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Approaches to the trade and poverty debate, concepts and definitions

3.2 Poverty The debate about the concept of poverty and the identification of the poor is at least as complex and long-lasting as the discussion about the optimal indicator of openness. The term poverty is used with quite some ambiguity, and many different subjective and objective indicators of well-being have been proposed to identify the poor. There is a general agreement on the fact that poverty implies deprivation, but it is less clear what exactly the poor are deprived of, by how much, and for how long deprivation has to be present in order to be considered as poverty. The conceptual problem of identification is carried over to the problem of measurement. Once one has decided on an indicator for poverty at the level of the individual, the household or a group, a poverty line has to be set as a threshold to separate the poor from the nonpoor, and an aggregation procedure has to be applied to obtain a poverty measure at the national or regional level. These last two steps in poverty analysis are also controversial. Thresholds, for example, can be either absolute (such as a certain amount of income) or relative (e.g. a certain percentage of average income). 3.2.1 Historical perspective on the concept of poverty While earlier studies of poverty mainly focused on monetary concepts of poverty, such as private consumption or income as conceptual approaches to poverty, the last decades have shown a shift towards multidimensional concepts of poverty, with income being just one aspect out of several. The key criticism was that monetary aspects of income or expenditure alone would miss out important aspects of poverty and deprivation. In the following pages, we will examine the development of the concept of poverty throughout history and try to filter out the key lines of thought, very often presented as antitheses. It is important to note that adopting a historical perspective does not imply that earlier concepts have become obsolete, or that newer approaches are necessarily better than previous ones. On the contrary, you will see that previous approaches have contributed to a large extent to new developments in the field, and that in terms of measurement there has not been much progress since the 1960s. 3.2.1.1 From the early 20th century on The traditional approach to poverty was related to the idea of subsistence, prompted by British researchers in the early 20th century. Families were defined to be poor when their incomes were not sufficient to obtain the minimum necessaries
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for the maintenance of mere physical efficiency. Although clothing and shelter were taken into consideration when calculating the poverty line, food still accounted for the main share of subsistence. The income perspective has been the prevalent concept for a long period of time, and many countries still use poverty lines based on income to measure poverty. International poverty lines, such as the $1-a-day poverty line, also refer to a minimum income to satisfy subsistence needs. Income as an indicator has been criticized for several reasons:

Incomes may vary considerably within a year

because of seasonal fluctuations, particularly in agricultural areas, and also between years. As a result, people try to save in good times and draw on savings in bad times. The current income flow is not a good indicator of the average consumption possibilities of a household over time, since households tend to smooth consumption. Household or per capita consumption is hence traditionally viewed as the preferred indicator. Mechanisms for consumption smoothing such as savings and credits are likely to be less easily available in developing countries and in particular to the poor in developing countries. However, the poor may have access to social networks which may help through bad times, and they may be able to engage in barter transactions in order to smooth consumption. In practice, data availability and the nature of the research question will often be the decisive factors in choosing between income and consumption as indicator. Data on income earned through self-employment in the farm or non-farm sector are often not available. This represents an important challenge to poverty analysis, especially in developing and least developed countries, where wage earners form only a small proportion of the population. Although questions on different sources of income and types of work have been included in household surveys, for example questions on the amount of time spent on family help in a farm household, this type of information is difficult to recall, and it is not straightforward to attach a value to the amount of work. Again, information on consumption is considered to be more reliable than information on income sources. From a conceptual point of view, income flows have been criticized because they do not cover other sources of material welfare, such as governmental subsidies and transfers, publicly provided goods, and assets. Assets, such as land, can be both private and common property, which leads us to another level of complexity:

