 coun-
And if this recent rate of decline continues, the tar- tries (figure A.12).
get will be achieved in 2026 (United Nations Inter- Urbanization is associated with lower levels of
agency Group for Child Mortality Estimation 2015). child mortality (World Bank 2013). Figure A.13
Sub-Saharan Africa and South Asia bear the high- shows that child mortality rates tend to be lower in
est child mortality rates, despite rapid improvements countries with a larger share of the population liv-
since 2000 (figure A.11). In Sub-Saharan Africa, ing in urban areas. These lower rates may be because
the rate declined by more than half between 1990 urban residents tend to be more affluent or have bet-
and 2015 but still remained high at 83 deaths per ter access to health facilities and more cost-effective
1,000 live births. At the same time, the number of interventions. In urban areas, women also tend to
under-five deaths declined by only 24 percent largely be better educated and have better access to contra-
because of the large increase (nearly 76 percent) in ceptive methods than their rural counterparts, which
the under-five population in the region. in turn contributes to lower fertility rates and better
East Asia and the Pacific and Latin America and health for the mother and child (Mller et al. 2015).
the Caribbean have achieved the MDG 4 target. This is not always the case, however. Child mortality
Among the 145 countries evaluated, 57 have already tends to be very high in countries where the majority
met the child mortality target by 2015. Based on of the urban population lives in slums.2
236
FIGURE A.11 Under-five mortality rate (per 1,000 live births), by region, 19902015
180
160
140
100
80
60
40
20
0
1990 1995 2000 2005 2010 2015
East Asia and Pacific Middle East and North Africa Sub-Saharan Africa
Europe and Central Asia South Asia World
Latin America and the Caribbean
FIGURE A.12 Number of deaths of children under age five in 2015, selected countries
3.5
3.0
2.5
Deaths (millions)
2.0
3.5
1.5
1.0
0.5
0
Ug e
Pa a
n
ria
a
wi
am la
gh ali
an
da
ng ia
Co Ind h
De sia
Et p.
p.
t, A razi
ge
ny
in
di
qu
ta
da
es
op
go
e
Re
M
ala
ist
an
ge
e
.R
Ch
a
In
kis
Ni
lad
Ke
Su
bi
on
B
nz
An
hi
an
Ni
M
m
ra
Ta
oz
Ba
Af
o,
M
yp
ng
Eg
160 Angola
140 Chad Somalia
Deaths per 1,000 live births
120
Mali
Nigeria
100 Benin
Niger Guinea Cte dIvoire
Afghanistan
80 Burundi Mauritania
Mozambique
Lao PDR Liberia Haiti
60 MalawiSwaziland Ghana Djibouti
Timor-Leste KiribatiTurkmenistan
Kenya
Eritrea Senegal Botswana So Tom and Prncipe Gabon
40 Bangladesh
Cambodia Bhutan
Indonesia
Iraq Dominican Republic Nauru
20 Trinidad and Tobago Vietnam Philippines Nicaragua Algeria
Barbados Panama Peru Argentina
Sri Lanka Maldives Serbia Costa Rica
0 Ireland Hungary Canada Belgium
0 10 20 30 40 50 60 70 80 90 100
Share of urban population to total (%)
Source: World Development Indicators database. 237
MDG 5
Every day, around 800 young women lose their woman, the number of live births not only increased
lives before, during, or after childbirth. Most of rapidly but also outpaced the decline of the MMR.
these deaths are avoidable (WHO 2014b]. Maternal Improved maternal health care is found to be asso-
deaths are heavily concentrated in poor areas of the ciated with lower maternal mortality. However, less
world. Globally, an estimated 289,000 women died than 50 percent of women in South Asia and Sub-
from maternal causes in 2013, 99 percent of which Saharan Africa are able to meet the World Health
occurred in developing countries. Sub-Saharan Organizations recommendation of at least four pre-
Africa experienced disproportionately high mater- natal care services during each pregnancy. More-
nal deaths, accounting for 62 percent of the global over, only half of all births in these two regions are
total, followed by South Asia, which accounted for assisted by skilled birth attendants such as doctors,
24 percent. nurses, and trained midwives (figure A.15).
The MDG 5 target calls for reducing the mater- Reducing maternal deaths requires a comprehen-
nal mortality ratio (MMR) by 75 percent between sive approach to womens reproductive health ser-
1990 and 2015, the highest percentage reduc- vices, particularly through better access to contra-
tion among all MDG targets. The MMR is calcu- ception. Women with more than four children tend
lated based on the number of maternal deaths per to have an increased risk of maternal deaths (WHO
100,000 live births. During the period 19902013, 2013). A higher prevalence of contraceptive use can
the MMR came down substantially in developing reduce the number of pregnancies, leading to a lower
countries as a whole, declining from 430 maternal risk of maternal deaths. Moreover, contraceptive use
deaths per 100,000 live births in 1990 to 230 mater- can reduce the likelihood of unwanted pregnancies
nal deaths in 2013 (figure A.14). Despite this very and therefore unsafe abortions, which are one of the
significant progress, most developing countries are main causes of maternal deaths. There is a negative
not likely to achieve this MDG target. According correlation between the MMR and the contracep-
to recent data, only 18 countries (12 percent) have tive prevalence rate (CPR) (Ahmed and others 2012)
already achieved or are likely to achieve the target (figure A.16). Most Sub-Saharan African countries
(World Bank MDG Data Dashboard). The majority have low CPRs and very high MMRs compared with
of developing countries (88 countries, 61 percent) other developing countries.
are seriously off target. Lower fertility rates for adolescent women (ages
Even though many countries are unlikely to 1519 years) are also associated with lower maternal
achieve the target, most of these countries have mortality ratios (Conde-Agudelo, Belizn, and Lam-
experienced a large reduction in their MMR since mers 2005). Women who give birth at early ages are
1990. A decline in the MMR itself, however, does likely to bear more children and are at greater risk
not necessarily mean that the number of mater- of death or serious complications from pregnancy.
nal deaths has declined. In Niger, for example, The adolescent fertility rate remained high in Sub-
the MMR declined by 37 percent between 1990 Saharan Africa, although it declined by about 26 per-
and 2013, but the number of maternal deaths cent between 1990 and 2014, from 140 to 103 per
increased by 30 percent. Because the number of 1,000 adolescent women (figure A.17). In contrast,
reproductive-age women (1549 years) more than during the same period in South Asia, the adolescent
doubled between 1990 and 2013, and because the fertility rate declined by two-thirds, from 103 to 35
total fertility rate remained very high at 7.6 births per per 1,000 adolescent women.
238
FIGURE A.14 Maternal mortality ratio, by region, 19902013 FIGURE A.15 Share of births attended by skilled health staff,
by region
1,000
100
900
90
Deaths per 100,000 live births
800
80
700
70
600
60
Percent
500
50
400
40
300
30
200
20
100
10
0
0
1990 1995 2000 2005 2010 2013 2015 Sub-Saharan South Middle East Latin East Asia Europe
targets
East Asia and Pacific Africa Asia and America and and
South Asia
North Africa and the Pacific Central Asia
Europe and Central Asia Sub-Saharan Africa
Caribbean
Latin America and the Caribbean Developing countries
Middle East and North Africa Source: United Nations Childrens Fund and household surveys (including Demographic and Health
Surveys and Multiple Indicator Cluster Surveys).
Source: United Nations Maternal Mortality Estimation Inter-agency Group, modeled estimates. Note: The percentage for each region is the average for the regions countries for the most recent
year available between 2008 and 2014.
FIGURE A.16 Comparison of contraceptive prevalence rate (CPR) and maternal mortality ratio
(MMR), by region
1,200
1,000
(per 100,000 live births), 2013
Maternal mortality ratio
800
600
400
200
0
0 10 20 30 40 50 60 70 80 90 100
CPR, most recent year available, 200814 (%)
East Asia and Pacific Europe and Central Asia Latin America and the Caribbean
Middle East and North Africa South Asia Sub-Saharan Africa
Source: United Nations Maternal Mortality Estimation Inter-agency Group, United Nations Childrens Fund, and household surveys (including
Demographic and Health Surveys and Multiple Indicator Cluster Surveys).
120
100
80
60
40
20
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
East Asia and Pacific Middle East and North Africa
Europe and Central Asia South Asia
Latin America and the Caribbean Sub-Saharan Africa 239
Source: United Nations Population Division.
MDG 6
HIV/AIDS, malaria, and tuberculosis are among the Slowing and reversing the HIV epidemic require
worlds deadliest infectious diseases. The targets of changes in behaviors based on understanding the
MDG 6 are to halt and begin to reverse the spread causes and transmission mechanisms of the disease,
and incidence of these diseases by 2015. In Sub- as well as on effective steps to avoid infection. Survey
Saharan Africa, the spread of HIV/AIDS brought to results show that wide knowledge gaps persist. Many
a standstill decades of steady increases in life expec- young people appear to be ill-informed about HIV
tancy: the regions average life expectancy at birth and engage in risky behaviors. Of the 10 countries
increased from 40 years in 1960 to 50 years in 1990 with the highest HIV prevalence rates, 2013 survey
but stagnated in the 2000s. HIV/AIDS has also left participants in Namibia and Swaziland were the most
millions of children orphaned. Tuberculosis killed informed, with more than 50 percent of the sampled
1.1 million people worldwide in 2013, most of them men and women ages 1524 able to list two ways to
ages 1545, and sickened millions more. Malaria has prevent HIV, as well as to reject three common mis-
taken a large toll as well, being one of the leading conceptions about HIV. In Kenya and Mozambique,
causes of death among young children, and at the men scored above 50 percent, but women fell short,
same time it has undermined the health of millions of while in Zimbabwe the opposite was the case. In the
adults at a high cost to their productivity. remaining five countries (Lesotho, Malawi, South
Across the world, an estimated 37 million people Africa, Uganda, and Zambia), both men and women
were living with HIV/AIDS in 2014. The number scored less than 50 percent.
of people newly infected with HIV is continuing to In 2013, there were 9 million new tuberculosis
decline in most parts of the world: 2 million people cases in the world and 1.1 million deaths. However,
contracted the disease in 2014, down 33 percent the incidence and prevalence of tuberculosis, as well
from 2001 and 13 percent from 2011. The spread of as the rate of deaths resulting from it, are falling: inci-
new HIV infections has slowed, in line with the tar- dence fell 41 percent between 1990 and 2013, and
get of halting and reversing the spread of HIV/AIDS the death rate fell 45 percent (WHO 2014a). Glob-
by 2015. However, the proportion of adults living ally, the target of halting and reversing tuberculosis
with HIV worldwide has stayed around 0.8 percent incidence by 2015 has been achieved. Despite popu-
since 2000. Sub-Saharan Africa remains the center of lation growth, the absolute numbers of tuberculosis
the HIV/AIDS epidemic, with about 70 percent of the cases and deaths have dropped because of the decline
worlds adults living with HIV. The HIV prevalence in the incidence and death rates (figure A.19).
rate was 4.5 percent in Sub-Saharan Africa in 2014, Globally, an estimated 214 million cases of malaria
compared with less than 1 percent in other regions occurred in 2015, which led to 438,000 deaths. An
that have data available. estimated 3.2 billion people are at risk of being
Despite the progress in stabilizing the propor- infected with malaria and developing the disease.
tion of adults living with HIV worldwide, continued Since 2000, there have been substantial reductions in
population growth means that the absolute number both the number of malaria cases and deaths. It is evi-
of adults with HIV is increasing (figure A.18). Their dent that the target of halting and reversing the inci-
number increased from 29 million in 2005 to 34 mil- dence of malaria has been met (WHO and UNICEF
lion in 2014 worldwide, and from 20 million to 24 2015). Country-level data suggest that there has been
million in Sub-Saharan Africa alone. This dynamic progress against malaria over time, although consis-
poses additional challenges to expanding coverage tent data needed to monitor trends globally are lim-
in access to antiretroviral drugs, which have dra- ited. Malaria occurs in all regions, but the most lethal
matically improved the survival rates for those liv- form of the malaria parasite is concentrated mainly
ing with HIV. In 2015, 15 million people worldwide in Sub-Saharan Africa. Insecticide-treated bed nets
are receiving antiretroviral drugs. The percentage of have proven an effective preventative, and their use by
people living with HIV who are not receiving anti- children in the region is growing (figure A.20). Better
retroviral therapies has fallen from 90 percent in testing and the use of combination drug therapies are
2006 to 60 percent in 2014 (UNAIDS 2015). improving the effectiveness of treatment.
