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A quality-index of poverty measures

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  • Daniel Gottlieb

    ()
    (National Insurance Institute and Hebrew University)

  • Alexander Fruman

    (National Insurance Institute and Hebrew University)

Abstract

The multitude of available poverty measures can confuse a policy maker who wants to evaluate a poverty-reduction policy. We proposes a rule for ranking poverty measures by use of the food-gap, calculated as the cost-difference between a household’s normative food basket, derived from a healthy diet, and the actually chosen food basket. The rationale for this indicator is based on the fact, that (1) basic food needs reflect an ultimate necessity, (2) food expenditure is highly divisibility, thus allowing for efficient marginal substitution between competing necessities when the household’s economic hardship increases. For these reasons we believe this to be an objective indicator for the sacrifice in the standard of living of a family under economic stress. A household is identified as ‘truly’ poor or non-poor by a given poverty measure if the diagnoses coincide and vice versa. The ranking is obtained by a gain-function, which adds up congruent and deducts contradicting outcomes for each poverty measure. We calculate four types of gain-functions –of headcounts, food-gaps, FGT-like powered food-gaps and an augmented version of the latter. The poverty measures include expenditure-based, income-based, relative, absolute, mixed measures and a multidimensional measure of social deprivation. The most qualitative measure is found to be Ravallion’s Food Energy Intake and Share measure, though it suffers from a possible bias, since it includes the food-norm in its design. The 60%-median income measure from all sources ranks highest among the unbiased measures. The absolute poverty measure yields the worst performance.

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Bibliographic Info

Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 239.

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Length: 29 pages
Date of creation: 2011
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Handle: RePEc:inq:inqwps:ecineq2011-239

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Keywords: poverty measures; food poverty; evaluation of poverty reduction policies;

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  1. Jones, Andrew & O'Donnell, Owen, 1995. "Equivalence scales and the costs of disability," Journal of Public Economics, Elsevier, Elsevier, vol. 56(2), pages 273-289, February.
  2. Asghar Zaidi & Tania Burchardt, 2005. "Comparing Incomes When Needs Differ: Equivalization For The Extra Costs Of Disability In The U.K," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(1), pages 89-114, 03.
  3. Yitzhaki, Shlomo, 2002. "Do we need a separate poverty measurement?," European Journal of Political Economy, Elsevier, vol. 18(1), pages 61-85, March.
  4. Sanjay G. Reddy & Sujata Visaria & Muhammad Asali, 2006. "Inter-country Comparisons of Poverty Based on a Capability Approach: An Empirical Exercise," Working Papers 27, International Policy Centre for Inclusive Growth.
  5. Gottlieb, Daniel & Manor, Roy, 2005. "On the Choice of a Policy-oriented Poverty Measure: The Case of Israel 1997-2002," MPRA Paper 3842, University Library of Munich, Germany.
  6. Martin Ravallion & Michael Lokshin, 2006. "Testing Poverty Lines," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(3), pages 399-421, 09.
  7. Alkire, Sabina & Foster, James, 2011. "Counting and multidimensional poverty measurement," Journal of Public Economics, Elsevier, Elsevier, vol. 95(7), pages 476-487.
  8. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198292975, October.
  9. Richard ANKER, 2006. "Poverty lines around the world: A new methodology and internationally comparable estimates," International Labour Review, International Labour Organization, International Labour Organization, vol. 145(4), pages 279-307, December.
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