Approaches to the trade and poverty debate, concepts and definitions

Should poverty be examined at the level of the individual, or rather at the household or village level? Finally, many authors claim that income and consumption, and the concept of subsistence show just one of the many dimensions of poverty, namely the material one, and neglect social, cultural, and political aspects. 3.2.1.2 The 1970s Basic needs and relative deprivation While the focus in the 1960s was predominantly on the level of income, and consequently macroeconomic indicators such as GDP per capita constituted the main welfare indicators, the following decade showed two important shifts. The first shift, promoted in particular by the research work of the International Labour Organization (ILO), was to broaden the concept of income-poverty to a wider set of basic needs. Thus, poverty should not only be defined as the lack of income to provide for food, shelter, clothing, household furniture and equipment, but also as the lack of access to services by and for the community at large, such as health, education, safe water, sanitation, public transport and cultural facilities. In rural areas, basic needs also include land as an essential asset, as well as tools and access to farming. The basic needs concept of poverty is an extension to the subsistence concept. In addition to material needs, social and cultural facilities have to be provided to communities to satisfy their basic needs. The main problem of the basic needs approach is its subjectivity. The adequate level of social and cultural facilities to be provided is not necessarily the same in all countries and regions, and it is thus relatively difficult to define what exactly adequate implies. The idea of relative deprivation in contrast to absolute deprivation was the second innovation in poverty research in the 1970s. Individuals, families and groups in the population can be said to be in poverty when they lack the resources to obtain the type of diet, participate in the activities and have the living conditions and amenities which are customary, or are at least widely encouraged or approved, in the societies to which they belong. Their resources are so seriously below those commanded by the average individual or family that they are, in effect, excluded from ordinary living patterns, customs and activities. (Townsend, 1979) Townsends idea of relative deprivation embodies a relative concept of poverty. Instead of defining poverty as the failure to meet absolute minimum nutritional or basic needs levels, it can be seen as a failure to keep up with the prevailing standards in

a given society, such as owning a car, a television, having a certain level of education, etc., i.e. items which are identified as necessities by the majority of the population as well as possessed by the majority of the population. The standards not only depend on the characteristics of a society but may also change over time. The poverty lines in many member countries of the Organisation for Economic Co-operation and Development (OECD) are an example of the use of a relative concept of poverty. These thresholds establish that a person is poor if his/her income is less than 50 per cent of the median income in the country. In this way, the entire income distribution can shift upwards without changing the poverty measure. The absolute number of poor people can even increase while the absolute value of income is rising. Another way to introduce relativity into the concept of poverty is to take account of the existing inequalities within the group of the poor, not only between poor and non-poor. We will discuss this concept of poverty, which emphasizes the depth and the intensity of poverty in contrast to the mere incidence of poverty, in the section on poverty measures. 3.2.1.3 The 1980s Participation, vulnerability, capabilities and within-household differences The decade of the 1980s brought up a whole range of new poverty concepts, adding more layers of complexity. One innovation was to focus even more on non-monetary aspects, drawing particularly on the work of Robert Chambers on isolation and powerlessness. The poor are often isolated from services, markets, government institutions and information. This isolation is in the first place physical isolation (lack of infrastructure, affordable transport, communication technologies). It can also be political isolation, where the poor are not able to take part in political decision-making processes or are discriminated when dealing with local or national authorities. The broadening of the concept was reflected in the development of a different method of qualitative poverty measurement, the so-called participatory poverty assessments (PPAs).2 Instead of defining a concept of poverty a priori, PPAs aim to use specific interviewing techniques to let the poor themselves define what poverty means and what types of deprivation it implies. This method was used by the World Bank in the study Voices of the poor included in the World Development Report 2000.

2 Other participatory poverty research methods had been developed and implemented earlier, such as the participatory action research, the participatory rural appraisal, the participatory learning and action (Chambers, 1995).

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Approaches to the trade and poverty debate, concepts and definitions

Participatory approaches also highlighted the role of vulnerability and its counterpart security for understanding the impact of shocks on the poor. Shocks can be natural (drought, flood), healthrelated (illness, disability), social (violence, war), economic (unemployment, changes in prices, terms of trade, inflation, etc.), political (riots, coup dtat), or of environmental nature (pollution, desertification, deforestation). At all these levels, one has to distinguish between idiosyncratic risks which affect only one individual or household (for instance, the household head falling ill), and covariant risks which affect whole villages, communities or even countries and regions (such as war or drought). Although strategies of risk reduction (e.g. diversification of income sources) and insurance are preferable, poor households mostly face constraints regarding their participation in formal insurance systems and will often have to cope with a shock when it occurs. The analysis of vulnerability refers to the role of assets as buffers in the case of a shock. Assets include human (e.g. education), physical (e.g. land, livestock, access to infrastructure, housing, irrigation etc.) and financial assets (access to credit), but also social assets and relations, such as networks of contacts in the family or wider groups. Social networks are of particular importance in the case of idiosyncratic risks, when other members of the network are most likely not affected by the same shock. These notions of powerlessness, vulnerability and the role of assets have been taken up in the more recent World Bank definition of poverty (World Development Report 2000). While a large number of methods can be used in a flexible way to let the poor themselves define what poverty means, this approach also presents drawbacks. Samples are rarely representative, because
Figure 9

