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POLICY AND ECONOMIC REPORT
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Lessons from Economics

Prosperity Gap index

The World Bank’s new measure for shared prosperity, the Global Prosperity Gap, represents the average
factor by which incomes worldwide would need to increase to meet a prosperity standard of $25/day,
expressed in 2017 PPPs.

The global prosperity standard is set at $25 per person per day—roughly equal to the per capita household
income of a typical person living in a country that transitions to high-income status.

The measure includes the income of every person in the world, aligning with the principles of a shared
prosperity metric. However, it places a significantly higher weight on the income shortfalls of the poor
than those of the rich.

The Prosperity Gap decreases (improves) when incomes rise and increases (worsens) when incomes
decline. There are three ways to use the Prosperity Gap index in country or regional analysis:-

? Ranking across countries (or sub-groups within countries)

Mean income is an important and widely used metric for assessing economic well-being. However, it does
not reflect how income is distributed among individuals, an essential dimension of welfare. In contrast,
the Prosperity Gap index captures both mean income and the degree of inequality in the distribution.

Figure 13: Ranking countries by mean income and Prosperity Gap from richest (top) to poorest (bottom)

Source- World Bank Page | 23

January 2025