Assessing Absolute and Relative Poverty Trends with Limited Data in Cape Verde

Cape Verde shifted from a socialist to a capitalistic model in the late 1980s. This shift enabled the population to benefit from rapid economic growth, but concerns have been expressed about a potential increase in inequality. Two household surveys with consumption data implemented in 1988–89 and 2001–02 provide information that can be used to assess the impact on welfare of this policy shift. Initial estimates based on these two surveys suggested that there had been an increase in poverty over time, but this was mainly due to the adoption of a relative measure of poverty and to comparability issues between the surveys. The task of assessing the trends in poverty and inequality was also made more difficult because the unit level data of the first survey are not available. For the period 1988–89, the only information at our disposal consists of a number of tables on the distribution of income in the original report prepared 15 years ago on that survey. This makes it necessary to estimate poverty and inequality using group data. In this paper, we use the Poverty module of SimSIP in order to obtain new poverty and inequality trends over time with group data. We find that despite an increase in inequality over time, and thereby an increase in relative measures of poverty, absolute poverty measures have been reduced dramatically thanks to rapid growth.