FIGURE A.18 Prevalence of HIV in adults and number of adults living with HIV, by region, 19902014
7 40
FIGURE A.19 Rate and numbers of tuberculosis prevalence, incidence, and death in the world, 19902013
300 18
16
250
14
200 12
10
150
8
100 6
4
50
2
0 0
1990 1995 2000 2005 2010 2013
Prevalence of tuberculosis (right axis) Incidence of tuberculosis (right axis)
Deaths due to tuberculosis (right axis) Prevalence of tuberculosis (left axis)
Incidence of tuberculosis (left axis) Deaths due to tuberculosis (left axis)
Sources: World Health Organization and World Development Indicators Database.
Note: Incidence of tuberculosis is the estimated number of new pulmonary, smear-positive, and extrapulmonary tuberculosis cases. Incidence
includes patients with HIV. Prevalence includes both new cases and those who contracted the disease in the past and are still surviving.
0 20 40 60 80
Share of children under age 5 (%)
First observation (2000 or earlier)
Most recent observation (2007 or later) 241
Source: Household surveys (including Demographic and Health Surveys, Malaria Indicators Surveys, and Multiple
Indicator Cluster Surveys). Data are compiled by UNICEF.
MDG 7
MDG 7 seeks to promote environmental sustain- The water target of MDG 7 calls for halving
ability by focusing on several key targets: reversing the proportion of the population without access to
the loss of natural resources, preserving biodiversity, improved water and sanitation sources by 2015.
increasing access to safe water and sanitation, and The share of people worldwide without access to an
improving the living conditions of people in slums. improved water source declined from 23.9 percent
The aim is to achieve these goals in a sustainable in 1990 to 9.0 percent in 2015, achieving the target
manner, whereby peoples lives can improve without ahead of time (figure A.24). The result is especially
depleting natural and manmade capital stocks. impressive given that world population grew from
The loss of forests threatens the livelihood that 5.3 billion to 7.3 billion during this period, creating
poor people depend upon, destroys the habitat that more demand for improved water access. Not only
harbors biodiversity, and eliminates an important was coverage extended to more than half of the 1.3
carbon sink that helps moderate the climate. Net billion people without access in 1990, but a large
losses since 1990 have been substantial, especially in portion of newly added population was also able to
Latin American and the Caribbean and Sub-Saharan access improved water sources. By 2015, the absolute
Africa. The losses have only been partly compen- number of people without access to improved water
sated by gains elsewhere, mainly in the East Asia and sources worldwide dropped to 658 million peoplea
Pacific region and in high-income countries (figure 48 percent reduction compared with 1990. Progress
A.21). The rate of deforestation has slowed over the varies across regions, with Sub-Saharan Africa con-
past decade, but with current trends, zero net losses tinuing to lagabout 32 percent of its population
will not be reached for another two decades. lacks access. East Asia and the Pacific managed to
The protection of forests and other terrestrial and make impressive improvements, moving from a start-
marine areas is essential to preserving plant and ani- ing position of only 69 percent coverage in 1990 to
mal habitats, as well as the diversity of species. 3 By 94 percent in 2015. The other regions have access
2012, more than 14 percent of the worlds land and rates of more than 92 percent.
more than 12 percent of its oceans were protected, an In 1990, only 53 percent of the worlds population
improvement of 6 percentage points in both catego- had access to improved sanitation facilities. By 2015,
ries since 1990 (figure A.22). this proportion had risen to 68 percent, but this still
Failure to limit greenhouse gas emissions leaves leaves 2.4 billion people worldwide lacking access to
billions of people vulnerable to the adverse effects improved sanitation facilities. For the world to meet
of climate change, with developing countries being the 2015 MDG target on sanitation, 76 percent of
hit hardest. Higher temperatures, changes in precipi- the population needs access to improved sanitation.
tation patterns, rising sea levels, and more frequent This target was not met on time. Coverage is worse in
weather-related disasters pose risks for agriculture, rural areas, where 50 percent of the world population
food, and water supplies. Carbon dioxide emissions lacked access in 2015, compared with 18 percent in
rose by about 60 percent between 1990 and 2013, urban areas. This large disparity, especially in South
reaching an unprecedented level of 36 billion metric Asia and Sub-Saharan Africa, is the main reason that
tons. The average annual growth rate in emissions the sanitation target was not met on time. Given the
has slowed to 2.3 percent since 2010, slightly lower connections between sanitation and other MDGs,
than the annual average growth rate of 3 percent such as infant mortality, expanding access to sanita-
during the 200111 period (figure A.23). tion remains a critical part of the development agenda.
242
FIGURE A.21 Change in forest area, by region, 19902012 FIGURE A.22 Territorial and marine protected areas, by country
income group, 19902012
East Asia and Pacific
18
Europe and Central Asia 16
Latin America and the Caribbean 14
12
Middle East and North Africa
Percent
10
South Asia 8
Sub-Saharan Africa 6
High-income countries 4
2
8 7 6 5 4 3 2 1 0 1 0
Average hectares per year (thousands) Terrestrial- Marine- Terrestrial- Marine- Terrestrial- Marine-
protected protected protected protected protected protected
Sources: World Development Indicators Database and Food and Agriculture Organization. areas areas areas areas areas areas
Developing countries High-income countries World
1990 2012
Source: World Development Indicators Database derived from UNEP and WCMC databases.
FIGURE A.23 Carbon dioxide emissions from fossil fuel, FIGURE A.24 Access to an improved water source, by region,
by country income group, 19902011 19902015
35 100
30
80
25
Share of population (%)
Metric tons (billions)
20 60
15
40
10
20
5
0 0
1990 1993 1996 1999 2002 2005 2008 2011
1990 1995 2000 2005 2010 2015
Low-income countries Lower-middle-income countries
Upper-middle-income countries High-income countries East Asia and Pacific Middle East and North Africa
Europe and Central Asia South Asia
Sources: Carbon Dioxide Information Analysis Center and World Development Indicators Latin America and the Caribbean Sub-Saharan Africa
Database.
Sources: WHO/UNICEF Joint Monitoring Programme for Water Supply and Sanitation and World
Development Indicators Database.
243
MDG 8
MDG 8 focuses on the need to create a global envi- Poor Country Initiative and the Multilateral Debt
ronment that is conducive to promoting development Relief Initiative have completed the process. The debt
and eliminating poverty. Consequently, this goal high- service to export ratio averaged 11 percent in 2013,
lights the need to establish a fairer multilateral trad- half its 2000 level, but with wide disparity across
ing and financial system, deal comprehensively with regions (figure A.26). The ratio is likely to rise going
debt problems of developing countries, and address forward because of the fragile global economic out-
the special needs of low-income countries, includ- look, soft commodity prices, and projected 20 per-
ing landlocked and small island developing states. cent rise in developing countries external debt ser-
The goal recognizes that building and sustaining a vice over the next two to three years, following the
partnership is an ongoing process that does not stop 33 percent increase in their combined external debt
on a given date or when a specific target is reached. stock since 2010.
Moreover, the goal highlights the need to support With the rapid development and adoption of
infrastructure development and to provide affordable mobile telephone services and the global expan-
access to new technologies and essential medicines. sion of the Internet, information and communica-
Official development assistance (ODA) by the tion technologies are recognized as essential tools of
Development Assistance Committee (DAC) members development, contributing to global integration and
of the Organisation for Economic Co-operation and enhancing public sector effectiveness, efficiency, and
Development (OECD) reached a high of $135 bil- transparency. Further spreading the use of advanced
lion in 2013, 6.1 percent higher than in 2012 in real technology for reducing disaster risk, managing com-
terms. This increase came after two successive years municable disease outbreaks, and addressing the
of decreases in 2011 and 2012 in real terms (figure impacts of climate change carries enormous promise.
A.25). The rebound in 2013 happened because sev- Global partnership also includes cooperation with
eral members stepped up spending on foreign aid, the private sector, and making available the benefits
despite continued budget pressures, and five new of new technologies, especially information and com-
member countries joined the DAC: the Czech Repub- munications. Mobile cellular subscriptions reached
lic, Iceland, Poland, the Slovak Republic, and Slove- almost 7 billion worldwide in 2014. Developing coun-
nia. The 0.7 percent target of ODA as a share of gross tries share of global mobile cellular subscriptions rose
national income (GNI) was met and exceeded only from 26 percent in 2000 to 75 percent in 2014. High-
by Denmark, Luxembourg, Norway, and Sweden, income economies had more than 1 mobile cellular
while the Netherlands fell below this target for the subscription per person in 2014, with 123 subscrip-
first time since 1974. On the other hand, the top five tions per 100 people, and upper-middle-income econ-
ODA contributors by volume were the United States, omies also reached 101 subscriptions per 100 people.
the United Kingdom, Germany, Japan, and France. For lower-middle-income economies, the number is
The debt burden of developing economies, mea- 87, while low-income economies lagged with 57 sub-
sured as the proportion of external debt service to scriptions per 100 people in 2014 (figure A.27). In
export receipts, fell to half its 2000 levels in 2013. part, mobile cellular phones have replaced fixed-line
This improvement is linked to greater external debt telephone systems: the fi xed telephone subscription
servicing capacity due to increased export earnings, rate in the world has been falling gradually, from 19
better debt management, and enhanced debt restruc- in 2005 to 15 subscriptions per 100 people in 2014.
turing, as well as to more favorable borrowing con- Similarly, Internet use in developing countries
ditions on international capital markets in recent appears to be increasing quickly. Internet use spread
years. The poorest and most highly indebted coun- rapidly in high-income economies in the 1990s but
tries have also benefited from extensive debt relief: 35 was barely under way in developing-country regions.
of the 39 countries eligible for the Heavily Indebted Since 2000, the number of Internet users per 100
244
people in developing countries has grown an average exist around the world. For example, the low-income
of 26 percent a year. The percentage of the population countries of South Asia and Sub-Saharan Africa
with Internet access more than doubled in South Asia alone account for about half of the approximately
between 2010 and 2014, with 17 percent of the popu- 4 billion people who are not yet using the Internet
lation having access in 2014. However, large gaps still (figure A.28).
FIGURE A.25 Official development assistance from FIGURE A.26 Total debt service, by region, 19902013
Development Assistance Committee members, 19902013
120 35
US$ (2012, billions)
30
100
25
80
20
60 15
40 10
5
20
0
0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
East Asia and Pacific Middle East and North Africa
Bilateral net official development assistance Europe and Central Asia South Asia
Multilateral net official development assistance Latin America and the Caribbean Sub-Saharan Africa
Sources: Organisation for Economic Co-operation and Development, StatExtracts. Source: World Development Indicators Database.
FIGURE A.27 Mobile cellular subscriptions, by income FIGURE A.28 Internet users, by region, 200014
group, 200014 90
140
80
120 70
Internet users per 100 people
Subscriptions per 100 people
100 60
50
80
40
60
30
40 20
20 10
0
0 2000 2002 2004 2006 2008 2010 2012 2014
2000 2002 2004 2006 2008 2010 2012 2014
East Asia and Pacific South Asia
High-income countries Lower-middle-income countries
Europe and Central Asia Sub-Saharan Africa
Low-income countries Upper-middle-income countries
Latin America and the Caribbean High-income countries
Sources: International Telecommunications Union and World Development Indicators Middle East and North Africa
Database.
Sources: International Telecommunications Union and World Development Indicators
Database.
245
Notes UNAIDS (Joint United Nations Programme
on HIV/AIDS). 2015. How AIDS Changed
1. MDG Dashboard is available at: http://data Everything. Geneva: UNAIDS.
.worldbank.org/mdgs. UNESCO (United Nations Educational, Scientific
2. As in Angola, Central Africa Republic, Chad, and Cultural Organization). 2004. Education
Democratic Republic of Congo, Guinea- for All Global Monitoring Report 2003/4:
Bissau, Nigeria, Mali, Sierra Leone, and Gender and Education for AllThe Leap to
Somalia, for example. Equality. Paris: UNESCO.
3. Protected areas are defined as terrestrial, fresh- U N ICEF, W HO, and World Bank (United
water, or marine areas that are recognized, Nations Childrens Fund, World Health Orga-
dedicated, and managed, through legal or nization, and World Bank). 2015. 2014 Joint
other effective means, to achieve the long-term Child Malnutrition EstimatesLevels and
conservation of nature with associated ecosys- Trends. New York: UNICEF. http://www.who
tem services and cultural values. This defi ni- .int/nutgrowthdb/estimates2014/en/.
tion includes, for example, national parks and United Nations Inter-agency Group for Child
nature reserves (United Nations Environmen- Mortality Estimation. 2015. Levels & Trends
tal ProgrammeWorld Conservation Moni- in Child Mortality: Report 2015. UNICEF,
toring Centre). New York.
WHO (World Health Organization). 2013. Fam-
References ily Planning. Fact Sheet 351, Geneva. http://
www.who.int/mediacentre/factsheets/fs351
Ahmed, S., Q. Li, L. Liu, and A. O. Tsui. 2012. /en/.
