Diverging Identification of the Poor: A non-random process. Chile 1992–2017

This paper explores and compares how two different approaches identify the poor. We investigated the degree of association in the identification of the poor between the utilitarian approach, implemented through the standard monetary FGT measure, and the capability approach, implemented through the Alkire-Foster method. The correlation between socioeconomic characteristics and demographics with a measure of the association in the identification of the poor is investigated at the province level by using a panel fixed-effects model. In addition, using different cross-sections of the data, we study the issue at the household level by means of a logit model. In both cases, household non-eligibility across some of the indicators of the multidimensional poverty index is a relevant empirical issue that needs to be considered. In Chile, we find that in the past 25 years, the level of association between the two poverty measures has declined at a rate of 1.5% per year, being robust in alternative measures of association in the identification of the poor. The decline is unimportant during the 1990s, a decade of rapid economic growth, while it is notable thereafter, in a period characterized by modest economic growth and the progressive introduction and deepening of social policies. We find that a rural location of residence and demographic changes can explain the reduction. Income-poor households are more likely to be multidimensionally poor if their stock of education is lower, if their size is larger, and if they are located in rural areas. Consequently, the poverty overlap decline is a real process, in which the inconsistent of the poor is not randomly distributed across the population. On the basis of our results, we hypothesize that the reduction in the overlap between these two poverty measures is a general phenomenon that tends to occur in countries undergoing demographic transition, urbanization, and progress in education. If so, and given the fact that poverty alleviation strategies are adopted partly on the basis of poverty statistics, in the developing world, the diverging identification of the poor might have distributive consequences for the poor themselves.