What is Development

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What is Development?

• Definitions and Measurement
• August 29, 2007

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Outline

• What is Development?
• Growth, Capability Deprivation, Income Poverty
• Issues of Measurement
• Why is measurement important?
• What are some problems with income measures?

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Readings for Today

• Sen (Intro, ch. 1, ch. 2, and ch. 4)
• WDR (pp 15-29)
• Passé-Smith Could it be that the whole world is
  already rich?

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Development as Freedom

• The process of expanding the real freedoms that
  people enjoy (Sen 3)
• Capability Deprivation vs. Income Poverty

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Why is Measurement Important?

• The problem of international comparisons poverty
  lines differ across countries
• The World Banks 1-a-day and 2 a day poverty
  lines as a benchmark
• 1-a-day
• corresponds with poverty line in a low-income
  country.
• below this level of income, basic caloric and/or
  nutrient intake is probably inadequate
• Implying not only hunger and malnutrition, but
  also fundamental limits on human capacities

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Distribution of 1-a-day poverty (2001)
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Share of population in 1-a-day poverty, 2001
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2-dollar-a-day poverty(2001)
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Share of population in 2-a-day poverty, 2001
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Average Annual Income Per Capita, 2005 (Gross
Domestic Product per Capita, PPP. IMF data)
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Measuring Poverty Monetary or Income Approaches

• Income is an important component of well-being
• Measurement via household income and expenditure
  (consumption) survey
• Income, from all sources including
• Wages
• Sale of output (minus inputs and investment)
• Private transfers (for example, remittances)
• Public transfers (subsidies, food stamps)
• (Impute cash value to grown food)

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Poverty Lines

• Allows for creation of poverty lines
• Across countries the 1-a-day and 2-a-day
  assessments
• But countries differ in level of income and
  prices, and therefore poverty lines differ too
• Absolute approaches some minimum needs,
  typically measured in terms of caloric intake
• .but ultimately socially defined from 1-a-day
  to US 18,000 a year (50 a day) for a family of
  four.

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Poverty Assessments

• Poverty lines show aggregate trends in poverty
  over time
• but can also be used as part of more
  disaggregated poverty assessments that identify
  potential target groups
• and allow for tests of hypotheses

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High Poverty Counties Counties withPoverty
Rates 20 or Higher in 1999
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Critique of Income Measures I

• Income is instrumental to some need
  translation of income into fulfillment of need
  varies by factors such as age and disability
  (Sen)
• Physical quality-of-life measures
• Caloric and nutrient intake
• Enfant mortality
• Literacy
• Life expectancy
• Does income correlate with physical quality of
  life measures?

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Average Daily Food Consumption (Calories, 1995)
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Infant mortality rate, per 1000 births
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Critique of Income Measures II

• The welfare of the poor is highly dependent on
  government infrastructure and services
• Households with equal incomes may have different
  access to services (urban vs. rural households in
  particular)
• Examples
• Access to potable water
• Schools and clinics
• Roads

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Critique of Income Measures III

• Income is a snapshot
• but the incomes of poor households are often
  highly variable over time
• because of exposure to risks of various sorts.
• Income at one point in time does not capture risk
  that income may fall.
• Chronic vs. transitory poverty.

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Critique of Income Measures IV The Significance
of Assets

• Participatory poverty assessments (PPA Voices of
  the Poor)
• Surprise the poor talk less about income than
  expected, but repeatedly return to the importance
  of various assets
• Assets are things of value owned by the household
  which can generate or increase income and buffer
  against losses in income
• Examples?

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Assets of Significance to the Poor

• Financial assets or savings are typically
  limited
• Physical capital (land, animals, housing)
• Human capital (health and education)
• Social capital the value of networks and the
  cost of exclusion
• Environmental assets and commons

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The Significance of Assets

• We have neither land nor work. . . . Some of us
  have land in the reserve, but we cant transport
  our products from there because it is too far. It
  is difficult to carry them, and since I dont
  have land here, and only in the reserve, I am
  poor.
• Ecuador 1996
• In my family if anyone becomes seriously ill, we
  know that we will lose him because we do not even
  have enough money for food so we cannot buy
  medicine.
• Vietnam 1999a

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The Significance of Assets

• I used to never worry about my illiteracy and the
  fact that I was not able to send my children to
  school, as long as we had something to eat. But
  now . . . I realize that my children are in
  trouble for life because they cannot get any
  decent job if they dont know how to read and
  write.
• Swaziland 1997
• You have to cultivate networks and contacts with
  people with power and influence to secure a
  livelihood and future.
• Pakistan 1993

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Coming up

• Inequality
• The problem of vulnerability and risk