Maternal Deaths Averted by Contraceptive . 2014a. Global Tuberculosis Report
Use: An Analysis of 172 Countries. The Lan- 2014. Geneva: World Health Organization.
cet 380 (9837): 11125. . 2014b. Maternal Mortality. Fact
Conde-Agudelo, A., J. M. Belizn, and C. Lam- Sheet 348, Geneva. http://www.who.int
mers. 2005. Maternal-Perinatal Morbidity /mediacentre/factsheets/fs348/.
and Mortality Associated with Adolescent WHO and UNICEF (World Health Organization
Pregnancy in Latin America: Cross-Sectional and United Nations Childrens Fund). 2015.
Study. American Journal of Obstetrics and Achieving the Malaria MDG Target: Revers-
Gynecology 192 (2): 34249. ing the Incidence of Malaria 2000 2015.
M ller, R., T. Kiziak, R. Klingholz, and M. Geneva: WHO.
Herrmann. 2015. Consequential Omis- World Bank. 2013. Global Monitoring Report
sions. How Demography Shapes Devel- 2013: Rural-Urban Dynamics and the Millen-
opment: Lessons from the MDGs for the nium Development Goals. Washington, DC:
SDGs. Berlin: Berlin-Institut fr Bevlkerung World Bank.
und Entwicklung. http://nbn-resolving.de World Bank. 2015 World Development Indica-
/urn:nbn:de:101:1-201504135086. tors 2015. Washington, DC: World Bank.
246
B
The Role of Multilateral
Development Banks: From
Millennium Development Goals to
Sustainable Development Goals
In reflecting on the role of policies and insti- country circumstances. Still, several themes
tutions needed to make progress toward emerge that will be useful to inform efforts
development goals, it is useful to consider toward the SDGs. With so much of develop-
the contributions made by the multilateral ment driven by country-level stakeholders,
development banks (MDBs). Development ensuring that they retain full ownership is
hinges on the efforts of multiple stakeholders essential. Given the range of country circum-
at the country and global levels, including the stances, the approach to the MDGs needs to
engagement of the MDBs. This appendix con- be country specific. Finally, implementation
veys reflections from the World Bank Group, arrangements, including adequate policy
the African Development Bank (AfDB), the focus and fi nancing (the MDBs have made
Asian Development Bank (ADB), the Euro- commitments of over $400 billion for the
pean Bank for Reconstruction and Develop- period 201618) are key to progress. These
ment (EBRD), and the Inter-American Devel- lessons and others will facilitate the transfor-
opment Bank (IDB) on their experiences with mative progress envisioned by the SDGs.
the Millennium Development Goals (MDGs),
and describes lessons learned for the Sustain-
able Development Goals (SDGs). Each MDB
The World Bank Group
section answers two questions: The World Bank Group has worked closely
with clients endeavoring to achieve the
How has it been supporting progress MDGs and, building on this experience,
toward the MDGs? seeks to contribute strongly to the SDG
What lessons can be drawn from its expe- agenda. Through numerous MDG-related
rience with the MDGs, in terms of what engagements at the global and country lev-
worked and what was less effective, for els, the World Bank Group has supported a
designing our future engagements on the broad range of client efforts. Based on contin-
SDGs? ual assessment of this experience, the World
Bank Group has implemented institutional
The experience of the MDBs in support- and financial changes aimed at enhancing
ing efforts toward the MDGs spans the globe effectiveness and deepening engagement on
and is highly contextual, based on specific the 2030 agenda.
247
248 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S GLOBAL MONITORING REPORT 2015/2016
Supporting progress toward the MDGs Bank Group boosted MDG-related activi-
ties, scaling up engagement on basic educa-
Numerous fi ndings emerge from the World
tion, agriculture, and infrastructure, while
Bank Groups extensive MDG-related activi-
focusing on results management and put-
ties, which will help shape the institutions
ting more resources into impact evaluations.
engagement on the SDG agenda. The com-
In the process, the institution developed a
plexity of development and the wide range
selectivity framework that sought to chan-
of stakeholders make attribution and identi-
nel its resources into areas where additional
fication of cause and effect difficult. Still, a resources were urgently needed and could
review of the World Bank Groups strategies, best make a difference, mindful that other
partnerships, and institutional changes dur- entities may be better placed to support
ing the MDG period yields five key fi ndings development efforts in various areas.
(World Bank 2015): The share of World Bank Group lending
for the MDGs has remained broadly stable
The World Bank Group integrated the at about 40 percent (figure B.1). This level
MDGs into its strategies at both at the cor- reflects a prioritization of development objec-
porate and the country levels. tives that was broadly consistent with the
The analytical and advisory services pro- MDGs already in the 1990s, and with the
vided by the World Bank Group contrib- expansion of total commitments, the World
uted meaningfully to the evolution of Bank Group continued to focus on MDG
development thinking in support of the areas, especially the social sectors. The bulk
MDGs. of lending commitments were in the form of
The country-based model was essential to investment loans, rather than budget sup-
ensure that the MDGs agreed upon at the port. In many instances, the World Bank
global level are fully reflected in country Group sought to implement multisectoral
development programs. approaches, emphasizing public administra-
Given that development is a collaborative tion in many education and health projects,
effort, the World Bank Group has sought for example. In other cases, even if a mul-
to work closely with other development tisectoral approach was not evident at the
partners and stakeholders in supporting project level, the majority of countries with
the MDGs. health and nutrition projects also had water
More needs to be done to articulate a results and sanitation projects. More work is needed
chain than translates the World Bank to ensure that multisectoral approaches
Groups activities and approaches into con- deliver expected results.
tributions toward progress on the MDGs.
Contributing to the knowledge base
Integrating the MDGs into World Bank underpinning the MDGs
Group Strategies The World Bank Groups analytical work
The World Bank integrated MDG-related been a central part of the institutions engage-
initiatives into its core strategies, while ment on development, influencing strategy
increasing emphasis on institutions, gover- and the results agenda. The share of analyti-
nance, and global public goods. It formally cal and advisory work related to the MDGs
endorsed the MDGs through the 2001 Stra- has grown steadily during the MDG period
tegic Framework Paper, emphasizing the (figure B.2). The nonlending technical assis-
importance of the results-based framework tance component has risen particularly
of the MDGs in helping to monitor develop- quickly. The production of impact evalu-
ment impact, as well as the role of the MDGs ations also rose strongly during the MDG
in facilitating enhanced donor coordination period, and more needs to be done to put
and engagement with country counterparts. good feedback loops in place to ensure ade-
In the course of the MDG period, the World quate learning from these outputs.
GLOBAL MONITORING REPORT 2015/2016 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S 249
40 Fiscal Fiscal
19902001 200214
30 MDG 1 9 7
Percent
MDG 2 5 10
20 MDG 3 7 11
MDG 4 1 2
10 MDG 5 1 1
MDG 6 1 3
0 MDG 7 31 27
Fiscal Fiscal Fiscal Fiscal Fiscal MDG 8 45 38
199094 199599 200004 200509 201014 Total 100 100
Development policy Investment
MDG 2 12 3
30
MDG 3 14 8
20 MDG 4 0 1
MDG 5 0 1
10
MDG 6 2 3
0 MDG 7 22 23
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal MDG 8 48 51
200004 200509 201014 200004 200509 201014
Total 100 100
By expenditure By number
Economic and sector work Nonlending technical assistance
this approach, several key organizational 2002 to 2014, nearly five times the World
changes were implemented during the MDG Bank Groups related commitments during
period, including extensive decentralization this period.
of staff to the field and matrix management.
MDG themes were reflected in country Articulating a results chain for the
strategies. While the MDGs were not always World Bank Group
explicitly noted, closer analysis of a cross- While the World Bank Group has consistently
section of 40 country engagements shows sought to increase its results focus, including
that more than 80 percent of the strate- by supporting statistical capacity building in
gic pillars underpinning the World Bank client countries, connecting specific interven-
Groups country strategies were related to tions to MDG outcomes remains challeng-
MDG themes (World Bank 2015). In some ing. The focus on results is mainstreamed
instances, the strategy focused explicitly in the activities of the World Bank Group,
on supporting efforts toward MDGs that as reflected in results-based country strate-
the country was not expected to meet, for gies and the deployment of new financing
example in relation to education and gender instruments, such as the Program for Results,
equality in the Republic of Yemen. While the which links financing to predetermined
country-based model has proven effective, it results in stages. In support of sound moni-
could be strengthened further to ensure inte- toring frameworks, the World Bank Group
gration with sector and corporate strategies. provided assistance for statistical capacity
building in many client countries. Establish-
Building partnerships for achieving ing a clear results chain from interventions
the MDGs to intermediate outcomes to results remains
The complexity of development means that difficult, and more needs to be done to put
effective progress depends on partnerships in place effective feedback loops that sharpen
and selectivity based on institutional com- the focus on specific MDG areas that may
parative advantage. The global endorsement need additional attention at the country level.
of the MDGs provided a platform to help
align the efforts of the development com-
Supporting progress toward the SDGs
munity toward shared objectives. To support
with learning from the MDGs
this improved alignment, the World Bank
Group prepared a selectivity framework that Translating the SDGs articulated at the global
emphasizes comparative advantage, strategic level into effective development programs at
relevance, and expected benefits. It has also the country level is the central implementa-
sought to deepen partnerships at numerous tion challenge. It will be challenging for many
levels, although more could be done. Strong governments and other stakeholders to bring
partnerships boosted trust-funded activities the wide-ranging and integrated SDG agenda
to complement various World Bank Group into effective development programs that also
efforts toward the MDGs, centered on spe- match country-level priorities. The World
cific thematic areas. For example, the Educa- Bank Group will seek to support clients in
tion for All Fast Track Initiative channeled this process, based on lessons learned from
funds into primary education, and enabled the MDG experience and recommendations
the World Bank Group to put its resources from assessments (Schmaljohann, Prizzon,
into other aspects of service delivery and con- and Rogerson 2015; World Bank 2015). The
nections between education and the labor institution will focus on its core strengths,
market. In some cases, the funds managed including the provision of long-term country
and supervised by the World Bank Group far level engagements, integrated development
exceeded its own resources. For example, the solutions, a full menu of services (knowl-
Global Fund to Fight Aids, Tuberculosis and edge and financing), and platforms for cross-
Malaria, disbursed about $26.7 billion from border initiatives (World Bank 2015).
GLOBAL MONITORING REPORT 2015/2016 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S 251
The World Bank Group supports the inte- The AfDB supports progress toward the
grated set of SDGs and will intensify efforts MDGs through country-level interventions
on four cross-cutting prerequisites that are that are directly aligned with the countries
essential enablers for the wider SDG agenda national development efforts. The analysis
in many countries. These prerequisites presented here is based on the AfDBs 2014
include supporting countries to transition Annual Report, its 2014 Development Effec-
from fragility and confl ict to development, tiveness Review, and data from the 2014
to scale up infrastructure investment, to MDG report jointly produced with the Afri-
mitigate climate change, and to join the data can Union, the United Nations Economic
revolution (World Bank 2015). Making gains Commission for Africa, and the United
in these cross-cutting areas generally hinges Nations Development Programme, where it
on working at the international level with a was found that Africas progress toward the
wide range of stakeholders. The World Bank achievement of MDGs has been mixed. The
Group will seek to contribute meaningfully analysis found variations across countries
on related initiatives. and regions, with some countries making
The World Bank Group is implementing significant progress toward the targets while
institutional and fi nancing changes to boost others have not. Table B.1 highlights the best-
effectiveness and impact. While still applying performing countries for selected targets and
the country-based model, the World Bank indicators.
