Poverty at a Global Level

International Organizations such as the World Bank set a global poverty line or a poverty line or groups of countries collectively (such as developing nations). Currently, the World Bank has set the International Poverty line at $1.90.
As you can see, this poverty line is specified in terms of US Dollars. Data regarding poverty for each country is thus calculated by converting all information regarding income to US Dollars. This is done by using the exchange rates.
This method has attracted some criticism, because developing nations where one would expect higher poverty have many “non-traded goods” (goods that don’t cross borders that is, are not internationally traded such as staple food items) the poverty line may not provide a clear picture of the true level of poverty, mostly overstating the poverty levels.
This proves to be a major difficulty for calculating Global Poverty levels. The solution to this problem lies in Purchasing Power Parity or PPP. Purchasing Power Parity allows for adjustments in data to represent the income of all countries in terms of “international dollars” and reduce discrepancies.