Poverty Measurement and Analysis

1
Poverty Measurement and Analysis
Suresh Babu International Food
Policy Research Institute
2
Conceptual Framework of Linking Poverty
Nutrition


Nutrition Security

Adult development and Labor productivity
Dietary Intake Macro-nutrients Micro-nutrients
Immediate Causes





Health Status









Access to food Household income/ expenditures
on food
Health environment services Access quality
of health, sanitation water


Maternal child care practices Quality
quantity of care

• Policies that encourage
• -food production
• income generation
• transfer food in-kind

Policies that improve -adequate sanitation -safe
water supply -health care availability -environmen
tal safety/ shelter
Policies programs that increase -caregivers
access -caregivers resource control -caregivers
knowledge, adoption practice





Underlying Causes















Political legal Institutions Political
commitment, legal structures for implementing
food laws




Basic Causes
Resource control, ownership, use Resource use
pricing policies



Potential resources Poverty/natural resources
availability/ agricultural technology

3

Immediate Causes


Adult development

Nutrition Security
Labor productivity
















Dietary Intake Macro-nutrients Micro-nutrients



Health Status















Health environment services Access quality
of health, sanitation water




Access to food Household income/ expenditures
on food
Maternal child care practices Quality
quantity of care









4
Underlying Causes

• Policies that encourage
• -food production
• income generation
• transfer food in-kind

policies that improve -adequate sanitation -safe
water supply -health care availability -environmen
tal safety/ shelter
Policies programs that increase -caregivers
access -caregivers resource control -caregivers
knowledge, adoption practice

































5
Basic Causes



Political legal institutions Political
commitment, legal structures for implementing
food laws



















Resource control, ownership, use Resource use
pricing policies




















Potential resources Poverty/natural resources
availability/ agricultural technology








Sources Adapted from UNICEF (1998) Haddad
(1999) and Smith and Haddad (2000)
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Introduction to Poverty Analysis

• Why poverty analysis?
• Who wants poverty information?
• Role of policymakers policy analysts
• Poverty estimates for policy analysis
• Poverty estimates for policy evaluation
• Cost-effectiveness of poverty analysis

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What is Poverty?

• Poverty is welfare level below a reasonable
  minimum.
• Poverty has various dimensions
• Income poverty
• Security poverty
• Education poverty
• Health Nutrition Poverty
• Multiple deprivation
• Poor peoples perception of poverty level

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What do we mean by Poverty?

• The primary focus is on individuals or groups
  suffering from multiple deprivations

Education poor
Core Poor
Health Poor
Security Poor
Income Poor
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Poverty Lines and Poverty Measurement

• Two Issues in Generating Poverty Estimates
• Fixing a poverty line Identification
• Measuring poverty Aggregation

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Methods of Fixing Poverty Lines

• Cost-of-basic-needs method (Food-share method)
• Cost of basic food needs
• Cost of basic non-food needs
• Food-energy method
• Expenditure level that meets the food energy
  requirement
• Based on calorie-income relationships
• Fitting and tracing calorie-expenditure graph

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Cost-of-Basic-Needs Method

• Total Poverty Line Z
• ZZF ZN
• ZF Food Poverty Line
• ZNNon-food Poverty Line

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How to calculate the Food Poverty Line

• Calculate average household (HH) size
• Find minimum requirement of daily per-capita
  calories for WHO
• Find the typical food bundle of the relative poor
  HH
• Calculate the calories of this food bundle
• Determine the cost of this food bundle
• WHOs average minimum
• ZF calorie requirement
• calories in average food bundle for
• relatively poor HH

Cost of the average food bundle

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How to Calculate the Non-food Poverty Line

• Find typical Household (HH) on the food poverty
  line.
• Calculate the non-food expenditures of the HH.
• xF per capita expenditures on food
• XN per capita expenditure on non-food
• X total per capita expenditure
• ZN E XNxF ZF for the poor
• (Non-food poverty line is the per capita
  non-food expenditure level when the per capita
  food expenditure level is equal to the food
  poverty line)
• ZN E XNx ZF for the ultra (extreme)
  poor
• (The non-food poverty line is given by the
  per capita non-food expenditure when the total
  expenditure is equal to the food poverty line.
  The food poverty line in essence becomes the
  total poverty line for the ultra poor)
• Z ZF ZN