Group seeks to support progress on the SDGs
with better knowledge flows and integrated
AfDBs engagements during the new
development solutions, as well as new opera-
SDG era
tional instruments. Stretched and leveraged
balance sheets are enabling greater fi nanc- Africa has enjoyed high levels of average
ing volumes to clients. These efforts will growthabove 5 percentduring the MDG
also be essential to making progress toward era, but with wide variations at the country
the World Bank Groups goals of eliminat- level. In 2015 and beyond, the prospects for
ing extreme poverty and boosting shared Africa are significantly brighter than they
prosperity. were at the turn of the millennium. Its per-
formance on MDGs has been muted, how-
ever, with the continent off track in achiev-
African Development Bank ing five of the eight MDGs by 2015. The new
era of SDGs presents a unique opportunity
Progress toward MDG attainment
for Africa to articulate its common priori-
Despite a weak start, the pace of progress ties, opportunities, and challenges. African
toward the attainment of the MDGs in governments need to develop a strong vision
Africa accelerated after 2003. The continent for monitoring and accountability, with clear
started from a relatively low base on virtu- plans for financing and implementation of
ally all MDGs, requiring large investments the strategies.
and much effort to catch up with compara- The AfDB remains a significant fi nancier
tor regions. Despite these efforts, progress of infrastructure projects, with a cumula-
has been slow in a number of countries. Dur- tive contribution of $45 billion from 1967
ing the new SDG era, the AfDBs overarch- to 2014. In line with its Ten-Year Strategy
ing goal will remain poverty reduction, but (201322), and through its lending, techni-
the institution will also seek to ensure that cal expertise, and policy advocacy, the AfDB
growth is more inclusive. Inclusive growth plans to support Africas development in
will be underpinned by enhancing the capac- five priority areas: infrastructure, regional
ity of Africans to sustainably manage and integration, private sector development,
leverage their natural resources to drive their skills and technology, and governance and
development efforts in a peaceful manner. accountability. The institutions support will
252 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S GLOBAL MONITORING REPORT 2015/2016
TABLE B.1 Africas recent MDG performance: Selected targets and indicators
Goals Targets and indicators Best-performing countriesa
Goal 1: Target 1A: Halve (between 1990 and 2015), the proportion Egypt, Arab Rep.; Gabon, Guinea; Morocco;
Eradicate extreme of people whose income is less than $1.25 a day per Tunisia.
poverty and hunger person.
Target 1B: Achieve full and productive employment and Burkina Faso, Ethiopia, Togo, Zimbabwe.
decent work for all, including women and young people.
Target 1C: Halve (between 1990 and 2015) the proportion Algeria; Benin; Egypt, Arab Rep.; Ghana;
of people who suer from hunger. Guinea-Bissau; Mali; South Africa; Tunisia.
Goal 2: Indicator 2.1: Increase net enrollment ratio in primary. Algeria; Egypt, Arab Rep.; Rwanda; So Tom
Achieve universal primary education by 1.5 percent annually. and Prncipe.
education
Indicator 2.2: Proportion of pupils starting grade 1 who Ghana, Morocco, Tanzania, Zambia.
reach last grade of primary education.
Goal 3: Indicator 3.1: Ratio of girls to boys in primary, secondary The Gambia; Ghana; Mauritius; Rwanda;
Promote gender equality and tertiary education. So Tom and Prncipe.
and empower women
Indicator 3.2: Share of women in wage employment in Botswana, Ethiopia, South Africa.
the non-agricultural sector.
Indicator 3.3: Proportion of seats held by women in Angola, Mozambique, Rwanda, Seychelles,
national parliament. South Africa.
Goal 4: Indicators 4.1 and 4.2: Under-ve mortality and infant Egypt, Arab Rep.; Ethiopia; Liberia; Libya; Malawi;
Reduce child mortality (under-one) mortality rates. Rwanda; Seychelles; Tanzania; Tunisia.
by two-thirds
Goal 5: Target 5A: Reduce by three-quarters, the maternal Equatorial Guinea; Egypt, Arab Rep.; Eritrea;
Improve maternal health mortality ratio between 1990 and 2015. Libya; Mauritius; Rwanda; So Tom and
Prncipe; Tunisia.
Target 5B: Achieve by 2015 universal access to Egypt, Arab Rep.; Ghana; Guinea-Bissau;
reproductive health. Rwanda; South Africa; Swaziland.
Goal 6: Target 6A: To have halted by 2015 and begun to reverse Cte dIvoire, Namibia, South Africa, Zimbabwe.
Combat HIV/AIDS, malaria, the spread of HIV/AIDS and other diseases.
and other diseases
Target 6B: Achieve by 2010 universal access to treatment Botswana, Comoros, Namibia, Rwanda.
of HIV/AIDS for all those who need it.
Target 6C: To have halted by 2015 and begun to reverse Algeria; Cabo Verde; Egypt, Arab Rep.; Libya;
the incidence of malaria and other major diseases. Mauritius; So Tom and Prncipe; Sudan;
Tunisia.
Goal 7: Target 7A: Integrate the principles of sustainable Egypt, Arab Rep.; Gabon; Morocco; Nigeria.
Ensure environmental development into country policies and programs and
sustainability reverse the loss of environmental resources.
Target 7C: Reduce by half the proportion of people Algeria; Botswana; Egypt, Arab Rep.; Libya; Mali;
without sustainable access to safe drinking water and Mauritius; Namibia; Rwanda; Swaziland.
basic sanitation, by 2015.
Goal 8: Target 8F: In cooperation with the private sector, make Kenya, Libya, Rwanda, Seychelles, Sudan,
Global partnership for available the benets of new technologies, especially Uganda, Zambia.
development information and communications technology.
help to create the conditions in which Afri- initiatives have an explicit focus on promot-
cans can identify and implement innovative ing peace and security, such as the support
solutions to their development challenges. for the International Conference on the Great
Lakes Region.
Infrastructure
Infrastructure remains the AfDBs high- Private sector development
est priority, absorbing the lions share of its The AfDB also aims to build an environment
resources. The AfDB invests heavily in trans- in which African businesses can innovate and
port infrastructure, helping to put in place flourish. Its Private Sector Strategy 201317
the backbone highway network to link Afri- focuses on improving Africas business cli-
can countries to each other and the feeder mate and promoting enterprise development.
roads that link businesses and households Through its budget support operations and
to markets and services. Over the past two technical assistance, the AfDB is helping
years, the AfDB has built or rehabilitated African countries to modernize their busi-
over 6,000 kilometers of road and provided ness regulations and to make their tax sys-
32 million people with improved access to tems more effective. Improved governance
transport. Projects like the 175-kilometer allows for more frequent use of public-private
road between Wacha and Maji in Ethiopia partnerships as an effective methodology to
have dramatically reduced transportation deliver critical infrastructure, with a good
costs for farmers, raising rural incomes. The number of successful transactions recently
AfDB is also investing in railways, airports, completed, such as the Henri Konan Bdi
and port facilities. In the energy sector, it Bridge in Abidjan, Cte dIvoire. The AfDB is
has funded over 1.3 gigawatts of new power- also helping to create a sustainable market in
generation capacity, while providing 10 mil- microfi nance for household enterprises and
lion people with electricity connections. The small businesses. Over the past two years, it
AfDB is also making substantial investments has provided 17,900 microcredits and created
in renewable energy, such as Africas larg- 1.2 million jobs, of which 340,000 were for
est wind power project in Lake Turkana in women. The AfDBs private sector window
Kenya, and is helping African countries to continues to provide fi nance so that African
access international climate funds and lever- businesses can innovate and flourish through-
age private sector finance for clean energy out the continent.
projects. The AfDBs investments in water
and sanitation have benefited more than Skills and technology
4 million people. To boost water security, the The AfDB is investing in the technical and
AfDB also has a strong focus on the manage- vocational skills of young Africans to equip
ment of water resources. them for gainful employment and success-
ful entrepreneurship. Its support has a strong
Regional integration focus on science and technology to promote
Under its new Strategy for Regional Integra- more innovative, knowledge-based econo-
tion 201423, the AfDB is prioritizing the mies. Over the past two years, the AfDB has
development of regional infrastructure (along provided vocational training to 5,430 young
with the institutions required to manage it) people and constructed over 1,480 class-
and the promotion of industrialization and rooms and educational support facilities. It is
trade. In the past two years, it has built 680 rapidly expanding its investments in this area
kilometers of cross-border roads, together with projects to transform systems of voca-
with improved border infrastructure. It has tional training in the Democratic Republic of
ongoing investments in cross-border power Congo, Mauritania, Morocco, Rwanda, Tan-
transmission lines, and is helping to link zania, and Zimbabwe. It is also supporting a
national power grids into more efficient network of centers of excellence in biomedi-
regional power pools. Many AfDB regional cal science to help address the skills gap.
254 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S GLOBAL MONITORING REPORT 2015/2016
nonlending support to developing member To raise awareness about the MDGs in the
countries. A large part of its lending assis- region, support regular monitoring and prog-
tance supports development of sustainable ress, and develop the institutional capacity of
infrastructure. In 201113, infrastructure developing member countries to achieve the
projectswhich contributes directly to MDGs, the ADB entered into a long-term
MDG 1 by promoting inclusive economic partnership with the United Nations Devel-
growth, supporting reduction in poverty, and opment Programme and the United Nations
creating employment and other economic Economic and Social Commission for Asia
opportunitiesaccounted for $24.8 billion, and the Pacific, which produces the regular
or 69 percent, of sovereign approvals. Sup- series of regional MDG reports (UNESCAP,
port for agriculture and irrigation projects ADB, and UNDP 2015). The reports show
contributes to poverty reduction through its that the region has made big gains in reduc-
impact on farm productivity, food security, ing povertyas measured by the reduction
and mitigation of malnutrition. The volume in the number and share of people living on
of ADB-assisted education projects, which less than $1.25 a day purchasing power par-
support progress on MDG 2, is projected to ityand has made good progress on other
increase from 4 percent during 201113 to 6 MDGs. Some MDGs have been achieved
percent during 201517. The ADB also plans ahead of 2015, the target year: gender equal-
to increase health sector operations to meet ity in education, reducing HIV prevalence,
its target of 35 percent of annual approvals. stopping the spread of tuberculosis, increas-
Clean energy and sustainable transportation ing forest cover, reducing consumption of
projects directly support MDG 7 by strength- ozone-depleting substances, and halving the
ening environmental sustainability and man- proportion of people without access to safe
aging climate change by lowering carbon drinking water.
emissions. In 2014, the ADB already sur-
passed its 2016 targets to incorporate climate
Lessons from East Asia and the Pacific
change in 45 percent of its operations and in
and the post-2015 agenda
50 percent of its operations to support envi-
ronmental sustainability. The ADB also assists The MDGs were effective in East Asia and
with water supply and sanitation-related proj- the Pacific in influencing local priorities,
ects in urban and rural areas, which directly shaping national budgets, and protecting
support MDG 7 by increasing the proportion social expenditures. Many countries in the
of the population with access to safe drinking region have adapted the goals to meet their
water and sanitation facilities. specific needs. The MDGs have influenced
In addition to direct support, infrastruc- national development planning frameworks
ture projects also indirectly support progress in nine East Asia-Pacific countries including
on other non-income MDGs. For example, Bangladesh, Cambodia, India, Indonesia, the
ADB-supported transport projects, includ- Lao Peoples Democratic Republic, Mongo-
ing rural roads, improve access to schools lia, Nepal, Timor-Leste, and Vanuatu (ADB,
and hospitals across genders, necessary for UNESCAP, and UNDP 2013). However,
progress on MDG 2 on universal primary the articulation of the MDGs as stand-alone
education, MDG 3 on eliminating gender goals led to a fragmented approach to public
disparities in education, and MDGs 4 and 5 policy and planning, monitoring, and assess-
on reducing child mortality and improving ing contributions toward achieving the goals.
maternal health. ADB-assisted water sup- Moreover, some development challenges, like
ply and sanitation projects also contribute to unplanned urbanization and the rising threat
progress on the health-related MDGs (ADB of climate change, were not considered when
2015a). A number of examples of ADB sup- the MDGs were formulated. Data require-
port are presented in the ADB publication ments that escalated with MDG monitoring
Together We Deliver. were inadequately backed by resources. The
256 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S GLOBAL MONITORING REPORT 2015/2016
post-2015 development goals should recog- to shared development agendas. The larg-
nize the importance of customization and that est sums are increasingly in private hands,
their inherent interdependence will require however, and are not directly programmable
coordinated action across ministries, the or available for development. While gov-
importance of data for monitoring, the cross- ernments have the primary role in drawing
cutting nature of infrastructure, and the key in these funds, as well as in influencing the
role of policy and knowledge support for sus- course of private activities on economies,
tainable development. societies, and the environment in line with
While strong economic dynamism has sustainable development, they will need assis-
driven regional success in income poverty tance to create a supportive environment to
reduction, challenges remain on inclusion- mobilize private investment.
related issues in the region and within devel- While MDG monitoring in the region
oping member countries. High levels of hun- reveals improvement in the availability of
ger remain, fast-growing developing member data in recent years, it also highlights large
countries continue to lose shocking numbers data gaps that strain national capacities for
of children before their fifth birthday, and producing, disseminating and using quality
thousands of mothers die in childbirth. Strik- statistics for MDG monitoring. The post-
ing disparities remain between and within 2015 agenda will bring renewed demand for
subregions, countries, and even social groups new indicators to measure other dimensions
in their progress toward the MDGs. For of environmental, economic and social prog-
instance, South Asia as a whole is on track ress. Resources will be needed to increase
for just nine MDG indicators, but Sri Lanka support for national statistical systems along
is on track for 15 and generally outperforms with actions to promote open access and use
the subregion. Within developing mem- of data.
ber countries, disparities between men and
women, between social and ethnic groups,
ADB focus and preparedness for the
and between regions hold back large sections
Post-2015 Development Agenda
of the population from achieving the MDGs.
