On the power of poverty orderings

This paper investigates the possibility of increasing the ordering power of additively separable poverty measures beyond the condition of second degree stochastic dominance by considering third degree stochastic dominance. For a fixed poverty line, the ordering power can be significantly enhanced by using the third degree criterion. For a range of poverty lines, the marginal power of the third degree criterion over the second degree depends critically upon the lower bound of the range; if the lower bound poverty line is arbitrarily close to zero, the two criteria coincide. The implications of a strong version of the transfer sensitivity axiom are also considered. Received: 20 November 1995/Accepted: 16 February 1998     

A global count of the extreme poor in 2012: data issues,methodology and initial results

The 2014 release of a new set of purchasing power parity (PPP) conversion factors (PPPs) for 2011 has prompted a revision of the World Bank’s international poverty line. In revising the line, we have sought to minimize changes to the real purchasing power of the earlier $1.25 line (in 2005 PPPs), so as to preserve the integrity of the goalposts for international targets such as the Sustainable Development Goals (SDGs) and the World Bank’s twin goals – which were set with respect to that line. In particular, the new line was obtained by inflating the same fifteen national poverty lines – originally used by Ravallion et al. (World Bank Econ. Rev. 23(2): 163–184 2009) to construct the $1.25 line – to 2011 prices in local currency units, and then converting them to US dollars using 2011 PPP conversion factors. With a small approximation, this procedure yields a new international poverty line of $1.90 per person per day. In combination with other changes described in the paper, this revision leads to relatively small changes in global poverty incidence for 2011: from 14.5 % using the old method to 14.1 % using the new method. In 2012, the new reference year for the global count, we find 12.7 % of the world’s population, or 897 million people, are living in extreme poverty. There are changes in the regional composition of poverty, but they are also relatively small. This paper documents methodological decisions taken in the process of updating both the poverty line and the consumption and income distributions at the country level, including issues of inter-temporal and spatial price adjustments. It also describes various caveats and limitations of the approach taken.     

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.     

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.     

Region-specific versus country-specific poverty lines in analysis of poverty

An analysis of poverty based on a country-specific income poverty line suffers from disregarding regional differences in prices and needs within a country and may, therefore, produce results that give a misleading picture of the extent of poverty as well as the geographic and demographic composition of the poor. To account for differences in prices and needs, this paper introduces an alternative method for identifying the poor based on a set of region-specific poverty lines. Applying Norwegian household register data for 2001 we find that the national level of poverty is only slightly affected by the change in definition of poverty line. However, the geographic as well as the demographic poverty profiles are shown to depend heavily on whether the method for identifying the poor relies on region- or country-specific thresholds. As expected, the results demonstrate that an analysis of poverty based on a country-specific threshold produces downward biased poverty rates in urban areas and upward biased poverty rates in rural areas. Moreover, when region-specific poverty thresholds form the basis of the poverty analysis, we find that the poverty rates among young singles and non-western immigrants are significantly higher than what is suggested by previous empirical evidence based on a joint country-specific poverty line.     

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.     

The ideology of small family

Data are obtained and analyzed from 4232 rural families of handloom weavers in Karnataka state, India. 60.20% families are small families with 6 or fewer family members, of whom 25% have 3 members. 96.78% of small families have only one occupation. 30.50% of large families and 12.42% of medium sized families have more than one occupation. About 74% of families have income under the poverty line (under Rs 3500/year). 83% of small families are under the poverty line. The dependency ratio of small families is 1:2. 33% of all dependents are found among small families which are below the poverty line. 82% of dependents in small families are in small families under the poverty line. Almost 50% of dependents belong to small families. Small families are found to have slightly lower levels of education, although average level of education is very similar regardless of family size. The findings are used as evidence that small families do not necessarily augment the economy and that economic, educational, and cultural thresholds may be necessary before small family size affects economic development and improves the general well-being of family members. The social system that the small family is operating in is considered an important factor affecting the quality of life of the family.     

