Brookings – Opinion | February 6, 2014
Amidst the growing global consensus around a target of “zero” extreme poverty for 2030, there is renewed debate around the role of official development assistance (ODA) and how much will be required to achieve the goal. The ideal way to assess this question would be through country-specific, bottom-up costing assessments that account for general equilibrium price dynamics and allow for the possibility of shocks, whether positive (e.g., technology) or negative (e.g., conflict or fuel price spikes). In the absence of such rigorous scenario-based analysis, some back-of-the-envelope calculations help inform the approximate orders of magnitude of aid required.
Two conceptually distinct approaches can help inform deliberations on the issue:
- The first is to estimate the cost of essential services for extremely poor people and the amount of public expenditure required to finance them.
- The second is to estimate the dollar value of the extreme poverty gap, i.e., the amount of transfers theoretically required to bring each person in the world up to a living standard of $1.25 a day.
1. Essential Services Budget GapWatch movie online The Transporter Refueled (2015)
A budget gap for basic services can be estimated through some simple arithmetic. Assume the following:
(1) A full package of basic public services for health, education, infrastructure, agriculture and public administration costs $200 per capita per year, including roughly $100-140 for Millennium Development Goal-type public investments (in line with the bottom-up estimates of the U.N. Millennium Project, 2005). [Read more…]