Issues that remain importantand should The ADB has taken early steps in readying for
therefore help define the Post-2015 Devel- the proposed SDGs in line with priorities iden-
opment Agendainclude inequality, lack tified in its Strategy 2020 Midterm Review.
of decent and productive jobs, continuing The mid-term review of the ADBs corporate
hunger and food insecurity, gender discrimi- Strategy 2020 confi rms alignment with the
nation, limited achievements in health, low- new SDGs to be finalized in September 2015
quality education, heightened vulnerability by United Nations member states, including
and economic insecurity, rapid demographic ADB clients and shareholders (ADB 2014).
change, unplanned urbanization, pressure on The review concluded that Strategy 2020
natural resources, exposure to disasters, and remains valid in its broad strategic directions
the rising threat of climate change. to address the development challenges of a
The changing development fi nance land- transforming Asia and Pacific. It found that
scape makes it clear that all sources of the ADBs 10 strategic priorities respond to
fi nance, public and private, need to be har- the SDGs in a manner consistent with reali-
nessed to achieve sustainable development. ties of country-level implementation. The 10
Growing domestic public resources in the priorities are poverty reduction and inclusive
region will continue to be the most important economic growth, environment and climate
source of development fi nance. At the same change, regional cooperation and integration,
time, international public flowslike official infrastructure development, middle-income
development assistanceare critical for low- countries, private sector development and
income and fragile countries and a signal of operations, knowledge solutions, financial
the development communitys commitment resources and partnerships, delivering value
GLOBAL MONITORING REPORT 2015/2016 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S 257
for money, and organizing to meet new chal- place these with investors for public-private
lenges. The ADB has also initiated work on a partnerships. The ADB is also assisting its
new strategy to guide it over the longer term developing member countries to access cli-
and that will reflect the SDGs once approved. mate finance sources from funds such as the
The ADB recognizes that the new global Global Environment Facility, Climate Invest-
sustainable development agenda will need ment Funds, and the Green Climate Fund
new thinking on fi nancing and the capacity for projects with sustainable development
to tap all sources of funds. In its 2015 report benefits.
Making Money Work: Financing a Sustain- In responding to the financing needs of the
able Future in Asia and Pacific, ADB offers proposed SDGs, the ADBs priority will be to
insights on the scale of the regions increased direct resources to human needs, infrastruc-
fi nancing needs and the importance of har- ture, and cross-border public goods. These
nessing all sources of finance, public and categories are synergistically interlinked
private (ADB 2015b). The report looks at and together can strengthen sustainable
both sides of making money work: shifting development results. While infrastructure
money toward investments in sustainable deficits are a continuing bottleneck affect-
development, and boosting the ability of ing most MDGs, matters related to fi nanc-
developing member countries to attract more ing, implementation, accountability, and the
money from a wider range of sources for such role of partnerships are claiming center stage
investments. as developing member countries and their
The ADB is enhancing its own capacity to development partners explore the Post-2015
provide fi nance for poverty eradication and Development Agenda.
sustainable development. The ADB Board of
Governors recently approved a groundbreak-
ing initiative to combine the lending opera-
European Bank for
tions of the banks Asian Development Fund
Reconstruction and
with its ordinary capital resources balance
Development
sheet. The merger will boost ADBs total With their focus on poverty reduction and
annual lending and grant approvals to as high social development, the MDGs have limited
as $20 billion50 percent more than the cur- overlap with the EBRDs economic transition
rent level. ADB assistance to poor countries and private sectorfocused mandate. Never-
will rise by up to 70 percent. Together with theless, there are links between the EBRDs
cofinancing, the ADBs annual assistance will activities and the MDG targets in the areas
reach as high as $40 billion in coming years, of gender equality, water and sanitation, and
up from $23 billion in 2014. Poor countries environmental sustainability.
currently eligible for development fund loans
will continue to receive concessional loans
Gender equality (MDG 3)
from expanded ordinary capital resources
on the same terms and conditions as current With its commitment to gender equal-
Asian Development Fund loans. The fund ity through its Strategic Gender Initia-
will be retained as a grant-only donor fund to tive, approved in April 2013, the EBRD
provide assistance to eligible countries. has contributed to the overarching gender
In addition to making more funds avail- equality goal, particularly with respect to
able, the ADB is also helping to strengthen the economic empowerment dimension of
the capacity of its developing member coun- MDG 3, which is the EBRDs niche within
tries to draw in money toward sustain- gender equality. During the implementation
able development. The Asia Pacific Project of the initiative, the EBRD has contributed
Preparation Facility approved in November to an increase in the share of women in non-
2014 will help prepare a pipeline of ready agricultural wage employment. Through the
to finance infrastructure investments and development of Equal Opportunities projects,
258 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S GLOBAL MONITORING REPORT 2015/2016
implementation of all EBRD-funded proj- shown impressive results since the beginning
ects based on EU standards and interna- of the millenniumincluding poverty, the
tional best practice; size of the middle class, income inequality,
Providing finance and technical assistance education, child malnutrition, and maternal
specifically aimed at environmental issues and infant mortality. While these achieve-
such as sustainable energy, climate change, ments were facilitated by favorable terms
environmental infrastructure, and nuclear of trade, the responsible management of
safety; domestic economic policies, and reforms
Promoting social inclusion through invest- of social policies over a two-decade period,
ment and other forms of support for commitment to the well-defi ned MDGs was
microenterprises and by increasing access an important determinant as well. Moving
to community services such as water and forward, the region now faces the double
public transport; challenge of achieving the new SDGs while
Supporting projects that promote gender sustaining and deepening recent social
equality; and achievements.
Encouraging public participation for pre- The Inter-American Development Bank
investment consultation and disclosure, made its own contribution to meeting the
together with maintaining regular strategic MDGs through technical assistance, opera-
dialogue with civil society organizations. tional tools, socioeconomic research, country
strategies, dialogue with governments, and
The broader SDG agenda, to be agreed other instruments and activities. The IDBs
in 2015, is likely to broaden the scope of the Institutional Strategy closely mirrored the
EBRDs involvement in the global develop- MDGs. In 2010 the Ninth General Increase
ment agenda. Many of the headline goals, in the Resources of the IDB established two
such as those involving infrastructure, agri- overarching objectives: poverty and inequal-
culture, climate change, and access to energy, ity reduction, and sustainable growth. The
represent areas of work in which the EBRD institutional strategy also placed a high prior-
has been engaged for years. In some cases, ity on tracking results and promoting devel-
there is significant room for scaling up activi- opment effectiveness in all of the IDBs work.
ties that can have real development impact. The IDBs Corporate Results Framework
Given its unique mandate, the EBRD is eager serves as the primary tool for monitoring
to share lessons learned in how to approach and measuring the IDBs performance and
and mobilize private sector finance. Together, the achievement of its strategic objectives.
MDBs can also forge joint initiatives in this To assist the region in facing new challenges
regard, building upon their competitive going forward, the IDB recently updated its
advantages built from decades of regional Institutional Strategy, approved by the Board
experience. of Governors in 2015, again placing spe-
cial emphasis on reduction of poverty and
inequality and on sustained growth.
Inter-American Development The Social Strategy for Equity and Pro-
Bank ductivity provides a set of detailed guidelines
The conclusion of the MDG target period at designed to assist countries in responding
the end of 2015 and the initiation of a new, more effectively to the challenges of sus-
more ambitious set of SDGs in 2016 will be a tainability and inclusiveness. It focuses on
milestone for all nations, but in particular for increasing access to comprehensive child
Latin America and the Caribbean. The region development services (essential nutrition,
has made significant social progress since the early stimulation, family education) for
MDGs were established in 2000. The region children from poor households in order to
has achieved several MDGs and several oth- prevent developmental delays and prepare
ers are expected to be achieved by the end of children for entry into the school system;
2015. Indicators of social development have increasing the quality, equity, and relevance
260 T H E R O L E O F M U LT I L AT E R A L D E V E LO P M E N T B A N K S GLOBAL MONITORING REPORT 2015/2016
263
264 D ATA S O U R C E S GLOBAL MONITORING REPORT 2015/2016
TABLE C.1 Shared prosperity estimates by country based on the latest surveys available from the Global Database of
Shared Prosperity (continued)
Mean consumption or income per capitac
Annualized growth
per capitac,d Baseline Most recent year
Total
population Bottom 40% Total population Bottom 40% Total population
Country Perioda Typeb Bottom 40 % (%) $ a day (PPP) $ a day (PPP) $ a day (PPP) $ a day (PPP) PPP year
Lithuania 200813 I 1.77 1.16 10.14 20.99 9.28 19.79 2011
Luxembourg 200712 I 2.67 0.54 38.29 72.80 33.44 70.85 2011
Madagascar 200510 C 4.49 3.52 0.78 1.74 0.62 1.45 2011
Malawi 200410 C 1.84 1.27 0.78 1.77 0.70 1.90 2011
Mali 200609 C 2.25 1.47 1.10 2.53 1.20 2.38 2011
Mauritania 200814 C 3.25 1.62 2.36 5.47 2.86 6.03 2011
Mauritius 200612 C 0.76 0.86 5.31 11.02 5.54 11.56 2011
Mexico 200812 I 1.15 0.22 3.39 11.27 3.54 11.17 2011
Moldova 200813 C 4.99 1.81 4.23 8.77 5.40 9.59 2011
Montenegro 200813 C 4.81 3.64 8.86 16.35 6.92 13.59 2011
Nepal 200310 C 7.47 4.08 1.21 2.97 2.00 3.91 2011
Netherlands 200712 I 0.01 0.99 28.06 51.72 28.05 49.21 2011
Nigeria 200309 C 0.12 1.12 0.93 2.33 0.94 2.49 2011
Norway 200712 I 3.17 2.39 33.37 58.45 39.00 65.77 2011
Pakistan 200410 C 3.76 2.69 1.82 3.40 2.27 3.99 2011
Panama 200812 I 4.14 3.63 4.58 17.18 5.39 19.82 2011
Paraguay 200712 I 7.21 5.20 3.39 11.75 4.80 15.15 2011
Peru 200712 I 8.57 3.99 3.06 11.19 4.62 13.61 2011
Philippines 200612 C 1.15 0.41 2.05 5.58 2.20 5.72 2011
Poland 200712 C 1.99 1.44 7.57 15.21 8.35 16.34 2011
Portugal 200712 I 1.99 2.14 12.89 27.97 11.65 25.11 2011
Romania 200813 C 0.58 0.28 4.81 8.89 4.95 8.76 2011
Russian Federation 200712 C 5.86 5.27 7.60 19.42 10.10 25.11 2011
Rwanda 200510 C 5.04 3.89 0.72 2.27 0.92 2.75 2011
Senegal 200511 C 0.23 0.31 1.31 3.10 1.29 3.16 2011
Serbia 200710 C 1.76 1.33 7.32 13.37 6.94 12.84 2011
Slovak Republic 200813 I 5.48 6.67 12.46 20.27 16.27 28.00 2011
Slovenia 200813 I 0.84 0.28 20.64 33.44 19.79 32.97 2011
South Africa 200611 C 4.09 4.38 1.73 9.50 2.12 11.78 2011
Spain 200712 I 1.32 0.00 17.14 36.25 16.04 36.25 2011
Sri Lanka 200612 C 2.21 1.66 2.96 6.80 3.37 7.51 2011
Sweden 200712 I 2.04 2.25 26.22 45.14 29.01 50.46 2011
Switzerland 200712 I 2.43 0.93 30.49 63.18 34.38 66.19 2011
Tanzania 200711 C 3.54 1.59 1.01 2.40 1.20 2.58 2011
Thailand 200812 C 4.78 3.95 5.15 12.45 6.21 14.54 2011
Togo 200611 C 2.17 0.95 0.99 2.50 0.89 2.63 2011
Tunisia 200510 C 3.45 2.63 3.72 8.44 4.40 9.61 2011
Turkey 200712 C 4.33 4.81 5.40 12.92 6.67 16.34 2011
Uganda 200912 C 3.90 2.95 1.23 3.14 1.39 3.43 2011
Ukraine 200813 C 3.47 2.27 6.81 11.60 8.08 12.97 2011
United Kingdom 200712 I 1.67 2.78 23.89 51.10 21.96 44.38 2011
United States 200713 I 0.16 0.43 2011
Uruguay 200712 I 7.87 4.33 6.00 18.63 8.75 23.03 2011
Vietnam 200410 C 6.22 7.81 2.13 5.03 3.07 7.89 2011
Source: Global Database of Shared Prosperity 2015.
