Multidimensional poverty indices

This paper explores the axiomatic foundation of multidimensional poverty indices. Departing from the income approach which measures poverty by aggregating shortfalls of incomes from a pre-determined poverty-line income, a multidimensional index is a numerical representation of shortfalls of basic needs from some pre-specified minimum levels. The class of subgroup consistent poverty indices introduced by Foster and Shorrocks (1991) is generalized to the multidimensional context. New concepts necessary for the design of distribution-sensitive multidimensional poverty measures are introduced. Specific classes of subgroup consistent multidimensional poverty measures are derived based on sets of reasonable axioms. This paper also highlights the fact that domain restrictions may have a critical role in the design of multidimensional indices. Received: 1 March 1999/Accepted: 1 August 2000     

Multiple Disadvantages Among Older Citizens: What a Multidimensional Measure of Poverty Can Show

Using the newly created Freedom Poverty Measure, a multidimensional measure of poverty, it can be seen that there were 534,700 individuals who were in freedom poverty, who had either poor health or poor education in addition to having low incomes. This multidimensional disadvantage would not normally be captured by single measures of poverty, such as income poverty measures. Men were significantly less likely to be in freedom poverty than women (OR = 0.63, 95% CI: 0.54–0.74, p < .0001), and the proportion of individuals in freedom poverty increased with age, with those older than 85 being 2.3 times more likely to be in freedom poverty than those aged 65 to 69 years (95% CI: 1.73–3.11, p < .0001). Policy responses to address the marginalization of disadvantaged older people should take a multidisciplinary approach, addressing health inequalities in particular, not just low income.     

Poverty orderings and welfare dominance

This paper examines the partial orderings of discrete distributions derived from various poverty indices and sets of welfare functions. The poverty ordering with respect to some indexP is the ordering obtained whenP ranks consistently over a range of admissible poverty lines. The poverty orderings derived from the headcount ratio, the per-capita income gap and another distribution-sensitive index are characterized in some detail when the poverty standard is allowed to take any positive value, and these orderings are shown to coincide with the natural interpretation of first, second and third degree welfare dominance, respectively. Additional results are then obtained for the situation in which the admissible poverty lines cannot exceed some finite upper bound.We are particularly indebted to Nick Kiefer for initial insights into the issues addressed in this paper. We have also had helpful comments from Amartya Sen, from an anomymous referee, and from many seminar audiences. Financial support from the Krannert Endowment Trust and the Leverhulme Trust is gratefully acknowledged.     

The measurement of transient poverty: Theory and application to Pakistan

The present paper investigates the measurement of transient poverty when each person's welfare level fluctuates due to exogenous risk. The paper namely characterizes the sensitivity of transient/chronic poverty decomposition with respect to the poverty line and to the expected welfare level so that the decomposition analysis will be based on solid theoretical foundations and be robust empirically. Theoretical results show that poverty measures associated with prudent risk preferences perform better than other measures in assuring that the value of transient poverty increases with the depth of chronic poverty and that the decomposition is not highly sensitive to the poverty line. Poverty measures such as those associated with constant relative risk aversion are thus superior to popular Foster–Greer–Thorbecke (FGT) measures such as headcount, poverty gap, and squared poverty gap indices. These theoretical arguments are confirmed empirically by the application of the decomposition to a two-period household panel dataset from rural Pakistan. The relative magnitudes of transient versus chronic poverty are more robust to changes in the poverty line when poverty measures associated with constant relative risk aversion are used than when FGT poverty measures are used.     

Three perspectives on the mismatch between measures of material poverty

The two most prominent measures of material poverty within contemporary European poverty analysis are low income and material deprivation. However, it is by now well‐known that these measures identify substantially different people as being poor. In this research note, I seek to demonstrate that there are at least three ways to understand the mismatch between low income and material deprivation, relating to three different forms of identification: identifying poor households, identifying groups at risk of poverty and identifying trends in material poverty over time. Drawing on data from the British Household Panel Survey, I show that while low income and material deprivation identify very different households as being poor, and display distinct trends over time, in many cases they identify the same groups at being at risk of material poverty.     

Measuring the impact of price changes on poverty

This paper develops a methodology to measure the impact of price changes on poverty measured by an entire class of additive separable poverty measures. This impact is captured by means of the price elasticity of poverty. The total effect of changes in price on poverty is explained in terms of two components, income and distribution effects. The income effect measures the change in poverty when all prices increase uniformly, whereas the distribution effect captures the change in poverty because of changes in relative prices. Using this decomposition, the paper derives an empirically operational index, which reveals whether the price changes have been pro-poor or anti-poor. The paper also derives a new price index for the poor. While this index can be computed for any poverty measures, our empirical analysis applied to Brazil is based on three poverty measures, the head-count ratio, the poverty gap ratio and the severity of poverty. The empirical analysis shows that price changes in Brazil during the 1999–2006 periods have been anti-poor. Nevertheless, during the last 2 to 3 years, the price changes have affected the poor less adversely than the non-poor.     