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Minimum daily caloric requirements by sector and
gender
Urban
Rural
Age categories
Male
Female
Male
Female
0 to 1 year
820
820
820
820
gt1 to 2 years
1,150
1,150
1,150
1,150
gt2 to 3 years
1,350
1,350
1,350
1,350
gt3 to 5 years
1,550
1,550
1,550
1,550
gt5 to 7 years
1,850
1,750
1,850
1,750
gt7 to 10 years
2,100
1,800
2,100
1,800
gt10 to 12 years
2,200
1,950
2,200
1,950
gt12 to 14 years
2,400
2,100
2,400
2,100
gt14 to 16 years
2,600
2,150
2,600
2,150
gt16 to 18 years
2,850
2,150
2,850
2,150
gt18 to 30 years
3,150
2,500
3,500
2,750
gt30 to 60 years
3,050
2,450
3,400
2,750
gt60 years
2,600
2,200
2,850
2,450
Source
Caloric requirements are from WHO (1985, Tables
42 to 49).
Notes
Requirements used are for men weighing 70
kilograms and for women weighing 60 kilograms.
Urban
individuals are assumed to need 1.8 times the
basal metabolic rate (BMR), while rural
individuals are assumed
to need 2.0 times the average BMR. Children under
one year of age are assigned the average caloric
need of
children either 36, 69, or 912 months old.
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Poverty lines and spatial price indexes by region
Food poverty line
Reference poverty line
Ultra poverty line
Relative price index
Region
Metropolitan
50.18
75.36
129
.19
1.000
101
.72
Lower urban
45.94
67.52
0.787
Lower rural
44.29
85
.38
0.661
64.71
Upper urban
101.36
45.19
0.785
67.51
82.81
Upper rural
40.36
53.37
0.641
Notes
Poverty lines are monthly, per capita figures in
Egyptian pounds. The Metropolitan poverty line
is used as a
base line to create the relative price index,
which is simply the ratio of each region's
reference poverty line to
the base line.
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Issues in the Poverty Line

• Does a poverty line exists?
• Can it be used is it well accepted?
• Are international standards for setting poverty
  lines accepted in all countries?
• Can we use the same poverty line throughout a
  country?
• Can the nutritional basket underlying the poverty
  line be derived from surveys?

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Measures of Poverty

• Incidence of Poverty poverty rate
• Use the headcount rate to calculate the poverty
  rate of the of population below the poverty
  line
• Depth of Poverty how far a person is below the
  poverty line
• Poverty Gap aggregation of depth of poverty
• Poverty Severity aggregation with weights

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Head-count Index of Poverty

• Proportion of population whose consumption (y) is
  less than the poverty line Z
• Y1, Y2,..Z, ..Yn
• 
  q
• H q/n
• H Head-count index
• q number of poor
• n size of the population
• Eg if n100 q50 then H0.5 or 50
• Problems
• Insensitive to the depth of poverty
• H will not change when a poor persons welfare
  changes if he/she remains below the poverty line

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Example of the Head-count Index Calculation

• Income of 4 individuals in a sample 1,2,3,4
• Poverty Line Z 3.0
• H q/n 3/4 0.75 or 75

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Head-count of Absolute Poverty for Bangladesh
Year Sector BBS Graph Fitting Method Ahmed et al. (1991) Ravallion Sen (1994) Rahman Haque (1988) Hossain Sen (1992) Sen Islam (1993) Muqtada (1986)
1973/ 1974 Rural Urban 82.9 81.4 (5.6) - - 65.3 62.5 71.3 n.a. n.a. 63.2 55.9 37.8
1981/ 1982 Rural Urban 73.8 66.0 71.8 65.3 - 79.1 50.7 65.3 n.a n.a. 48.4 -
1983/ 1984 Rural Urban 57.0 66.0 n.a. n.a. 53.8 40.9 49.8 39.5 50.0 n.a. n.a. 42.6 -
1985/ 1986 Rural Urban 51.0 56.0 51.6 66.8 45.9 30.8 47.1 29.1 41.3 n.a. n.a. 30.6 -
1988/ 1989 Rural Urban 48.0 44.0 - 49.7 35.9 - 43.8 n.a. n.a. 33.4 -
1991/ 1992 Rural Urban 50.0 46.8 - 52.9 33.6 - - - -
 
