Efficiency Analysis and the Lower Convex Hull Approach

At least nominally, if not in fact, poverty reduction has been the espoused policy target of nations and global institutions in recent years, putting demands upon ‘Chiffrefilic’ economists to quantify it and measure its progress. Like many things in life, it is hard to define, but you know it when you see it and typically, the more instruments available to describe it, the better it is described! Indeed Sen’s arguments (see Sen, 1995) — that welfare and inequality, when measured in terms of functionings and capabilities, is intrinsically a many dimensioned thing — are equally pertinent for poverty measurement. When confined to the single variable paradigm the measurement and testing of poverty states has prompted many questions: ‘What variable should be employed (income or consumption)?’, ‘What should the poverty cut-off point be?’, ‘How should the variable be transformed (incidence, depth or intensity formulations)?’, ‘Should we use permanent or transitory concepts?’. These issues are both diminished and compounded in magnitude when we move to a multidimensional paradigm: to some extent, variable choice becomes less of a problem (if in doubt include as much as possible), but how the combination of the factors in defining what would be a poverty boundary and the extent of poverty it delimits presents a whole new set of questions.