Multidimensional time and income poverty: well-being gap and minimum 2DGAP poverty intensity – German evidence

This paper focuses on interdependent multidimensional poverty of time and income with its incidence and intensity. We introduce a Two Dimensional Minimum Poverty Gap (2DGAP) measure, which quantifies the shortest path to escape multidimensional poverty. The 2DGAP disentangles single poverty attribute gaps while assuring their interdependence; an important issue for targeted antipoverty policies. Besides income, we include genuine personal leisure time with social participation reflecting Sen’s capability approach. The interdependence of multidimensional poverty is estimated by a CES-type well-being function with individual German data. The empirical results of Germany’s “working poor” emphasize the importance of time with social participation aspects in the multidimensional poverty discussion.     

Do Minimum Wages Fight Poverty?

We present evidence on the effects of minimum wages on family incomes. The results indicate that minimum wages increase both the probability that poor families escape poverty and the probability that previously nonpoor families fall into poverty. The estimated increase in the flow into poverty is larger, although this difference is not statistically significant. We also find that minimum wages tend to boost the incomes of poor families that remain below the poverty line. On net, the various trade-offs created by minimum wage increases more closely resemble income redistribution among low-income families than income redistribution from high- to low-income families.     

Association of Egalitarian Attitudes with Income,Poverty, and Entitlement Program Utilization

This article examines the relationship between egalitarian gender attitudes and its effect on income, poverty, and social service utilization. In a sample of married fathers in the Fragile Families data (N = 717), we conducted regression analyses on these questions, five years after initial interviews. Our results indicate that egalitarian attitudes were positively associated with income and social service utilization and negatively associated with poverty. Implications of these findings are discussed, including possible explanations for these findings, their importance for social work practice, and recommendations for social policy.     

Global poverty estimates based on 2011 purchasing power parity: where should the new poverty line be drawn?

This paper aims to present a new global poverty line based on the 2011 Purchasing Power Parity (PPP). To calculate a new global poverty threshold based on 2011 PPP, this paper moves away from the World Bank’s method of anchoring a single global poverty line on the national poverty lines of the 15 poorest countries. It instead proposes an alternative method of using equivalent poverty lines. Each country is shown to have a different equivalent poverty line. This paper finds that there is no single international poverty line in 2011 PPP that is equivalent to $1.25 in 2005 PPP. Single poverty lines vary for each region because countries have experienced different inflation rates and have different PPP conversion rates between 2005 and 2011. To calculate a single poverty line in 2011 PPP, this paper measures the weighted average of equivalent poverty lines of 101 countries around the globe with weights proportional to their populations. Based on the new method, the corresponding poverty line is estimated at $1.93 in 2011 PPP. The World Bank has officially adopted the poverty line of $1.90 in 2011 PPP. This paper demonstrates that our proposed poverty line performs better than the World Bank’s in terms of preserving the real purchasing power of the previous line of $1.25 in 2005 PPP. Given the new poverty threshold of $1.93, the number of poor worldwide is reduced by 6.42 million, with the reduction largely occurring in South Asia and Sub-Saharan Africa.     

A general class of inequality elasticities of poverty

Many authors have recently emphasized the crucial role of income inequalities in the design of efficient policies aimed at reducing poverty. However, the link between variations in the degree of inequality and variations in poverty is not well documented. The literature, for instance, does not provide any satisfying tool for predicting how a small relative variation in the Gini index may be associated with a variation in the headcount index. In the present paper, we define a family of Lorenz curve transformations that can directly be interpreted in terms of relative variations of known inequality measures. Then, we extend Kakwani’s (Rev Income Wealth 39(2):121–139, 1993) methodology for the calculation of inequality elasticities of poverty. Improvements are threefold with respect to Kakwani’s work. First, our formulas are not confined to the sole Gini index. Secondly, they embrace the uncertainty and the complexity of the mechanical link between inequality and poverty. Third, using some flexible functional form, one can easily perform an accurate estimation of the point inequality elasticities of poverty corresponding to observed variations of a given income distribution. We also propose a simple measure that may be helpful to assess how “pro-poor” are inequality variations by comparing the observed elasticities with the set of theoretical elasticities that could be obtained from the initial income distribution.     

The concept and measurement of asset poverty: Levels, trends and composition for the U.S., 1983–2001

American prosperity in the second half of the 1980s together with the booming economy of the 1990s created the impression that American households have done well, particularly in terms of wealth acquisition. In this paper, we develop the concept of “asset poverty” as a measure of economic hardship, distinct from and complementary to the more commonly used concept of “income poverty.” We define a household with insufficient assets to enable it to meet basic needs (as measured by the income poverty line) for a period of three months to be asset poor. The results reveal that in the face of the large growth in overall assets in the U.S. and a fall in standard income poverty over the period from 1983 to 2001, the level of asset poverty increased from 22.4 to 24.5 percent. We also find that asset poverty rates for blacks and Hispanics are over twice those for whites; that asset poverty rates fall monotonically with both age and education; that they are much higher for renters than homeowners; and that by family type they range from a low of 5 percent for elderly couples to 71 percent for female single parents.     