particular groups such as the poorest, women, elderly, disabled may be underrepresented. Besides, studies implemented in a specific region and in cooperation with members of particular tribes are not necessarily representative of the country as a whole. Another potential problem of qualitative survey instruments is the interviewer bias which arises if the interviewer or organizer preconditions the answers and results to a certain extent through the choice of questions and methods. Influential theoretical work was proposed in the 1980s by Nobel Laureate Amartya Sen, who describes poverty in terms of entitlements, capabilities and functionings. People use their capabilities to convert their entitlements, i.e. commodities over which they have control, into functionings which they value and which represent the various things people can do or be in their lives. Sen emphasized that income was only valuable if it increased the capabilities of individuals. Sens framework explains why people may not achieve certain functionings, such as being able to take part in the life of the community due to an entitlement failure (loss of an entitlement or a capability failure). This terminology may sound a bit complicated, but Figure 9 provides an example which may help clarify Sens framework. You see the three elements entitlements, capabilities and functionings. The missing arrows show respectively which failure is taking place. In the situation visualized in the figure, people are entitled to food and information, but health care is not available. This means that, although people may be in principle able to access health, health care is not available (entitlement failure). Moreover, people may have access to information, but if they cannot read (capability failure) they will not be able to transform the entitlement information into participation in decision-making, as it requires the use of written information.

Sens concept of poverty an example

Commodities Capabilities Ability to eat Ability to care Literacy Functionings Being well nourished Avoiding disease Participation in decision-making

Entlitlements Food Information

Not entlitled Health care

Source: Based on McCulloch et al. (2001, p. 39)

Although Sens concept is interesting from a theoretical point of view, it is difficult to put his framework into practice. As you can see, it is not easy to define which functionings are the most
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important ones, to measure capabilities as a relative and to explain how exactly entitlements are translated into functionings. Martha Nussbaum built on Sens work, but in contrast to him she

Approaches to the trade and poverty debate, concepts and definitions

attempted to provide a list of ten Central Human Capabilities,3 which are absolutely necessary to ensure a life in dignity (Nussbaum, 2003). Finally, the decade was characterized by an increasing interest in within-household differences: Does poverty affect men and women, adults and children, household heads and other household members in the same way? Most probably it does not. Research focused in particular on gender aspects of poverty and development, and on the type of policy that could help strengthen the position of women. 3.2.1.4 The 1990s Human development and social exclusion The concept of poverty was further developed in the 1990s. Inspired in particular by Sens entitlement theory, UNDP developed the idea of human development. If human development is about enlarging choices, poverty means that opportunities and choices most basic to human development are denied to lead a long, healthy, creative life and to enjoy a decent standard of living, freedom, dignity, self-respect and the respect of others [] (UNDP, 1997)

This approach highlights that poverty is a multi-dimensional concept. Various forms of deprivations have to be taken into account (income, health, education, participation, human rights, etc.) and the weight of a deprivation or disadvantage depends to a large extent on peoples subjective perceptions. Despite the recognition of the multidimensionality of poverty, the human poverty index proposed by UNDP is limited to measurable indicators. Aspects such as lack of political freedom, inability to participate in decision-making and community life, lack of personal security etc. are not included. The three indicators chosen are (a) vulnerability to death at an early age (under 40 years); (b) illiteracy; and (c) economic provisioning (percentage of people with access to safe water, health services, and the percentage of malnourished children under five). The two main drawbacks of indices are that the choice of variables remains somewhat arbitrary, and that information can get lost in the process of weighting and aggregating the individual indicators to one single measure. 3.2.2 Why is the concept of poverty so complex? The historical review of the concept of poverty has introduced you to several aspect of poverty and has shown that poverty is a highly complex issue. Table 6 summarizes the major lines of thought and questions raised in the debate.

