The Discrepancy Between Two Approaches to Global Poverty: What Does it Reveal?

For decades, international communities have developed poverty measures to inform needs assessment and aid allocation. Building on these efforts, this paper examines the discrepancies between global poverty measures and brings that analysis to bear on identifying the salient dimensions of poverty. First, a comparison is made between the monetary and capability approaches to poverty and identifies comparable indices: the poverty headcount ratio (P0) and the multidimensional poverty headcount ratio (H), respectively. The paper then describes the degree of discrepancy between P0 and H for 102 developing countries from 2010 to 2019, synthesizing data from the Multidimensional Poverty Index, the World Development Indicators, and OECD aid activity. Next, the position of countries are analyzed with respect to the fitted line of the two measures, classifying countries into either income-poor or capability-poor categories. Findings suggest that countries such as Pakistan and Ethiopia, for example, experience capability poverty while Malawi and Mozambique experience income poverty. Finally, I examine whether sector aid composition corresponds to a country’s relative income and poverty status, finding that capability-poor countries receive marginally higher social sectoral aid compared to economic sector aid. This study suggests that the discrepancies between measures of international poverty can be used to target, monitor, and evaluate global aid distribution.