Note: = Not available.
a. Refers to the years in which the underlying household survey data were collected; in cases for which the data collection period bridged two calendar years, the
year in which most of the data were collected is reported. The initial year refers to the nearest survey collected ve years before the most recent survey available;
only surveys collected between three and seven years before the most recent survey are considered. The nal year refers to the most recent survey available
between 2010 and 2014.
b. Denotes whether the data reported are based on consumption (C) or income (I) data. Capital letters indicate that grouped data were used.
c. Based on real mean per capita consumption or income measured at 2011 and 2005 purchasing power parity (PPP) using the PovcalNet (http://iresearch.worldbank
.org/PovcalNet). For some countries, means are not reported because of grouped and/or condential data.
d. The annualized growth rate is computed as (Mean in year 2/Mean in year 1)^(1/(Year 2 Year 1)) 1.
e. Covers urban areas only.
266 D ATA S O U R C E S GLOBAL MONITORING REPORT 2015/2016
3. Demographic typology
Evidence shows that changes in age struc- group, the fertility rate from 1985, 30 years
ture can affect GDP, with the exact impact ago, is used to identify how far along coun-
depending on the nature of the change. Lee tries are in the fi nal phase of demographic
and Mason (2006), among others, have transition, which is characterized by low
identified two demographic dividends rates of both fertility and mortality. Thirty
associated with changes in the working-age years describes the ballpark length of a gen-
population share in different stages of demo- eration from the birth of a parent to the birth
graphic transition. After an initial decline in of a child, although the exact length would
mortality, countries tend to transition from vary by country and across time. Coun-
high to low fertility. During this phase, the tries whose fertility rate in 1985 was below
population share of children declines and replacement are most likely to be the furthest
the share of people of working age increases, along in their demographic transition, with
while the share of elderly remains small. As the potential for a first demographic dividend
a result, these countries potentially experi- being part of their past. These countries are
ence a boost to aggregate economic growth, classified as post-dividend. Countries whose
a phenomenon referred to as the first demo- fertility rate in 1985 was at or above replace-
graphic dividend. Subsequently, as the pop- ment are likely to have entered the final phase
ulation share in working age continues to of demographic transition more recently; they
increase, countries are in a position to realize may still be reaping the first demographic
high rates of savings and investment, build- dividend but are at the tail end of that win-
ing up large stocks of human and physical dow. These countries are classified as late-
capital. The contribution of this capital to dividend countries.
production, which may be long term, is con- The second broad group includes coun-
sidered a second demographic dividend. tries whose working-age population shares
The demographic dividends are potential are growing. On the basis of the current
economic outcomes associated with a coun- total fertility rate, two subgroups are con-
trys demographic context. The extent to sidered: those for which the window for the
which countries reap these dividends var- first demographic dividend was open recently
ies. The demographic typology in this report and those for which it will open in the future.
classifies countries on the basis of the eco- If a countrys total fertility is below four
nomic implications of their demographic births per woman, then it is likely that the
characteristics. country has been progressing through the
A few criteria are used to identify whether demographic transition model and will be
the potential for a first demographic divi- experiencing rapid reductions in the popula-
dend is in a countrys past, present, or future. tion share of its youth. These are the early-
The first criterion is whether the working- dividend countries. Countries whose current
age share is likely to be rising or not during fertility rates are four births per woman or
201530the time horizon for several devel- higher are most likely at an earlier stage of
opment goals. This criterion differentiates demographic transition and have yet to expe-
two broad groups of countries. rience most of the decline in the child popula-
The first broad group is made up of coun- tion share that makes the fi rst demographic
tries for which the working-age share is pro- dividend possible. These are the pre-dividend
jected to decrease or stay unchanged during countries. It should be noted that the selec-
201530; for this group of countries, the tion of the specific value of four births per
potential for the fi rst demographic dividend woman as the cutoff is arbitrary and that the
has either already passed or is passing. To dis- classification of some countries would change
tinguish two subgroups within this broader if a slightly different value had been selected.
GLOBAL MONITORING REPORT 2015/2016 D ATA S O U R C E S 269
TABLE C.3 Economies by World Bank Group classification and demographic typology
Percent change in
World Bank Group working-age population Total fertility Total fertility
Name income classification Demographic type share, 201530 rate, 198590 rate, 201520
Afghanistan LIC Pre-dividend 17.53 7.47 4.25
Albania UMC Late-dividend 10.69 3.15 1.78
Algeria UMC Early-dividend 0.99 5.30 2.62
Angola UMC Pre-dividend 6.56 7.25 5.79
Antigua and Barbuda HIC Post-dividend 2.78 2.07 2.03
Argentina HIC Early-dividend 1.13 3.05 2.27
Armenia LMC Late-dividend 8.09 2.58 1.51
Aruba HIC Late-dividend 8.13 2.30 1.62
Australia HIC Post-dividend 6.42 1.86 1.86
Austria HIC Post-dividend 9.17 1.45 1.53
Azerbaijan UMC Late-dividend 7.88 2.95 2.22
Bahamas, The HIC Late-dividend 6.78 2.65 1.83
Bahrain HIC Early-dividend 1.45 4.08 1.98
Bangladesh LMC Early-dividend 6.15 4.98 2.08
Barbados HIC Post-dividend 8.53 1.77 1.80
Belarus UMC Post-dividend 8.41 2.00 1.64
Belgium HIC Post-dividend 6.77 1.56 1.83
Belize UMC Early-dividend 4.65 4.70 2.46
Benin LIC Pre-dividend 7.60 6.88 4.50
Bhutan LMC Early-dividend 4.47 6.11 1.93
Bolivia LMC Early-dividend 4.99 5.09 2.83
Bosnia and Herzegovina UMC Post-dividend 9.86 1.91 1.23
(Table continues next page)
270 D ATA S O U R C E S GLOBAL MONITORING REPORT 2015/2016
TABLE C.3 Economies by World Bank Group classification and demographic typology (continued)
Percent change in
World Bank Group working-age population Total fertility Total fertility
Name income classification Demographic type share, 201530 rate, 198590 rate, 201520
Botswana UMC Early-dividend 4.39 5.11 2.67
Brazil UMC Late-dividend 1.41 3.10 1.74
Brunei Darussalam HIC Late-dividend 3.21 3.72 1.82
Bulgaria UMC Post-dividend 4.91 1.95 1.60
Burkina Faso LIC Pre-dividend 8.18 7.07 5.23
Burundi LIC Pre-dividend 3.67 7.59 5.66
Cabo Verde LMC Early-dividend 4.30 5.63 2.19
Cambodia LIC Early-dividend 2.39 5.99 2.53
Cameroon LMC Pre-dividend 8.25 6.60 4.46
Canada HIC Post-dividend 10.27 1.62 1.56
Central African Republic LIC Pre-dividend 7.15 5.90 4.02
Chad LIC Pre-dividend 7.99 7.21 5.79
Chile HIC Late-dividend 4.98 2.60 1.73
China UMC Late-dividend 7.12 2.75 1.59
Colombia UMC Late-dividend 0.93 3.18 1.83
Comoros LIC Pre-dividend 6.34 6.70 4.23
Congo, Dem. Rep. LIC Pre-dividend 7.15 6.98 5.66
Congo, Rep. LMC Pre-dividend 6.23 5.55 4.64
Costa Rica UMC Late-dividend 2.89 3.31 1.76
Cte dIvoire LMC Pre-dividend 4.49 6.85 4.77
Croatia HIC Post-dividend 6.58 1.72 1.48
Cuba UMC Post-dividend 9.04 1.85 1.58
Cyprus HIC Late-dividend 5.01 2.43 1.42
Czech Republic HIC Post-dividend 5.85 1.90 1.54
Denmark HIC Post-dividend 5.12 1.54 1.76
Djibouti LMC Early-dividend 4.93 6.18 2.99
Dominican Republic UMC Early-dividend 2.71 3.65 2.38
Ecuador UMC Early-dividend 1.28 4.00 2.44
Egypt, Arab Rep. LMC Early-dividend 3.29 5.15 3.16
El Salvador LMC Early-dividend 2.51 4.17 1.87
Equatorial Guinea HIC Pre-dividend 1.32 5.89 4.52
Eritrea LIC Pre-dividend 12.43 6.51 4.02
Estonia HIC Late-dividend 5.97 2.20 1.66
Ethiopia LIC Early-dividend 12.05 7.37 3.99
Fiji UMC Late-dividend 0.28 3.47 2.48
Finland HIC Post-dividend 7.05 1.66 1.77
France HIC Post-dividend 5.44 1.81 1.99
French Polynesia HIC Late-dividend 5.51 3.64 1.99
Gabon UMC Early-dividend 7.18 5.58 3.68
Gambia, The LIC Pre-dividend 6.25 6.14 5.53
Georgia LMC Late-dividend 7.19 2.26 1.82
Germany HIC Post-dividend 10.74 1.43 1.44
Ghana LMC Early-dividend 6.42 5.88 3.95
Greece HIC Post-dividend 2.46 1.53 1.30
Grenada UMC Early-dividend 0.92 4.14 2.08
Guam HIC Late-dividend 4.48 3.14 2.32
Guatemala LMC Early-dividend 8.10 5.50 3.03
(Table continues next page)
GLOBAL MONITORING REPORT 2015/2016 D ATA S O U R C E S 271
TABLE C.3 Economies by World Bank Group classification and demographic typology (continued)
Percent change in
World Bank Group working-age population Total fertility Total fertility
Name income classification Demographic type share, 201530 rate, 198590 rate, 201520
Guinea LIC Pre-dividend 6.57 6.63 4.73
GuineaBissau LIC Pre-dividend 6.01 6.68 4.56
Guyana LMC Late-dividend 3.02 3.77 2.47
Haiti LIC Early-dividend 6.11 5.70 2.85
Honduras LMC Early-dividend 7.02 5.37 2.25
Hong Kong SAR, China HIC Post-dividend 17.53 1.36 1.30
Hungary HIC Post-dividend 4.48 1.86 1.40
Iceland HIC Late-dividend 6.25 2.12 1.90
India LMC Early-dividend 3.11 4.27 2.34
Indonesia LMC Early-dividend 1.40 3.40 2.36
Iran, Islamic Rep. UMC Early-dividend 1.48 5.62 1.62
Iraq UMC Pre-dividend 5.10 6.09 4.35
Ireland HIC Late-dividend 1.78 2.18 2.00
Israel HIC Early-dividend 0.27 3.07 2.93
Italy HIC Post-dividend 7.83 1.35 1.49
Jamaica UMC Late-dividend 3.36 3.10 1.99
Japan HIC Post-dividend 5.68 1.66 1.46
Jordan UMC Early-dividend 7.74 6.02 3.20
Kazakhstan UMC Late-dividend 2.03 3.03 2.53
Kenya LMC Pre-dividend 8.34 6.54 4.10
Kiribati LMC Early-dividend 2.21 4.80 3.58
Korea, Dem. Peoples Rep. LIC Late-dividend 1.47 2.36 1.94
Korea, Rep. HIC Post-dividend 13.45 1.60 1.33
Kuwait HIC Late-dividend 2.00 3.15 2.04
Kyrgyz Republic LMC Late-dividend 0.74 4.02 2.93
Lao PDR LMC Early-dividend 6.81 6.27 2.77
Latvia HIC Late-dividend 5.61 2.13 1.55
Lebanon UMC Late-dividend 1.84 3.23 1.71
Lesotho LMC Early-dividend 4.97 5.14 3.01
Liberia LIC Pre-dividend 7.82 6.72 4.47
Libya UMC Early-dividend 7.10 5.71 2.32
Lithuania HIC Post-dividend 7.62 2.06 1.63
Luxembourg HIC Post-dividend 6.68 1.47 1.61
Macao SAR, China HIC Post-dividend 16.77 1.94 1.34
Macedonia, FYR UMC Late-dividend 6.94 2.27 1.55
Madagascar LIC Pre-dividend 4.74 6.30 4.21
Malawi LIC Pre-dividend 9.24 7.30 4.88
Malaysia UMC Late-dividend 1.75 3.59 1.90
Maldives UMC Early-dividend 3.66 6.66 1.98
Mali LIC Pre-dividend 8.38 7.15 5.92
