Differences Between Monetary and Multidimensional Poverty in the Lao PDR: Implications for Targeting of Poverty Reduction Policies and Interventions

This study compares monetary and multidimensional poverty measures for the Lao People's Democratic Republic. Using household data of 2007/2008, we compare the empirical outcomes of the country's current official monetary poverty measure with those of a multidimensional poverty measure. We analyze which population subgroups are identified as poor by both measures and thus belong to the category of the poorest of the poor; and we look at which subgroups are identified as poor by only one of the measures and belong either to the category of the income‐poor (identified as poor only by the monetary measure) or to that of the overlooked poor (identified as poor only by the multidimensional poverty measure). Furthermore, we examined drivers of these differences using a multinomial regression model and found that monetary poverty does not capture the multiple deprivations of ethnic minorities, who are only identified as poor when using a multidimensional poverty measure. We conclude that complementing the monetary poverty measure with a multidimensional poverty index would enable more effective targeting of poverty reduction efforts.