3 The 10 capabilities

specified are: life; bodily health; bodily integrity; senses, imagination and thought; emotions; practical reason; affiliation; concern for other species; play; and control over ones political and material environment.

Table 6

The concept of poverty

Monetary indicators such as income and consumption are often used because they are either regarded as a sufficient measure on their own or as strongly correlated with other measures of poverty, such as literacy, which are more difficult to quantify. Nonetheless, monetary indicators are not always easy to quantify, especially if the informal sector and household production play an important role in the economy. We have also seen that other dimensions of poverty, such as dignity, self-esteem or participation, are not necessarily reflected in income. At the same time, definitions emphasizing these types of higher needs often place them at the same level as fundamental needs, i.e. food, shelter, housing and safe water. The priority in countries with high levels of poverty would be in most cases to satisfy the basic needs, although non-monetary needs, such as autonomy, are certainly also important. Objective indicators are usually quantitative such as income and consumption, calorie intake, medical data and are defined externally by researchers or policy-makers analyzing poverty, not by the poor themselves. Subjective indicators have a qualitative element, such as indicators derived from participatory poverty assessments (security, dignity, etc.). Subjective indicators are always dependent on the specific context (e.g. what does adequate mean, how important is deprivation from participation in this group) and are therefore specific and not universal (see below). The analysis of poverty in terms of income focuses on a flow of goods and services. We have seen, though, that stock measures, such as physical/monetary, social and human capital assets can play a very important role in explaining poverty, in particular the response to shocks. According to Sen, income captures the input to an individuals or a groups capabilities and functionings, and does not represent a direct measure of well-being. For example, money invested into education may increase the capability to participate in decision-making processes in the community, which would be an output or impact indicator. The link between the input income and the output is however not automatic. As discussed above, poverty concepts can either be absolute or relative. A measure is absolute if, for example, an absolute amount of income or minimum calories is set as a threshold below which an individual is considered as poor. Relative measures take account of the local context, and can therefore differ depending on the region, country or population group. Poverty can also be examined in relation to a mean or median measure of the whole population and reflect at

Monetary or non-monetary indicators

Objective or subjective indicators

Stock or flow measures

Input or output/impact indicator

Absolute/universal or relative measures

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Approaches to the trade and poverty debate, concepts and definitions

Table 6

The concept of poverty

the same time the level of inequality in the society. The European poverty line is an example of this approach. Universal measures, such as the $1-a-day poverty line (in 1985 PPP), are meant to enable comparisons between different countries and regions. Conditions can differ widely, however, for that reason national poverty concepts are always used in addition to this global concept of poverty. Poverty has been traditionally measured at the household level, since decisions on production, savings and expenditures are often taken at the level of the household, not of the individual. So-called equivalence scales have been used to adjust for the size and the composition of the household. They measure the change in income needed to bring households of different size and composition to the same level of welfare. Size is important, since there are economies of scale in larger households (e.g. the average cost per person of rent, food, electricity declines with an increasing number of household members). Composition matters because children are generally considered to be less costly than adults, and women less costly than men. The delicate part is to define how the equivalence scale should be set or estimated (e.g. does a 12year-old girl correspond to 0.5 adult men?), and there is an entire body of research on the topic of equivalence scales. At the following link, you can find a paper that discusses the two best known methods for estimation of equivalence scales, applying the concept to the Philippines: http://www3.pids.gov. ph/ris/pjd/pidsjpd92-1poor. The question of within-household differences and bargaining within households has stimulated a trend towards disaggregated analysis in order to capture differences in the types and causes of deprivation affecting men, women, elderly, children, etc. In addition, poverty analysis at the level of social groups examines the role of networks integrating members from several households. Many surveys or poverty analyses report on the incidence or extent of poverty at a specific point in time and capture the poor who at that time fall below a specified threshold or poverty line. In particular, in the case of subjective poverty assessments, the perception of poverty will change if the poor change. However, there is also a long history of thinking about poverty in terms of a life cycle experience and of analyzing the dynamics of poverty over time. In this case, transient poverty temporary poverty after a shock such as a drought or war has to be distinguished from chronic poverty, where people experience poverty for extended periods of time or throughout their lives. Chronic poverty is a problem in most LDCs, where the majority of the population falls below the poverty line. At the same time, there has been increasing attention to those living close to the poverty threshold and moving in and out of poverty as a consequence of shocks, both in developing and developed countries. In this context, researchers also speak of actual versus potential poverty. Actual poverty captures those who are identified as poor at a specific point in time. Potential poverty also includes those who are vulnerable to shocks because they are exposed to many risks and do not have a good coping strategy, even if the current income classifies them as non-poor. Panel surveys, which trace the lives of a specific group of people over time, have been used for this type of analysis.