Malta HIC Post-dividend 7.59 2.01 1.49
Mauritania LMC Pre-dividend 5.82 6.09 4.39
Mauritius UMC Late-dividend 5.64 2.31 1.44
Mexico UMC Early-dividend 2.42 3.75 2.14
Micronesia, Fed. Sts. LMC Early-dividend 1.22 5.20 3.08
Moldova LMC Late-dividend 7.08 2.64 1.23
Mongolia UMC Late-dividend 1.48 4.84 2.54
(Table continues next page)
272 D ATA S O U R C E S GLOBAL MONITORING REPORT 2015/2016
TABLE C.3 Economies by World Bank Group classification and demographic typology (continued)
Percent change in
World Bank Group working-age population Total fertility Total fertility
Name income classification Demographic type share, 201530 rate, 198590 rate, 201520
Montenegro UMC Late-dividend 4.46 2.11 1.65
Morocco LMC Late-dividend 0.95 4.45 2.38
Mozambique LIC Pre-dividend 7.28 6.33 5.12
Myanmar LMC Early-dividend 3.22 3.80 2.13
Namibia UMC Early-dividend 4.45 5.55 3.31
Nepal LIC Early-dividend 10.01 5.33 2.09
Netherlands HIC Post-dividend 8.89 1.55 1.77
New Caledonia HIC Late-dividend 2.95 3.03 2.04
New Zealand HIC Post-dividend 6.56 2.03 1.99
Nicaragua LMC Early-dividend 4.70 5.00 2.16
Niger LIC Pre-dividend 1.75 7.69 7.46
Nigeria LMC Pre-dividend 6.15 6.60 5.41
Norway HIC Post-dividend 5.43 1.80 1.81
Oman HIC Late-dividend 4.18 7.85 2.51
Pakistan LMC Early-dividend 5.51 6.30 3.38
Panama UMC Early-dividend 0.27 3.24 2.36
Papua New Guinea LMC Early-dividend 6.18 4.97 3.58
Paraguay UMC Early-dividend 2.65 4.77 2.45
Peru UMC Early-dividend 1.69 4.10 2.35
Philippines LMC Early-dividend 2.40 4.53 2.87
Poland HIC Late-dividend 8.38 2.16 1.33
Portugal HIC Post-dividend 5.92 1.62 1.24
Puerto Rico HIC Late-dividend 3.09 2.26 1.59
Qatar HIC Late-dividend 2.27 4.41 1.95
Romania UMC Late-dividend 3.79 2.22 1.53
Russian Federation HIC Late-dividend 8.60 2.12 1.72
Rwanda LIC Early-dividend 11.47 7.99 3.62
Samoa LMC Early-dividend 3.99 5.35 3.90
Saudi Arabia HIC Early-dividend 3.09 6.22 2.59
Senegal LMC Pre-dividend 7.23 6.88 4.83
Serbia UMC Late-dividend 4.38 2.23 1.59
Seychelles HIC Late-dividend 2.97 2.94 2.21
Sierra Leone LIC Pre-dividend 10.04 6.66 4.28
Singapore HIC Post-dividend 12.12 1.70 1.26
Slovak Republic HIC Late-dividend 8.71 2.15 1.44
Slovenia HIC Post-dividend 10.57 1.65 1.65
Solomon Islands LMC Early-dividend 9.87 6.13 3.76
Somalia LIC Pre-dividend 4.81 7.26 6.12
South Africa UMC Early-dividend 2.73 4.00 2.28
South Sudan LIC Pre-dividend 6.75 6.83 4.73
Spain HIC Post-dividend 6.41 1.46 1.38
Sri Lanka LMC Late-dividend 1.84 2.64 2.03
St. Lucia UMC Late-dividend 0.91 3.65 1.82
St. Vincent and the
Grenadines UMC Late-dividend 1.32 3.10 1.90
Sudan LMC Pre-dividend 7.27 6.30 4.13
Suriname UMC Early-dividend 0.37 3.42 2.28
(Table continues next page)
GLOBAL MONITORING REPORT 2015/2016 D ATA S O U R C E S 273
TABLE C.3 Economies by World Bank Group classification and demographic typology (continued)
Percent change in
World Bank Group working-age population Total fertility Total fertility
Name income classification Demographic type share, 201530 rate, 198590 rate, 201520
Swaziland LMC Early-dividend 5.15 6.13 3.06
Sweden HIC Post-dividend 4.42 1.91 1.93
Switzerland HIC Post-dividend 8.81 1.55 1.57
Syrian Arab Republic LMC Early-dividend 11.32 5.87 2.77
Tajikistan LMC Early-dividend 0.33 5.41 3.32
Tanzania LIC Pre-dividend 6.70 6.36 4.92
Thailand UMC Late-dividend 7.29 2.30 1.46
TimorLeste LMC Pre-dividend 7.27 5.21 5.33
Togo LIC Pre-dividend 7.63 6.62 4.35
Tonga UMC Early-dividend 7.86 4.74 3.58
Trinidad and Tobago HIC Late-dividend 2.76 2.75 1.73
Tunisia UMC Late-dividend 3.50 4.00 2.07
Turkey UMC Early-dividend 0.90 3.35 2.01
Turkmenistan UMC Early-dividend 1.49 4.55 2.22
Uganda LIC Pre-dividend 10.18 7.10 5.46
Ukraine LMC Post-dividend 7.37 1.90 1.56
United Arab Emirates HIC Late-dividend 4.19 4.83 1.73
United Kingdom HIC Post-dividend 5.18 1.84 1.91
United States HIC Post-dividend 7.77 1.91 1.90
Uruguay HIC Late-dividend 0.61 2.53 1.98
Uzbekistan LMC Early-dividend 1.46 4.40 2.33
Vanuatu LMC Early-dividend 4.95 5.04 3.22
Venezuela, RB HIC Early-dividend 0.78 3.65 2.28
Vietnam LMC Late-dividend 3.84 3.85 1.95
Virgin Islands (U.S.) HIC Late-dividend 10.79 3.02 2.18
West Bank and Gaza LMC Early-dividend 6.24 6.76 3.95
Yemen, Rep. LMC Early-dividend 10.13 8.80 3.79
Zambia LMC Pre-dividend 7.43 6.68 5.14
Zimbabwe LIC Early-dividend 10.51 5.66 3.65
Source: UN World Population Prospects (2015) and World Bank 2015.
Note: This table uses the World Bank Group income classication of July 2015. LIC = low-income countries. LMC = lower-middle-income
countries. UMC = is upper-middle-income countries. HIC = high-income countries.
References
Lee, R., and A. Mason. 2006. What Is the United Nations, Department of Economic and
Demographic Dividend? Finance and Devel- Social Affairs, Population Division.
opment 43 (3). World Bank. 2015. Country and Lending
UN (United Nations). 2015. World Population Groups (http://data.worldbank.org /about
Prospects: The 2015 Revision, New York: /country-and-lending-groups).
274 D ATA S O U R C E S GLOBAL MONITORING REPORT 2015/2016
FIGURE C.4.1 Growth of the working-age share FIGURE C.4.2 Growth of the working-age share
of the population can increase real GDP per capita of the population can increase savings as a share
of Gross National Income
growth rate with different controls, percent
working-age share on real GDP per capita
2 1
Estimated impact of change in the
0.6
0
(1) (2) (3) (1) (2) (3) (1) (2) (3)
OLS FE GMM
0.4
(1) (2) (3)
Source: World Bank calculations, based on data from Penn World Tables,
UN 2015, World Development Indicators, Treisman 2007, and Barro and
Lee 2010. Source: World Bank calculations, based on data from Penn World Tables,
Note: All estimates, including Ordinary Least Squares (OLS), Panel with UN 2015, World Development Indicators, and Treisman 2007.
Fixed Effects (FE), and Generalized Method of Moments (GMM), are signifi- Note: All estimates are significant at the 5 percent level and include time
cant at the 5 percent level and include time fixed effect and regional fixed fixed effect and regional fixed effect (World Bank regions). Data (unbal-
effect (World Bank regions). Data (unbalanced panel) cover 127 countries anced panel) cover 173 countries for 19602010, using five-year averages,
for 19502010, using five-year averages, and include 1,796 observations. and include 1,107 observations. Specifications (1), (2), and (3) differ accord-
Specifications (1), (2), and (3) differ according to the inclusion of specific ing to the inclusion of specific covariates: (2) includes initial per capita
covariates: (2) includes initial GDP per capita as a control to capture income GDP as a control; (3) includes initial per capita GDP, a set of geographical
convergence across countries; (3) includes initial per capita GDP, log of variables (such as latitude and a dummy identifying landlocked countries),
years of schooling, a set of geographical variables (such as latitude and a and a set of institutional variables (such as dummy variables for countries
dummy identifying landlocked countries), and a set of institutional vari- that were not former colonies, former British colonies, and former French
ables (such as dummy variables for countries that were not former colonies, colonies). Additional covariates were tested (such as openness to trade
former British colonies, and former French colonies). Additional covariates and years of schooling) and results are robust. In the GMM specification
were tested (such as openness to trade) and results are robust. In the GMM (1), lags 2 to 8 of the share of working-age population were used. In the
specification (1), lags 2 to 8 of changes in the share of working-age popula- GMM specifications (2) and (3), lags 2 to 8 of the share of working-age
tion were used. In the GMM specifications (2) and (3), lags 2 to 8 of changes population and the initial per capita GDP was used. Geographic and time
in the share of working-age population and the initial per capita GDP were variables were used as instruments. Results are also significant when
used. Geographic and time variables were used as instruments. Results are reducing the number of instruments.
also significant when reducing the number of instruments.
with other potential endogeneity issues related population is associated with an increase of
to omitted variables that could simultaneously 0.6 to 0.8 percentage point on savings (figure
affect gyand gw, a procedure was adopted sim- C.4.2).1
ilar to that in Rajan and Subramanian (2008).
That paper uses a system-GMM estimation to
identify a causal relationship between inter-
Note
national aid and growth. Similar approaches 1. Because of potential endogeneity issues
were adopted to estimate the effect of change described in this appendix, the econometric
in the share of the working-age population results should be interpreted cautiously. The
on growth and savings. The results under dif- analysis using panel fi xed effects and system-
ferent specifications suggest that an increase GMM estimators aims to address these issues.
in the share of working-age population has a
positive effect on GDP per capita growth. An
increase of 1 percentage point in the working-
References
age population share is estimated to boost per Barro, R. and J.-W. Lee. 2010. A New Data
capita GDP by 1.1 to 2.0 percentage points, Set of Educational Attainment in the World,
on average (figure C.4.1). Also, an increase of 19502010. Journal of Development Eco-
1 percentage point in the share of working-age nomics 104 (April): 18498.
276 D ATA S O U R C E S GLOBAL MONITORING REPORT 2015/2016
Bloom, D., and D. Canning. 2004. Global synthesis. Population change, labor markets
Demographic Change: Dimensions and Eco- and sustainable growth: Towards a new eco-
nomic Significance. In Global Demographic nomic paradigm, 538.
Change: Economic Impacts and Policy Chal- IMF. 2004. World Economic Outlook: The
lenges, proceedings of a symposium, spon- Global Demographic Transition. Washington,
sored by the Federal Reserve Bank of Kansas DC: International Monetary Fund.
City, Jackson Hole, Wyoming, August 2628, Rajan, R. G., and A. Subramanian. 2008. Aid
956. and Growth: What Does the Cross-Country
Eastwood, R., and M. Lipton. 2011. Demo- Evidence Really Show? Review of Economics
graphic Transition in Sub-Saharan Africa: and Statistics 90 (4): 64365.
How Big Will the Economic Dividend Be? Treisman, D. 2007. What Have We Learned
Population Studies 65(1): 935. about the Causes of Corruption from Ten
Kelley, A. C., and R. M. Schmidt. 2005. Evolution Years of Cross-National Empirical Research?
of recent economic-demographic modeling: A Annual Review of Political Science.
synthesis. Journal of Population Economics, UN (United Nations). 2015. World Population
18(2), 275300. Prospects: The 2015 Revision. New York:
Kelley, A. C., & Schmidt, R. M. (2007). Evolution United Nations, Department of Economic and
of recent economic-demographic modeling: A Social Affairs, Population Division.