Vulnerability to individual and aggregate poverty

We propose families of measures for vulnerability to both individual and aggregate poverty. We view vulnerability as the burden caused by the threat of poverty. Exposure to states of the world where hardship may strike causes distress ex-ante, even if ex-post the dice are benign and poverty (consumption below a critical norm) does not materialise. We ensure our measures meet a set of desirable axioms—in the case of aggregate vulnerability, this set includes sensitivity to the degree of correlation of outcomes across individuals. We argue that individual vulnerability levels are not enough to compose the aggregate picture, e.g. because society may be wary of the threat of simultaneous, widespread poverty. We illustrate with data from Ethiopia, where rainfall risks are found to raise vulnerability to poverty despite sustained increases in consumption.     

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.     

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.     

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.     

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.     

Charitable conservatism, poverty radicalism and inequality aversion

In his Presidential Address to the European Economic Association, Tony Atkinson introduced the idea of a “charitable conservatism” position in public policy, which “exhibits a degree of concern for the poor, but this is the limit of the redistributional concern and there is indifference with respect to transfers above the poverty line.” This contrasts with the perspective of poverty indices, which give zero weight to those above the poverty line, which we call “poverty radicalism,” and with standard “inequality aversion” where the weights decline smoothly as we move up the income scale. The object of this paper is, first, to clarify the interrelationships between charitable conservatism, poverty radicalism and inequality aversion. We do this by showing how the patterns of welfare weights to which each of these gives rise are related to each other. Secondly, we are concerned to demonstrate the implications of these different views for optimal income taxation. In terms of levels and patterns of marginal tax rates, we show that charitable conservatism and poverty radicalism are on a continuum, and by choice of low or high inequality aversion one can approximate either outcome fairly well.     

Minimum wages and poverty with income-sharing

Textbook analysis tells us that in a competitive labor market, the introduction of a minimum wage above the competitive equilibrium wage will cause unemployment. This paper makes three contributions to the basic theory of the minimum wage. First, we analyze the effects of a higher minimum wage in terms of poverty rather than in terms of unemployment. Second, we extend the standard textbook model to allow for income-sharing between employed and unemployed persons in society. Third, we extend the basic model to deal with income sharing within families. We find that there are situations in which a higher minimum wage raises poverty, others where it reduces poverty, and yet others in which poverty is unchanged. We characterize precisely how the poverty effect depends on four parameters: the degree of poverty aversion, the elasticity of labor demand, the ratio of the minimum wage to the poverty line, and the extent of income-sharing. Thus, shifting the perspective from unemployment to poverty leads to a considerable enrichment of the theory of the minimum wage.      

Sequential procedures for poverty gap dominance

Poverty evaluations differ from welfare evaluations in one significant aspect, the existence of a threshold or reference point, the poverty line. We build up normative evaluation models in which comparisons are made taking distances from this reference point rather than from the origin to be ethically relevant, by focussing upon poverty gaps and not incomes. When poverty lines differ for different groups in a socially heterogeneous population, choosing poverty gaps instead of incomes as the relevant indicator brings in normatively appealing classes of poverty indices not previously accommodated, for which poverty comparisons are implemented through sequential poverty gap curves (or poverty gap distributions) dominance. These conditions are logically related to those suggested by Atkinson and Bourguignon (Arrow and the foundations of the theory of economic policy, Macmillan, London, 1987) and Bourguignon (J Econom 42:67–80, 1989) for welfare comparisons. However, the proportion of poor individuals in the society and their average poverty gap play a role in our comparisons, though they do not in the existing poverty dominance criteria for heterogeneous populations.     

A vulnerability approach to the definition of the middle class

Measurement of the middle class has recently come to the center of policy debate in middle-income countries as they search for the potential engines of growth and good governance. This debate assumes, first, that there is a meaningful definition of class, and second, that the thresholds which define relatively homogeneous groups in terms of pre-determined sociological characteristics can be found empirically. This paper aims at proposing a view of the middle class based on vulnerability to poverty. Following this approach the paper exploits panel data to determine the amount of comparable income -associated with a low probability of falling into poverty— which could define the lower bound of the middle class. It looks at absolute thresholds, challenging the view that people just above the poverty line are actually part of the middle class. In an analogy with poverty measurement, there is a degree of arbitrariness in the definition of specific thresholds, but the concept behind them is clear and economically meaningful. The estimated lower-threshold is used in cross-section surveys to quantify the size and the evolution of middle classes in Chile, Mexico, and Peru over the past two decades. The evidence also shows that the middle class has increased significantly in all three countries. There is an important group of people, however, who cannot be defined as middle class from this perspective, but remain vulnerable to fall back into poverty.     