Unit of measurement individual, household, group

Snapshot or dynamic analysis, and actual or potential poverty

3.2.3 Definition of an absolute poverty line Once we have chosen an indicator of poverty, we have to define a threshold which identifies part of the population as poor. Since the indicator has to provide a quantifiable measure and has to be computable under the common constraints of data availability, income and expenditure are still the most widely used poverty indicators to construct poverty lines, despite the importance of subjective and non-monetary concepts of poverty. As mentioned before, the indicator can either be relative or absolute. In practice, most countries, especially in the developing world, choose absolute indicators to define poverty and deprivation. Another debatable issue is that all poverty lines, whether absolute or relative, imply that there is a discontinuity, a turning point in the relationship between income or expenditure and welfare. Is
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this a reasonable assumption? Do people who are just above the poverty line have a very different living standard from those just below the poverty line? One could argue that there is a discontinuity, but at very low levels of income or expenditure, where people manage to obtain just enough for the minimum necessary diet. One way to account for the impacts below the poverty line and the vulnerability of those just above the threshold is to use multiple poverty lines. The same is valid for the analysis of countries experiencing extreme poverty compared to countries with slightly higher per capita income levels, which nevertheless have part of the population living at very low levels of income and consumption. You can for example find in many publications (such as the UNCTAD LDC Report 2002) an indication of the $2-a-day poverty line in addition to the $1-a-day line.

Approaches to the trade and poverty debate, concepts and definitions

Defining a poverty line involves setting income or expenditure levels that provide a minimum standard of living (usually defined in terms of food and non-food consumption). The three main methods for constructing poverty lines are the following:
(a) The food energy intake method

(c) International poverty lines

This method is based on the relationship between food energy (calorie intake) and income/ expenditure. The assumption is that food energy intake rises with increasing income but at a lower pace (see Figure 10). Given a level of required food energy intake, one can use the function to determine the poverty-line level of expenditure, taking into account both the value of purchased goods and the imputed value of consumption from household production.

The two methods above are country-specific, based on country-level prices and preferences. To compare poverty internationally, international poverty lines of $1-a-day and $2-a-day (in 1985 dollars adjusted to local currency using purchasing power parities) have been introduced. International poverty lines are not meaningful for country-level or within-country studies. The use of PPP exchange rates enables comparisons between countries. Statistical problems arise when PPP rates are adjusted over time and differ considerably from the ones that provided the basis for the original specification of the international poverty lines. For example, the PPP exchange rates in the Penn World Table differ considerably from the rates used by recent World Bank poverty estimates (World Development Indicators).

Figure 10

3.2.4 Aggregate poverty measures

Food energy function

Once you have defined the indicator and the poverty line and are able to identify the poor at individual or household levels, you have to decide how to aggregate the individual units in order to obtain a meaningful measure of poverty at the regional or national level. There are several ways of measuring poverty; we will focus on one class of measures which is very widely used, namely the Foster-Greer-Thorbecke class. This class of poverty measures has the advantage of capturing not only the incidence of poverty (how many poor are there), but also its intensity (how poor are the poor) and the level of inequality within the group of the poor. The general formula for the class, with which all three aspects of poverty can be expressed, is:

