Measures of Poverty and Inequality: A Reference Paper

The multitude of available poverty measures can confuse a policy maker who wants to evaluate a poverty-reduction policy. We proposes a rule for ranking poverty measures by use of the food-gap, calculated as the cost-difference between a household's normative food basket, derived from a healthy diet, and the actually chosen food basket. The rationale for this indicator is based on the fact, that (1) basic food needs reflect an ultimate necessity, (2) food expenditure is highly divisibility, thus allowing for efficient marginal substitution between competing necessities when the household's economic hardship increases. For these reasons we believe this to be an objective indicator for the sacrifice in the standard of living of a family under economic stress. A household is identified as 'truly' poor or non-poor by a given poverty measure if the diagnoses coincide and vice versa. The ranking is obtained by a gain-function, which adds up congruent and deducts contradicting outcomes for each poverty measure. We calculate four types of gainfunctions -of headcounts, food-gaps, FGT-like powered food-gaps and an augmented version of the latter. The poverty measures include expenditure-based, income-based, relative, absolute, mixed measures and a multidimensional measure of social deprivation. The most qualitative measure is found to be Ravallion's Food Energy Intake and Share measure, though it suffers from a possible bias, since it includes the food-norm in its design. The 60%-median income measure from all sources ranks highest among the unbiased measures. The absolute poverty measure yields the worst performance.

Journal of Statistical Planning and Inference, 1996

One of the major topics that attracted the attention of econometricians in recent years is measurement of poverty. This paper reviews critically the conceptual and statistical issues that have been examined by the econometricians. The paper provides a comprehensive review of major recent approaches and results on measurement of poverty. It devotes one section to outline a new approach to the measurement of poverty that is based on the actual consumption behaviour of the people instead of on arbitrary choice of either a poverty line or a deprivation function. It devotes two sections for suggesting fruitful areas of research, one addressed to economists on synthesizing poverty measurement with applied welfare economics, and another to statisticians on problems of statistical inference associated with functional estimation. The paper also highlights the importance of reliability theory and risk assessment in translating consumption deprivation into a poverty measure. A new index of poverty that depends on risk of consumption deprivation is also proposed.

2019

This paper discusses the different approaches to poverty and the many implications following the methods. Poverty is understood dissimilarly according to the approaches and ideally an adequate estimation of poverty requires a combination of approaches. Which target is identified as poor is just as important as the method of carrying out alleviation itself and it makes all the difference from the development perspective. The main agenda of using an approach is to identify target groups. As we shall target groups differ across the different methods but there is also a convergence visibly present. Poverty is finally about measuring deprivation but the parameters of defining the bare minimum shift according to method.

Theoretical Economics Letters, 2011

In this paper, a new optimization-based approach to constructing a poverty index is considered. From a general perspective, first and second order conditions based on a general poverty intensity function are derived. Then using specific intensity functions defined by [1,3] respectively, we specify related necessary and sufficient conditions and the underlying poverty indices. An extension based on a large class of intensity function is also investigated.

1991

We propose a poverty measure that satisfies *a number of properties that make it sensitive to the level of absolute deprivation of the poor. These properties are often violated by several poverty measures discussed in the literature. The measure corresponds to a Cobb-Douglas social welfare function which has a number of egalitarian features.

Journal of European Social Policy, 2006

Review of Income and Wealth, 2000

Our aim in this paper is to show how recent developments in the theory and methods of poverty measurement can be applied to provide more accurate descriptions of poverty trends to the typical consumers of these statistics-policy analysts, policy-makers and their critics. Since Amartya Sen's (1976) classic critique of the "headcount" approach to poverty measurement, considerable progress has been made in constructing axiomatically-driven measures of "poverty intensity." These measures have had little influence outside the small world of experts who devised them largely because their mathematical representation has made their meaning obscure to potential users. We focus on the Sen-Shorrocks-Thon (SST) index and its elaboration by Osberg and Xu which provides the information contained in the index in a format that is easily accessible within traditional categories of poverty analysis. The SST index and its decomposition provide an analytical framework for discussing the underlying components of aggregate trends that allows for unambiguous answers to the usual policyrelated questions concerning the components of change as well as their magnitude and direction.

European Journal of Political Economy, 2002

The aim of this paper is twofold. The first is to illustrate that a poverty index can be derived from a decomposition of an appropriate inequality index. The advantage of decomposing an inequality index is that the decomposition supplies additional information that is useful for poverty measurement. The second purpose is to illustrate the kind of policy analysis that can be performed with a decomposed inequality index by decomposing the Gini coefficient into Sen's poverty index and other components. The methodology suggests an answer to the following question: Assume that a tax has been imposed on an expenditure item or an income source, what will be the impact on the components of the inequality index? The analysis is performed with data from Romania. D 2002 Published by Elsevier Science B.V.

2011

The multitude of available poverty measures can confuse a policy maker who wants to evaluate a poverty-reduction policy. We proposes a rule for ranking poverty measures by use of the food-gap, calculated as the cost-difference between a household's normative food basket, derived from a healthy diet, and the actually chosen food basket. The rationale for this indicator is based on the fact, that (1) basic food needs reflect an ultimate necessity, (2) food expenditure is highly divisibility, thus allowing for efficient marginal substitution between competing necessities when the household's economic hardship increases. For these reasons we believe this to be an objective indicator for the sacrifice in the standard of living of a family under economic stress. A household is identified as 'truly' poor or non-poor by a given poverty measure if the diagnoses coincide and vice versa. The ranking is obtained by a gain-function, which adds up congruent and deducts contradicting outcomes for each poverty measure. We calculate four types of gainfunctions-of headcounts, food-gaps, FGT-like powered food-gaps and an augmented version of the latter. The poverty measures include expenditure-based, income-based, relative, absolute, mixed measures and a multidimensional measure of social deprivation. The most qualitative measure is found to be Ravallion's Food Energy Intake and Share measure, though it suffers from a possible bias, since it includes the food-norm in its design. The 60%-median income measure from all sources ranks highest among the unbiased measures. The absolute poverty measure yields the worst performance.

Advances in Intelligent and Soft Computing, 2011