International comparisons of poverty estimates entail both conceptual
and practical problems. Countries have different definitions of
poverty, and consistent comparisons across countries can be difficult.
Local poverty lines tend to have higher purchasing power in rich
countries, where more generous standards are used, than in poor
countries. Poverty measures based on an international poverty line
attempt to hold the real value of the poverty line constant across
countries, as is done when making comparisons over time. Since
World Development Report 1990 the World Bank has aimed to apply
a common standard in measuring extreme poverty, anchored to what
poverty means in the world’s poorest countries. The welfare of people
living in different countries can be measured on a common scale by
adjusting for differences in the purchasing power of currencies. The
commonly used $1 a day standard, measured in 1985 international
prices and adjusted to local currency using purchasing power parities
(PPPs), was chosen for World Development Report 1990 because it
was typical of the poverty lines in low-income countries at the time.
Early editions of World Development Indicators used PPPs from the
Penn World Tables to convert values in local currency to equivalent
purchasing power measured in U.S dollars. Later editions used 1993
consumption PPP estimates produced by the World Bank.