Unifying the Poverty Line:

Sincc 1982, the elderly poverty rate reported by the U.S. Census Bureau has fallen below the rate for the nonelderly population. This is cited as evidence of the success of U.S. social policies to benefit the elderly. But lower elderly poverty rates are an artifact of the fact that a lower, more stringent poverty line is applied to the elderly living in one- and two-person households, who constitute 85% of elderly persons. If the same poverty standard is applied to the elderly as to the nonelderly, the poverty rates are the same or slightly higher. The poverty line was originally based on the cost of an adequate diet. The lower standard for the elderly was based on the fact that the elderly consume fewer calories than nonelderly adults. This article shows there is no justification for this lower standard, and recommends its elimination. The overall nutrient requirements of the elderly are not lower, and the elderly spend a higher proportion of their budgets on food and on other necessities (shelter, health care) than the nonelderly. Alternative units of analysis examined under different income-pooling assumptions also show that poverty rates are not lower among the elderly than the nonelderly.     

Unifying the poverty line: a critique of maintaining lower poverty standards for the elderly

Since 1982, the elderly poverty rate reported by the U.S. Census Bureau has fallen below the rate for the nonelderly population. This is cited as evidence of the success of U.S. social policies to benefit the elderly. But lower elderly poverty rates are an artifact of the fact that a lower, more stringent poverty line is applied to the elderly living in one- and two-person households, who constitute 85% of elderly persons. If the same poverty standard is applied to the elderly as to the nonelderly, the poverty rates are the same or slightly higher. The poverty line was originally based on the cost of an adequate diet. The lower standard for the elderly was based on the fact that the elderly consume fewer calories than nonelderly adults. This article shows there is no justification for this lower standard, and recommends its elimination. The overall nutrient requirements of the elderly are not lower, and the elderly spend a higher proportion of their budgets on food and on other necessities (shelter, health care) than the nonelderly. Alternative units of analysis examined under different income-pooling assumptions also show that poverty rates are not lower among the elderly than the nonelderly.     

Flat rate taxes and relative poverty measurement

We provide a systematic analysis of the impact of revenue-neutral changes to the parameters of a flat rate tax system on the level of relative poverty (where the poverty line is some fraction of either the mean or the median post-tax income level). We also perform a similar analysis for a negative income tax system. We find that the choice of poverty line type has important consequences in respect of how changes to the tax parameters affect the level of relative poverty. Our results are illustrated with a numerical simulation, in which we allow the pre-tax income distribution to be either given exogenously or determined endogenously.     

Poverty and poverty alleviation programmes in the urban areas of Mozambique

The first part of this paper provides an analysis of poverty and destitution in the cities of Mozambique. The second part summarises the existing programmes for poverty alleviation and the social safety net. The last part describes in some detail the only organisation and programme which has had significant impact in terms of alleviating poverty and destitution: the Gabinete de Apoio a População Vulnerável (GAPVU) Cash Transfer Scheme.A poverty profile of Mozambique's urban centres shows that over half of all households are living in poverty. It distinguishes between absolutely poor and destitute households. The latter have expenditures less than two thirds of the poverty line, are at risk of malnutrition, high child mortality and low life expectancy and comprise nearly a third of the population. A distinction is made between structural and conjunctural causes of poverty and used as a basis for classifying households in different situations, in order to identify appropriate types of intervention. Existing policies and programmes to reduce poverty and alleviate destitution are reviewed and their strengths and weaknesses identified. The cash transfer scheme designed and operated by the GAPVU is described in more detail, and its effectiveness in reaching destitute households assessed. Finally, its administrative efficiency and financial and institutional sustainability are evaluated. It is shown to be a well designed programme which succeeds in reaching increasing numbers of vulnerable households because of its use of decentralised health and community administrative structures, and strong political and institutional backing.