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Measures of poverty Measures of poverty

There are Various measures of the extent of There are Various measures of the extent of poverty .poverty .

The head count index.The head count index. The poverty gap index.The poverty gap index. The squared poverty gap (poverty severity) The squared poverty gap (poverty severity)

index.index.

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Head count indexHead count index

The most widely –used measure is the headcount index.The most widely –used measure is the headcount index.It simply measures the proportion of the population that is counted as poor.It simply measures the proportion of the population that is counted as poor.Head count index=number of poor/total no. of populationHead count index=number of poor/total no. of populationWith the greatest virtues of H.I that it is simple to construct it has three With the greatest virtues of H.I that it is simple to construct it has three

weaknesses:weaknesses: It does not take the intensity of poverty into account.It does not take the intensity of poverty into account. It % of households are poor, it may be that 25% of individuals are poor.It % of households are poor, it may be that 25% of individuals are poor.But survey does not indicate how poor the poor are ,and hence does not But survey does not indicate how poor the poor are ,and hence does not

change if people below the poverty line become poorer.change if people below the poverty line become poorer. The poverty estimates should be calculated for individuals and not the The poverty estimates should be calculated for individuals and not the

households. if 20 data is always related to households, so in order to households. if 20 data is always related to households, so in order to measure at individual level we must take a critical assumption that all measure at individual level we must take a critical assumption that all members of the given household enjoy the same level of well-being.members of the given household enjoy the same level of well-being.

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Poverty gap indexPoverty gap index This popular measure of poverty adds up the extent to This popular measure of poverty adds up the extent to

which individuals on average fall below the poverty which individuals on average fall below the poverty line,and expresses it as a percentage of poverty line.line,and expresses it as a percentage of poverty line.

more specifically ,we define Poverty gap as the more specifically ,we define Poverty gap as the poverty line less the actual income for poor poverty line less the actual income for poor individuals: the gap is considered to be zero for individuals: the gap is considered to be zero for everyone else.everyone else.

G= ( z – y ).I (y<z).G= ( z – y ).I (y<z). This measures the proportionate poverty gap in the This measures the proportionate poverty gap in the

population ( where the non poor have zero poverty population ( where the non poor have zero poverty gap).gap).

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Poverty gap indexPoverty gap index

It is considered to be helpful as it gives the cost of It is considered to be helpful as it gives the cost of eliminating poverty (relative to the poverty eliminating poverty (relative to the poverty line ) ,because it shows how much to be transferred to line ) ,because it shows how much to be transferred to the poor to bring their incomes or expenditures up to the poor to bring their incomes or expenditures up to the poverty line(as a proportion of the poverty line).the poverty line(as a proportion of the poverty line).

The minimum cost of eliminating poverty using The minimum cost of eliminating poverty using targeted transfers is simply the sum of all the poverty targeted transfers is simply the sum of all the poverty gaps in a population; every gap is filled up to the gaps in a population; every gap is filled up to the poverty line. This is all possible subject to the perfect poverty line. This is all possible subject to the perfect efficiency.efficiency.

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Squared poverty gap ( poverty Squared poverty gap ( poverty severity ) indexseverity ) index

It is a measure of poverty that takes into account It is a measure of poverty that takes into account inequality among the poor.inequality among the poor.

This is weighted sum of poverty gaps (as a proportion This is weighted sum of poverty gaps (as a proportion of the poverty line), of the poverty line),

Where the weights are the proportionate poverty gaps Where the weights are the proportionate poverty gaps themselves:a poverty gap of 10% of the poverty line themselves:a poverty gap of 10% of the poverty line is given a weight of 10% and apoverty gap (say) 20% is given a weight of 10% and apoverty gap (say) 20% is given a weight of 20%: this is in contrast of is given a weight of 20%: this is in contrast of poverty gap index, where they are weighted equally.poverty gap index, where they are weighted equally.

The measure lacks intitive appeal and because it is The measure lacks intitive appeal and because it is not easy to iterpet it is not used very widely.not easy to iterpet it is not used very widely.

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INCIDENCE OF POVERTY INCIDENCE OF POVERTY

The measures of poverty depth and poverty The measures of poverty depth and poverty severity provide complimentary information severity provide complimentary information on the incidence of poverty .on the incidence of poverty .

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Assignment no.2Assignment no.2

Discuss the Incidence of poverty in Pakistan Discuss the Incidence of poverty in Pakistan BEFORE AND AFTER FLOODBEFORE AND AFTER FLOOD

Data and working of Poverty reduction Data and working of Poverty reduction strategies.strategies.

Submission and presentation21-4-11.Submission and presentation21-4-11.

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Income inequaltyIncome inequalty

Measuring Inequalitysize distributionsLorenz curves

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The Lorenz CurveThe Lorenz Curve

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The Greater the Curvature of the Lorenz The Greater the Curvature of the Lorenz Line, the Greater the Relative Degree of Line, the Greater the Relative Degree of

InequalityInequality

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Gini coefficients and aggregate Gini coefficients and aggregate measures of inequalitymeasures of inequality

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Four Curves Possible LorenzFour Curves Possible Lorenz

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Poverty, Inequality, and Social Poverty, Inequality, and Social WelfareWelfare

What’s so bad about inequality?What’s so bad about inequality? Dualistic development and shifting Lorenz Dualistic development and shifting Lorenz

curves: some stylized typologiescurves: some stylized typologies modern sector enlargementmodern sector enlargement modern sector enrichmentmodern sector enrichment traditional sector enrichmenttraditional sector enrichment