Food energy intake

Poverty line

Expenditure

A general poverty line covering food and nonfood items (clothes, housing, etc.) can be obtained by dividing the poverty line level through the average share of food expenditure in total expenditure of the poor (if food corresponds to two thirds of total expenditure, take the poverty 3 line level times 2 ). This method shows, however, several flaws and should not be used if data availability allows for the use of a different method (see for instance Ravallion and Bidani, 1994, for a critique). Food energy intake depends on many other factors apart from income, such as taste, the level of activity, the availability of publicly provided goods and the relative prices of food and nonfood items. Changes in any of these factors can lead to a change in the curve and hence to false indications about changes in poverty.
(b) Cost of basic needs

where yi is the income or expenditure of individual i; z is the poverty line; N is the total population; k is the number of poor people and is a parameter which shows the degree of aversion to inequality among the poor.

With

This method is preferable to the food intake method, but requires more data (on prices and consumption). The poverty line is calculated as the cost of a basket of food and non-food goods which satisfies basic needs.

=0 (inequality is not measured all poor are counted in the same way, independently on how far below the poverty line they are) one obtains the well-known headcount index, measure which is simple to construct and understand and therefore very popular. ; the proportion of poor people in the population (incidence)

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Approaches to the trade and poverty debate, concepts and definitions

With

=1, one obtains the poverty gap index, which shows the shortfall of the poor populations income from the poverty line, averaged over the entire population (the intensity of poverty).

Finally, with

=2 we obtain the severity index, also called squared poverty gap. This measure weights incomes of the poorest, who are the furthest away from the poverty line, more heavily than incomes of the poor whose incomes place them just below the poverty line. It is therefore a measure of inequality among the poor.

of the poor, taking into account that the poor are often a very heterogeneous group, constitutes a very important element of a research work on the trade-poverty relationship. Channels through which a poor individual or household can be affected by trade can be more easily identified if one has an understanding of who the poor are, where they live, which income sources they have access to, which coping strategies are available to them, etc. 3.2.5 Implications for targeted povertyreduction policies The debate about different concepts and indicators of poverty would be relatively redundant if all indicators of poverty identified the same group of individuals as poor. However, the various approaches can lead to significant differences who is poor under one approach might not be poor applying another type of indicator. Figure 11 shows considerable differences between the human poverty index measure and the PPP $1-a-day poverty measure (UNDP, 2006). Some countries show much higher levels of human poverty compared to their relatively low levels of income poverty, such as Morocco (MA) or South Africa (ZA). Similarly, some countries which managed to reduce human poverty still show high levels of income poverty (such as Nicaragua, NI). Country-level studies show that significantly different people are identified according to whether the monetary, capability or participatory approach and corresponding measures are used. In a study on Peru (Franco, 2003), 35 per cent of adults were classified as monetary poor (below national poverty line), but as not poor in terms of education (illiterate). In the case of children, the percentage reached 57 per cent. A smaller proportion was classified as education-poor and at the same time monetary non-poor (8 per cent of adults, 2 per cent of children). In the case of health measures (undernourishment and chronic illness), the results were similar the overlap (nonpoor and poor identified equally with both measures) only ranged between 40 per cent and 55 per cent of the population. Other studies from Viet Nam (Baulch and Masset, 2003), Uganda (McGee, 2000) and India (Franco, 2003) also showed large discrepancies between the group of poor identified by monetary and by different non-monetary measures. Poverty indicators and measurements have important implications for the targeting of poverty reduction policies. The fact that there is a considerable lack of overlap between different approaches implies that targeting poverty

