dfid: statistics training day london, november 11, 2013 jonathan haughton jhaughton@suffolk.edu...
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DFID: STATISTICS TRAINING DAYLONDON, NOVEMBER 11, 2013
J O N A T H A N H A U G H T O NJ H A U G H T O N @ S U F F O L K . E D U
H T T P : / / W E B . C A S . S U F F O L K . E D U / FA C U LT Y / J H A U G H T O N/
Measuring Poverty
1. Measuring poverty
2. Multidimensional poverty
3. Poverty Dynamics
4. Inference
5. International Poverty Comparisons
6. Vulnerability to Poverty
7. Tackling Poverty
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Outline
1. What?2. Why?3. Monetary measures:
a) What measure of welfare?b) What poverty line?c) How summarize the data?
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What is poverty?
“a pronounced deprivation in well-being” Conventional view: not enough money Sen: Lack of capabilities to function in society.
Treated in part 2
Distinct from, but related to Vulnerability (“ex ante poverty”) Inequality
A kissing cousin, if relative poverty line used
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Why measure poverty?
… given that it is expensive to measure
1. Keep the poor on the agenda2. Target interventions (domestic, international)3. Monitor and Evaluate projects, policies4. Evaluate institutions
World Bank: “Our dream is a world free of poverty”
N.B. Role of Poverty Reduction Strategy Papers
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Aside: Surveys
Poverty measures are based on survey data Ask:
Is sample frame representative? Sample size? Stratified?
If yes, use weights for summary statistics Clustering?
If yes, adjust when measuring standard errors Cross-section, or also panel? What indicator(s) collected? How? (e.g. diary?) Good data cleaning? Quality control?
LSMS have set a high standard EU-SILC: Income and living standards; “social cohesion”
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What welfare indicator?
“Utility”, as proxied by (typically) Income per capita, or Consumption per capita
Candidate 1: Income Income ≡ Consumption + Δ net worth
Net worth is hard to measure (e.g. livestock)What time period? Year? Lifetime?Income often seriously understated
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Expenditure?
Candidate 2: Expenditure Include own-production and purchases More stable than income; better tracks “lifetime
income”
Problems• Many items• Under-reporting,
especially luxuries• Sensitive to
questions– e.g Vietnam tobacco
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Table 10.1. Income vs. Consumption as a Measure of Welfare
Income (“potential”) Pro: Con: Measures household “command over resources” Can be measured with fewer questions than consumption, so cheaper to collect
Likely to be underreported. Subject to short-term, including seasonal, fluctuations. Some components hard to observe (e.g. informal sector income, home production, self-employment income) Tenuous link between income and welfare Reporting period might not capture the long-term average income of the household
Consumption (“achievement) Pro: Con: Shows current actual material standard of living Smoothed, so reflects long-term wellbeing Less understated than income
Households may have difficulty smoothing consumption Consumption choices may mislead (e.g. if a rich household chooses to live simply) Some expenses are irregular, so data may be noisy Some components are hard to measure (e.g. durable goods, housing services)
Source: Adapted from Albert (2004).
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Technical considerations
Durables Mainly depreciation + interest costs; need value
Housing Ask hypothetical about rentals?
Weddings and funerals
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Adult equivalents
Commonly: expenditure per capitaBut: individual needs differ; economies of
scale in consumption OECD scale: AE = 1 + 0.7 (Nad – 1) + 0.5 Nch Elegant: AE = (Nad + α Nch)^θ
e.g. α = 0.7; θ = 0.8. Deaton and Zaidi (1998)
“There are so far no satisfactory methods for estimating economics of scale” [in consumption]
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Other measures
Calories per dayFood share of consumptionNutritional outcomesPeer or observer assessmentsSelf-assessment
E.g. Social Weather Stations, the Philippines
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Poverty Lines
Relative: “the poor are always with us” Line giving poorest 20% (quintile) EU: 60% of national median equivalised disposable
income (OECD scale): “at risk of poverty”Absolute: for comparisons over time, states
World Bank “dollar a day” Cost-of-basic-needs poverty lines
Food poverty line (i.e. cost of enough food, only) US: Mollie Orshansky. 3 times cost of adequate food.
Updated over time to reflect price changes. Cash only.
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Cost of Basic Needs Method
Widely used, but with variations Pick a nutritional requirement for good health
e.g. 2,100 kcals per person per day Estimate the cost of buying enough food for this
e.g. Cost of diet of someone consuming 2,100±100 kcals/cap/day
Add a non-food component e.g. Non-food spending of someone consuming
2,100±100 kcals/cap/day
Update over time by revising prices
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Measures of Poverty
Headcount Index: P₀ = Np/N Popular, easy to understand Does not pick up depth of poverty
Assumes equal sharing within household
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Poverty Gap Index
Poverty Gap Index
Does not reflect inequality among the poor EU: “Relative median at-risk-of-poverty gap”
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FGT
Foster-Greer-Thorbecke
Poverty gap squared: α=2Choice makes a modest difference
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Individual y_a y_b y_c
1 115 110 120
2 115 114 121
3 118 120 122
4 118 124 123
5 127 125 123
6 127 127 125
7 138 138 135
8 142 147 140
9 178 178 171
10 217 212 215
Problem to try: Which country is poorest? z=126
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Other measures
Sen-Shorrocks-Thon
Watts
Time Taken to Exit
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