GLOBAL MONITORING REPORT 2015/2016 D ATA S O U R C E S 277
TABLE C.5.2 IMF member countries as classified in the World Economic Outlook, 2015
Advanced economy countries (35 countries)
Australia France Latvia Singapore
Austria Germany Lithuania Slovak Republic
Belgium Greece Luxembourg Slovenia
Canada Iceland Malta Spain
Cyprus Ireland Netherlands Sweden
Czech Republic Israel New Zealand Switzerland
Denmark Italy Norway United Kingdom
Estonia Japan Portugal United States
Finland Korea, Republic of San Marino
Emerging market and developing countries (153 countries)1
Emerging and Developing Europe (12 countries) Sub-Saharan Africa (45 countries)
Albania FYR Macedonia Angola2 Madagascar*
Bosnia and Herzegovina* Montenegro** Benin Malawi2
Bulgaria Poland Botswana Mali*,2
Croatia Romania Burkina Faso2 Mauritius**
Hungary Serbia Burundi*,2 Mozambique2
Kosovo* Turkey Cameroon Namibia
Cabo Verde** Niger2
Central African Republic*,2 Nigeria2
Emerging and Developing Asia (29 countries) Chad*,2 Rwanda
Bangladesh Myanmar* Comoros*,** So Tom and Prncipe**
Bhutan** Nepal Congo, Dem. Rep. of*,2 Senegal
Brunei Darussalam** 2 Palau** Congo, Rep. of 2 Seychelles**
Cambodia Papua New Guinea2 Cte dIvoire* Sierra Leone*,2
China Philippines Equatorial Guinea**,2 South Africa2
Fiji** Samoa** Eritrea*,2 South Sudan*,2
India Solomon Islands*,**,2 Ethiopia Swaziland**
Indonesia Sri Lanka Gabon2 Tanzania
Kiribati*,** Thailand Gambia, The* Togo*
Lao Peoples Democratic Republic Timor-Leste*,**,2 Ghana Uganda
Malaysia Tonga** Guinea2 Zambia2
Maldives** Tuvalu*,**,2 Guinea-Bissau*,2 Zimbabwe*,2
Marshall Islands*,** Vanuatu** Kenya
Micronesia, Federated States of*,** Vietnam Lesotho
Mongolia Liberia*
LINKAGE: A dynamic global CGE Asia; and early-, late-, and post-dividend
model for policy analysis high-income countries. The sectors are disag-
gregated into agriculture, natural resources,
LINKAGE is a dynamic, multiregion com- low-skill manufacturing, low-skill services,
putable general equilibrium model (CGE), high-skill manufacturing, and high-skill
initially designed for trade policy but later services.
extended to address a wider range of policy The core specification of the model rep-
areas. The main features of LINKAGE are licates a standard global dynamic CGE
described here, while a full description is pro- model. 2 Production is specified as a series
vided in van der Mensbrugghe (2011, 2013). of nested constant elasticity of substitution
The current version of LINKAGE relies on functions for the various inputsunskilled
the GTAP version 9, a global database for and skilled labor, capital, land, natural
2011.1 The data include social accounting resources (sector-specific), energy, and other
matrices and bilateral trade flows for 140 material inputs. LINKAGE uses a vintage
regions (countries or country aggregates) and structure of production that allows for new
57 sectors. The version employed in this study vintages of capital to be more substitutable
includes the following regions: Brazil, China, with other factors of production than old vin-
India, Japan, Nigeria, the Russian Federation, tages. In the labor market, the unemployment
Sri Lanka, and the United States; the Euro- rate is fi xed and labor may migrate between
pean Union and the European Free Trade rural and urban areas.
Association; pre-dividend countries in Sub- Demand by each domestic agent is speci-
Saharan Africa; early-dividend countries in fied at the so-called Armington level, that
Latin America and the Caribbean, Europe and is, demand for a bundle of domestically
Central Asia, East Asia and Pacific, Middle produced and imported goods. Arming-
East and North Africa, South Asia, and Sub- ton demand is aggregated across all agents
Saharan Africa; late-dividend countries in and allocated at the national level between
Latin America and the Caribbean, Europe domestic production and imports by region
and Central Asia, East Asia and Pacific, and of origin.
the Middle East and North Africa; post- The standard scenario incorporates three
dividend countries in Europe and Central closure rules. First, government expenditures
279
280 METHODOLOGY GLOBAL MONITORING REPORT 2015/2016
are held constant as a share of GDP and These productivity growth rates remain fixed
direct taxes adjust to cover revenue changes in the counterfactual scenarios.
needed to keep government savings (the fis- Demographic change affects the econ-
cal balance) at an exogenous level. The sec- omy through two channels: the labor force
ond closure rule determines the investment- and savings. In the baseline scenario, all
savings balance. Households save a portion new labor market entrants find produc-
of their incomes, with the average propen- tive employment. It is a neoclassical growth
sity to save influenced by elderly and youth model; hence, increases in the labor force
dependency rates, as well as GDP per capita translate into higher output. Savings respond
growth rates. The savings function specifica- to changes in the demographic structure of
tion follows Loayza, Schmidt-Hebbel, and the population, with declines in youth and
Servn (2000) with different coefficients for elderly dependency rates increasing savings
developed and developing countries. For (and investment).
China and Russia, we impose projections of In the scenario that is designed to permit
investment or savings rates up to 2030 from a lower-bound assessment of the impact of
World Bank regional reports. The third sav- demographic change, we assume that ben-
ings component, foreign savings (or current efits (losses) that are attributable to changes
account deficit), is exogenous. Given this, in the size of the labor force and savings
and the above-stated rules for household and (hence investment) do not materialize. More
government savings, investment is savings- specifically, in this scenario, total population
driven. The last closure determines the exter- in each region changes at the same rate as in
nal balance: the real exchange rate adjusts to the baseline, but the share of the working-age
maintain the fi xed foreign savings. We fi rst population in total population remains fi xed
generate the long-term baseline, then run a at the 2015 level over 201630. This scenario
number of counterfactual scenarios. By com- is beneficial to late- and post-dividend coun-
paring the two, we can isolate the impacts of tries since their working-age populations
various policy changes. increase at a faster rate than in the baseline,
The GTAP database is benchmarked to leading to more rapid labor-force growth
2011. In model runs, key macroeconomic and higher savings rates. It is detrimental to
aggregates from the World Banks Global pre- and early-dividend countries since their
Economic Prospects (World Bank 2015) working-age population growth rates are
report are replicated up to 2017. 3 Popula- slower than in the baseline, leading to slower
tion growth is based on the medium fertility labor-force growth and lower savings rates.
variant of the United Nations 2012 popula- In short, in this scenario we reverse the ben-
tion projections. Labor force growth follows efits of demographic change in pre- and early-
the growth of the working-age population, dividend countries, while we eliminate losses
defined here as the demographic cohort ages from the demographic change in late- and
15 to 64. The evolution of supply of skilled post-dividend countries. This approach per-
and unskilled workers is consistent with the mits us to isolate the impacts of demographic
constant educational trends scenario of the change on growth and poverty reduction,
International Institute for Applied Systems already embodied in the baseline scenario.
Analysis, in which supply growth is faster for
skilled workers than for unskilled workers.
In each period, capital stocks are defi ned as
GIDD: A global microsimulation
the previous periods (depreciated) stocks plus
model of poverty and shared
investment. Up to 2017, productivity growth
prosperity
in the baseline is calibrated to achieve the The analysis on the effect of these different
growth rates for the baseline scenario (as in scenarios on poverty and income distribu-
World Bank 2015); then we fi x the produc- tion is done using the Global Income Distri-
tivity growth for 201830 at the 2017 rate. bution Dynamics (GIDD) model. The GIDD
GLOBAL MONITORING REPORT 2015/2016 METHODOLOGY 281
combines a consistent set of price and volume CGE scenarios, the GIDD methodology
changes from a global CGE model (in this updates the household survey data for the end
case LINKAGE) with household surveys at year of our simulation, 2030. This update is
the global level (Bussolo, de Hoyos, and Med- done by reweighting the population charac-
vedev 2010). Developed by the World Banks terized by the most recent available house-
Development Prospects Group, the GIDD hold survey in GIDD using nonparametric
was inspired by previous efforts involving cross-entropy methods, but keeping it con-
simulation exercises (Bourguignon and Bus- sistent with the UN population projections.
solo 2012; Bourguignon and Pereira da Silva For the skill-unskilled breakdown, the GIDD
2003; Davies 2009). defines as skilled anyone with more than nine
Counterfactual global and country-level years of education.
income distributions are obtained by apply-
ing four changes to the initial distribution
estimated from the household data. These
MAMS: A country-level CGE
include demographic changes (considering age
model for policy analysis
structure and shifts in education); changes in The Maquette for Millennium Development
sector of employment; changes in relative Goal Simulations (MAMS) is an economic
wages across skills and sectors; and growth simulation model designed for analyzing
in consumption per capita. Data on demo- medium- and long-run development policies.
graphic changes are based on the popula- It is a country-level CGE model made up of
tion projections of the United Nations World a set of simultaneous linear and nonlinear
Population Prospect and are consistent with equations. The model is economywide, pro-
those considered in LINKAGE. Data on the viding a comprehensive and consistent view
latter three pieces of information are based of the economy, including linkages between
on the scenario analysis results from LINK- production and the income it generates,
AGE. Examples of earlier analyses using households, the government (its budget and
LINKAGE and GIDD include examinations fiscal policies), and the balance of payments.
of the effect of agriculture distortions in the The model is solved dynamically into the
global economy (Dessus, Herrera, and de future, providing a view of the economy in
Hoyos 2008), the effect of climate change on every year for a given scenario.
poverty and inequality (Bourguignon, Bus- It thus considers interactions between four
solo, and Pereira da Silva 2008), the effect groups of agents: producers, households,
of demographic change on Africa (Ahmed governments, and the nation in its dealings
et al. 2014), and external and internal shocks with the outside world. In each period, the
in Africa (Devarajan et al. 2015). different agents are subject to budgets and
For analyzing the impact of different their constraints. For each agent, receipts
demographic scenarios on poverty and and spending, the latter including savings
income distribution, we employ a sample and net borrowing, are equal by construc-
of 90 household surveys, covering approxi- tion. Producers maximize profits; households
mately 90 percent of global population and maximize utility. The government follows
global GDP. The GIDD model allows the rules specified by the analyst. For the nation,
analysis of macroeconomic shocks on pov- adjustments in the real exchange rate ensure
erty and sharing prosperity. Also, the rich- that its external accounts are in balance.
ness of the microeconomic data can provide Wages, rents, and prices play a crucial role
insights into regional and demographic char- by clearing markets for factors, goods, and
acteristics of the most affected households, services. For commodities that are traded
which can be useful for defi ning contingent internationally (exported and/or imported),
policies. domestic prices are influenced by interna-
In addition to incorporating the key tional price developments. Unless the coun-
changes in the variables derived from the try has a large share of the global market,
282 METHODOLOGY GLOBAL MONITORING REPORT 2015/2016
Decreux, Y., and H. Valin. 2007. MIRAGE, Lofgren, H., M. Cicowiez, and C. Diaz-Bonilla.
Updated Version of the Model for Trade Policy 2013. M A MS A Computable General
Analysis: Focus on Agriculture and Dynam- Equilibrium Model for Developing Country
ics. CEPII Working Paper 15, Centre dEtudes Strategy Analysis. In Handbook of Comput-
Prospectives et dInformations Internationales, able General Equilibrium Modeling, vol. 1A,
Paris. edited by P. B. Dixon and D. W. Jorgenson.
Dessus S., S. Herrera, and R. de Hoyos. 2008. Amsterdam: North Holland.
The Impact of Food Inflation on Urban Pov- van der Mensbrugghe, D. 2011. LINKAGE Tech-
erty and Its Monetary Cost: Some Back-of-the- nical Reference Document: Version 7.1. World
Envelope Calculations. Policy Research Work- Bank, Washington, DC.
ing Paper 4666, World Bank, Washington, DC. . 2013. Modeling the Global Economy
Devarajan S , D. Go, M. Maliszewska, I. Forward Looking Scenarios for Agriculture.
Osorio-Rodarte, and H. Timmer. 2015. Stress- In Handbook of Computable General Equi-
Testing Africas Recent Growth and Poverty librium Modeling, edited by P. B. Dixon and
Performance. Journal of Policy Modeling 37 D. W. Jorgenson, 93394. Amsterdam: North
(4): 52147. Holland.
Hertel, T. W., ed. 1998. Global Trade Analysis: World Bank. 2014. Urban China: Toward Effi-
Modeling and Applications. New York: Cam- cient, Inclusive, and Sustainable Urban-
bridge University Press. ization. World Bank and the Development
Loayza, N., K. Schmidt-Hebbel, and L. Servn. Research Council of the State Council, The
2000. What Drives Private Saving across the Peoples Republic of China.
World? Review of Economics and Statistics . 2015. Global Economic Prospects.
82 (2): 16581. Washington, DC: World Bank.
ECO-AUDIT
Environmental Benefits Statement
The World Bank Group is committed to reducing its environmental footprint. In
support of this commitment, the Publishing and Knowledge Division leverages
electronic publishing options and the print-on-demand technology that is located
in regional hubs worldwide. Together, these initiatives enable print runs to be low-
ered and shipping distances decreased, resulting in reduced paper consumption,
chemical use, greenhouse gas emissions, and waste.
The Publishing and Knowledge Division follows the recommended standards
for paper use set by the Green Press Initiative. The majority of our books are
printed on Forest Stewardship Council (FSC)certified paper, with nearly all con-
taining 50100 percent recycled content. The recycled fiber in our book paper
is either unbleached or bleached using totally chlorine-free (TCF), processed
chlorine-free (PCF), or enhanced elemental chlorine-free (EECF) processes.
More information about the Banks environmental philosophy can be found at
http://crinfo.worldbank.org/wbcrinfo/node/4.