In addition to this type of aggregate single-indicator measure, one finds two more types of poverty measures in research and policy analysis composite indices and discrete indicators. Composite indices have been constructed based on the position that income or monetary measures alone do not reflect sufficiently the various dimensions of poverty. The best known examples are the human development index and the human poverty index, both developed by UNDP. These indices rank the countries poverty in a range from zero (no human poverty) to 100 (human poverty affects the entire population of a country). As already mentioned above, the main advantage of composite indices is that they show a general trend in human and social poverty over time and between countries. The drawbacks of composite indices relate to the extent of arbitrariness in the choice of indicators entering the index, and the aggregation procedure which attaches a weight to each variable. The index number can also obscure the contribution of the individual indicators: Is a country in bad shape with regard to all of them or relatively advanced in one indicator while far behind in another? Discrete indicators of specific economic, social or political deprivations can be used to complement the single indicator measures based on consumption expenditure or income as well as the composite indices examined above. In that case, the objective would not be to determine how many poor there are or to provide a poverty ranking based on a range of indicators, but to describe in more detail the characteristics of the poor. Measures of education, health, political participation, infrastructure, ethnicity, religion, geographical concentration and social networks are usually used in such poverty profiles, which aim at providing insights not only into the symptoms of poverty, but also its causes. A detailed description
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Approaches to the trade and poverty debate, concepts and definitions

Figure 11

Comparison of measures of human poverty and income poverty

ZM CF NE ML

Population living on less than PPP $1 a day

80 70 60 50 40 30 20 10 0

NG MG TZ NI IN GH NA PK MA
30 40

Income poverty

BO EC TH BR DO
10

MN CN TN

BF YE ET

ID
20

ZA

50

60

70

MA Marocco, NI Nicaragua, ZA South Africa Source: UNDP International Poverty Centre (2006)

Human Poverty Index

reduction policies at a specific group of people can involve serious targeting errors in relation to other conceptual approaches. Differences in poverty measures can also be due to (a) discrepancies between survey and national account data; (b) the effects of questionnaire design and adjustments over time, in particular the choice of reporting periods for food and nonfood expenditures; (c) survey non-response; (d) the treatment of imperfect data; (e) the choice of poverty lines; and (f) the interplay between statistics and politics. These are the factors discussed for the Indian case, where official numbers showing a sharp poverty reduction from 36 per cent in 1993/1994 to 26 per cent in 1999/2000 have been questioned by several authors (Deaton and Kozel, 2005). One recommendation to researchers would be to always combine various indicators and measures, and to try to explain resulting differences. Be clear about the objective of the analysis: If you are interested in vulnerability, you will not be able to take a purely income-based measure. If you plan to analyze the development of a poverty measure over time and you want to apply timeseries analysis with various explanatory variables,
Key readings

a measure of consumption poverty may be a good choice, even if it does not account for the multidimensionality of poverty. Its advantages are that it is quantifiable, relatively reliable, and that it shows correlation to other poverty indicators. If you have to communicate your research to nonexperts, headcount measures of incidence based on income or consumption falling below an absolute poverty line will be the simplest and easiest measures to understand despite their flaws. Often, data availability will present a limitation to the indicators you can choose. If you are limited to quantitative measures due to the methodology followed, but have access to disaggregated information from interviews or household surveys, it is still a good idea to use additional information to provide an idea of other aspects of poverty, either on a country-wide basis or as a qualitative case study. Once the poor are identified based on income or consumption, researchers often go on to examine the characteristics of the poor: at the individual level you may consider education, health, employment, role in the household; at the household level, e.g. composition/demographic characteristics, occupation and education of other household members, land ownership; at the village level, e.g. infrastructure, social networks, geographical location, ethnicities.

UNDP International Poverty Centre (2006). The December 2006 edition of Poverty In Focus collects contributions from various authors, such as Peter Townsend from the London School of Economics, Nanak Kakwani, UNDP, and Ravi Kanbur, Cornell University. The short contributions deal with the concepts and measures of poverty and the choice of the right poverty line. It is a good briefing note on a variety of issues related to poverty. Available at: http://www.ipc-undp.org/pub/IPCPovertyInFocus9.pdf. White and Pettit (2004). If you are interested in participatory poverty concepts and measurement approaches, have a look at this paper. It presents a summary of participatory methods, discusses the use of participatory approaches in different types of research projects and shows their limitations. Available at: http://www.wider.unu.edu/publications/working-papers/research-papers/2004/ en_GB/rp2004-057/. Carvalho and White (1997). This paper reviews quantitative and qualitative measures of poverty and assesses their respective strengths and weaknesses in poverty analysis. It provides many country examples of the use of different measures underlining that measures should ideally be combined. Available at: http://129.3.20.41/eps/dev/papers/0505/0505003.pdf .

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