Women and poverty: A gender-sensitive approach

Poverty is not a gender neutral condition as the number of poor women exceeds that concerning men and women and men experience poverty in distinctive ways. This paper discusses the relevance of incorporating a gender perspective in poverty studies and provides a portrait of poverty among women in Portugal. Following a multidimensional concept of poverty, the methodology used comprises a cross-sectional and a dynamic analysis of poverty, using data from ECHP (1995–2001). The results point to the importance of various factors contributing to women's vulnerability to poverty, such as issues related to labor market, lone motherhood, ageing and education.     

Are income poverty and perceptions of financial difficulties dynamically interrelated?

An individual’s economic ill fare can be assessed both objectively, looking at one’s income with reference to a poverty line, or subjectively, on the basis of the individual’s perceived experience of financial difficulties. Although these are distinct perspectives, income poverty and perceptions of financial difficulties are likely to be interrelated. Low income (especially if it persists) is likely to negatively affect perceptions of financial difficulties and, as recently suggested by the behavioural economics literature, (past) subjective sentiment may in return influence individual’s income generating ability and poverty status. The aim of this paper is to determine the extent of these dynamic cross-effects between both processes. Using Luxembourg survey data, our main result highlights the existence of a feedback effect from past perceived financial difficulties on current income poverty suggesting that subjective perceptions can have objective effects on an individual’s behaviour and outcomes.     

Making and Shaping Poor Malawians: Citizenship Below the Poverty Line

This article explores a series of events in the global discourse on development and governance: the emergence of ‘the poor’ as a class of identifiable individuals rather than an abstract category; the preference for targeted development interventions; the organisation of beneficiaries into groups which are then used as sites for application of ‘governmentality’; and the Millennium Development Goals, which have necessitated national and local poverty lines corresponding to the global poverty line. One implication is that those below the poverty line may constitute a particular type of citizens: more subject to attempts to reform their rationality and conduct, and less the autonomous individuals that are presupposed by liberal democracy.     

Measuring the effect of spell recurrence on poverty dynamics—evidence from Spain

Accounting for the time individuals spend below the poverty line is an important dimension in order to design social policies to fight against poverty. The literature is currently aiming to construct a consistent aggregate measure of poverty over time that takes into account individual income lifetime profiles. It is however, far from clear which aspects of the specific patterns of poverty spells should be included. Using longitudinal data for Spain, this paper shows that the effect of spell recurrence on poverty dynamics is relevant. Poverty exit and re-entry rates vary not only with personal or household characteristics but also with spell accumulation and the duration of current and past spells. In general, our main findings support that an aggregate intertemporal poverty index should incorporate full individual poverty lifetime trajectories accounting for both poverty and non-poverty spell durations.     

Inference for the measurement of poverty in the presence of a stochastic weighting variable

Empirical applications of poverty measurement often have to deal with a stochastic weighting variable such as household size. Within the framework of a bivariate distribution function defined over income and weight, I derive the limiting distributions of the decomposable poverty measures and of the ordinates of stochastic dominance curves. The poverty line is allowed to depend on the income distribution. It is shown how the results can be used to test hypotheses concerning changes in poverty. The inference procedures are briefly illustrated using Belgian data. An erratum to this article can be found at     

Measuring Multidimensional Aspiration Gaps: A Means to Understanding Cultural Aspects of Poverty

This article links primary research into the way subjective well‐being among poor people can be defined and measured to the growing literature on poverty as a failure of capacity to aspire. Data from Bangladesh, Thailand and Peru are used to illustrate a measurement strategy based on defining well‐being as a function of the gap between individuals’ diverse and multiple aspirations, and their satisfaction with achieving them. Such analysis has the potential to illuminate variation in individual and local capacity to respond to different development opportunities. It also warns against the limitations of treating aspirations as a single rather than a multidimensional concept.     

Health and income poverty in Ireland, 2003�C2006

Recent advances in the measurement of bi-dimensional poverty are applied to a measure of poverty which incorporates income and health poverty. The correlation between income and poverty is examined using the Receiver Operating Characteristics curve. Following from this uni-dimensional and bi-dimensional poverty indices are calculated for Ireland for the years 2003–2006. Income poverty shows a fall over the period while health poverty falls and then rises. Bi-dimensional poverty generally moves in line with the individual indices depending upon the relative weight for each dimension. The results are generally not sensitive to the degree of poverty aversion or the substitutability between the different dimensions of poverty.