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A Quick-Fix for Perverse Incentives Inherent in Mainstream Multidimensional Poverty Measures

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  • Benoit Marie A Decerf

Abstract

Most multidimensional poverty measures used in practice, including the global Multidimensional Poverty Index, are based on the adjusted headcount ratio. This paper shows that this poverty index provides perverse incentives. Policies that minimize this index prioritize targeting the least intensely poor individuals, rather than the most intensely poor individuals. This paper proposes a quick-fix solution that tweaks the adjusted headcount ratio without affecting the identification of the poor. The resulting index satisfies the same properties as the adjusted headcount ratio, except for Dimensional Breakdown. The paper argues that this is not a sufficient reason to discard this index, by providing two examples illustrating key limitations of the decomposition across dimensions permitted by Dimensional Breakdown. This decomposition does not provide the necessary information to find optimal policies. More importantly, this decomposition may mislead policy makers on the underlying sources of progress.

Suggested Citation

  • Benoit Marie A Decerf, 2025. "A Quick-Fix for Perverse Incentives Inherent in Mainstream Multidimensional Poverty Measures," Policy Research Working Paper Series 11113, The World Bank.
    • Handle: RePEc:wbk:wbrwps:11113
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    References listed on IDEAS

    as
    1. Gaurav Datt, 2019. "Distribution-Sensitive Multidimensional Poverty Measures," The World Bank Economic Review, World Bank, vol. 33(3), pages 551-572.
    2. Koen Decancq & Marc Fleurbaey & François Maniquet, 2019. "Multidimensional poverty measurement with individual preferences," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 17(1), pages 29-49, March.
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