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Measuring Poverty
Topics Covered:
Size Distribution Lorenz Curve Gini Coefficient Functional Distribution
Absolute Poverty
People who are unable to fulfill basic needs Measured by the number of Headcount, i.e. people below the Poverty Line.
Poverty Line --- minimum level to income (people living on < $1 per day)
Headcount Index
Headcount index depends on
H --- number of People below Poverty Line, Yp Total Population --- N
Annual Income
Annaul Income
% of population
% of population
(Y
i 1
Yi )
Headcount index only satisfies first three This index satisfies all four
(Y 1
i 1
Yi )
Yp
Growth Typologies
1. Modern Sector Enlargement
Absolute incomes rise, absolute poverty is reduced, but Lorenz curve crosses so ambiguous affect
Women
More poor More malnourished Less likely to get medical services, clean water, sanitation, other benefits Lower earning capacity Limited control over their households Less access to education, formal sector employment, social security and govt employment programs
Policy Options
Altering functional distribution on income through policies designed to change relative factor prices
Raise minimum wage. Capital P??? Generally set lower, thus K is preferred to L. If subsidies on K removed, utilization of L will improve. Thus factor price distortions---combine growth, efficiency, high employment, less poverty & greater equality
Reducing the size distribution at the upper levels through progressive income and wealth taxes
Direct and indirect taxes on the rich
Direct transfer payments and the public provision of goods and services
Tax financed public consumption g&s Public consumption subsidies Workfare programs
Pay in-kind basic food stuff