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Poverty Gap Index (PGI)

• Aggregate short-fall of the poor relative to the
  poverty line Z
• Y1, Y2,, Yq Yq ? Z
• Poorest Least poor
• q
• PG 1/n S (Z-Yi)/Z mean proportionate
• i1 poverty gap across the
• whole
  population (zero gap
• for the
  nonpoor)

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Example of Poverty Gap Calculation
Income of4 individuals in a sample
1,2,3,4 Poverty line Z 3 n4 PG (3-1)/3
(3-2)/3/4 (2/3)
(1/3)/4
(3/3)/4 ¼ or
0.25 Poverty gap index does not capture
differences in severity of poverty.
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Why?

• Region A (1,2,3,4)
• Region B (2,2,2,4)
• Poverty line Z 3
• HA 0.75 HB 0.75
• PGA 0.25 PGB 0.25
• Poverty gap will be unaffected by an income
  transfer from a poor person to another poor
  person who remains below the poverty line

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Squared Poverty Gap Index (SPG)

• Mean of the squared proportionate poverty gap
• Reflects severity of poverty
• Sensitive to the distribution among the poor
• q
• SPG 1/n S (Z-Yi)/Z2
• i1
• Eg Region A (1,2,3,4) Region B (2,2,2,4)
  with Z3
• SPGA 0.14 SPGB
  0.08
• Poverty in region A gt Poverty in region B

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Poverty AnalysisIncome/Consumption Poverty
Profile

• Correlates poverty with
• Gender
• Age
• Residential location
• Ethnic characteristics
• Income source
• Employment sources
• Share of food/ non food consumption
• Education outcomes
• Malnutrition outcomes

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Qualitative Analysis of Poverty

• Role of informal sector?
• Social analysis of poverty?
• Institutional analysis of poverty reducing
  institutions
• Intra-household distribution of resources

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Use of Qualitative Methods

• Subjective meaning of poverty
• Intra-household dimensions of poverty
• Poor peoples priorities for action
• Social, political, and cultural factors, gender
  roles, and traditional beliefs
• Participants help in designing household surveys
• Assess the validity of HHS results at local level

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Income or Consumption?

• Consumption reflects income as well as past
  savings, access to credit markets, and seasonal
  variation in income
• No records of income or seasonal fluctuations
• Large informal sectors
• Consumption data helps in deriving the poverty
  line

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Measuring Income/ Consumption Poverty

• Household data availability tools
• Measurement of income poverty
• Quantitative analysis tools
• Qualitative analysis tools
• Income poverty dynamics tools

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Data Needs for Poverty Analysis

• National level data
• National accounts GDP, consumption, savings,
  investment, imports, exports, etc.
• Ministry of Finance, Central Statistical Agency
• Budgets, price surveys, and data collection
• Monthly, quarterly, and yearly

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Data Needs for Poverty Analysis cont.

• Local level data
• Consumer and producer prices, climatic data,
  availability and use of markets and services
• CSA, local service providers, regional
  departments
• Price and market surveys
• Monthly, yearly

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Data Needs for Poverty Analysis cont.

• Household Individual level data
• Household income, consumption, employment,
  assets, production, demography, etc.
• CSA, sectoral ministries, NGOs, academics
• Household survey, rapid assessments, monitoring
  and evaluation
• Yearly, 2-3 years, every 5 years

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Data Sources for Poverty Analysis

• Administrative data
• Population Census
• Household surveys LSMS, IE, Labor, DHS, RRA
• Qualitative and Participatory Assessments
  ethnographic, village studies, beneficiary
  assessments, etc.

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Types of Household Surveys

• Single-topic surveys
• Multi-topic surveys
• Census data
• Poverty monitoring surveys
• Times series data
• Panel data sets