Poverty: Concepts and Measurements

1
Poverty Concepts and Measurements

• Lecture 5, EC10009

2
Poverty Concepts and Measurements

• This lecture aims to answer a number of
  questions
• Are there different concepts of poverty?
• What methodologies can be adopted to understand
  the extent and characteristics of poverty in
  developing countries?
• What are the United Nations Millennium Goals?
• Is the goal of poverty reduction being fulfilled
  regional analysis

3
Poverty Concepts and Measurements

• Are there different concepts of poverty?
• Poverty can be both absolute and relative.
• Martin Ravallion, (1994) Poverty Comparisons.
• Absolute Poverty Those people who do not have
  adequate nutritional intake per day, or do not
  have adequate shelter or clothing in order to
  survive are deemed to be in absolute poverty.
• Nutritionally based poverty lines drawn from
  research on what the minimum level of nutrients
  is required by an individual per day can estimate
  the extent of absolute poverty, but only from a
  nutritional perspective (See work by the World
  Health Organisation on an idea of minimum
  nutritional intake required).

4
Poverty Concepts and Measurements

• Must also consider the wealth of the
  individual. Must be aware that somebody can be
  both rich and lacking in nutrition due to a poor
  diet. This represents a lack of nutrition.
  Somebody who is poor and is not eating much is
  under-nourished.
• Relative Poverty The relative position of some
  economic unit (e.g. individual, household, racial
  group) compared to another economic unit. A
  person can be relatively poor but not absolutely
  poor.
• Is measured by introducing largely ad hoc poverty
  lines. E.g. the World Bank reports the number of
  people in countries below a 1 a day as a
  proportion of the total population to see what is
  happening to absolute poverty.

5
Poverty Concepts and Measurements

• NOTE It is important to distinguish between
  absolute and relative poverty for
  poverty-reduction policy reasons.
• E.g. Economic growth will generally result in a
  reduction of absolute poverty but will only
  change relative poverty if there is a change in
  distribution of income. (Woolard and Leibbrandt,
  2001, pp. 47).
• Subjective Poverty Has been a growing
  literature on the self-reporting of poverty, with
  perceptions of poverty differing from whether
  these people would be officially categorized as
  poor. Research indicates that political party,
  home ownership and other factors influence
  subjective poverty.
• The question being asked by researchers is
  whether the poor know they are poor and whether
  the self-reported non-poor are economically poor.

6
Poverty Concepts and Measurements

• The Poverty Line
• Poverty line measures do signal to researchers
  where poverty is and becomes the first place to
  start in analyzing poverty in a certain country,
  within a certain economic group etc..
• Examples of Poverty Lines
• (1) 1 a day and 2 a day lines that the World
  Bank use (as mentioned previously).
• Mean or median household income level of the
  population, then calculate the income per person
  in that household using weightings for if a child
  or if of working age (adult equivalence
  scales).
• (3) Standard percentage of people earnings below
  50 of the median or mean wage can vary the 50
  figure down to 10 or 25 etcthis will give an
  idea as to the depth of poverty.

7
Poverty Concepts and Measurements

• Note
• What is required for a better understanding of
  who the poor are though is the frequency with
  which people/households fall in and out of
  poverty and for what reasons.

8
Poverty Concepts and Measurements

• What methodologies can be adopted to understand
  the extent and characteristics of poverty in
  developing countries?
• So far the lecture has concentrated on mostly
  estimating income inequalities and poverty lines
  and seeing how many people/households fall where.
• But poverty clearly has a more human face and
  one which many economists often overlook or
  choose to skip over because it is very hard to
  quantify. No surprise that the methodology used
  is then qualitative in nature.
• McKay (2002, pp. 5) refers to participatory
  investigations into poverty and inequality which
  necessarily involves the researcher NOT sitting
  in his/her ivory tower but actually living for a
  time in villages/households and understanding the
  dynamics of these micro-economies.
• The role of children in the family, of gender
  differences, of who works for money income and
  who does not, of access to any public services
  that exist, of the dynamics of villages and
  tribes, of who gets what when an elder dies.the
  list is long and interesting from a
  micro-economic perspective.

9
Poverty Concepts and Measurements

• What methodologies can be adopted to understand
  the extent and characteristics of poverty in
  developing countries? cont
• Look at the accessibility people have to basic
  modern day necessities such as housing, water,
  electricity, food, clothing, health.
• A country could be doing poorly regarding
  absolute poverty and relative poverty in terms of
  income per person, BUT may be huge improvements
  in the basic necessities we in developed
  countries take for granted issue of getting the
  basic building blocks in place before can expect
  development (e.g. South Africa).
• There is an issue too of improving access to
  education (like to have quality education!),
  better infrastructure, better and safer public
  transport systems.

10
Poverty Concepts and Measurements

• What are the United Nations Millennium Goals?
• Go to www.un.org and click on the development
  goals, for a more detailed understanding of the
  goals
• (1) Eradicate extreme poverty and hunger
• (2) Achieve universal primary education
• (3) Promote gender equality and empower women
• (4) Reduce child mortality
• (5) Improve maternal health
• (6) Combat HIV/AIDS, malaria and other diseases
• (7) Ensure environmental sustainability
• (8) Develop a global partnership for development

11
Poverty Concepts and Measurements

• The first Millennium Development Goal is to,
• (1) Reduce by half the proportion of people
  living on less than a dollar a day.
• (2) Reduce by half the proportion of people who
  suffer from hunger.
• Is progress being made in achieving the goal on
  world poverty?

12
Poverty Concepts and Measurements

• What appears to be happening is that the Chinese
  economic boom and to an extent the Indian boom is
  behind reductions in absolute poverty levels in
  these regions.
• Sub-Saharan Africa however is getting worse with
  more people in poverty now than when the Goals
  were set. Issues of conflict and war are given
  as possible explanations (the 9,2 million deaths
  due to conflict is taken from 1994-2003 so will
  include the genocide in Rwanda which could
  comprise as much as a ¼ of this figure), but this
  is not something you can paint a broad brush with
  for the entire area.
• E.G. South Africa has been at peace for a decade,
  Botswana (the new jewel in the Southern African
  crown previously was Zimbabwe) and Namibia have
  been at peace for many years.
• Are the economic policies very different between
  India, China, South Africa, Botswana and Nigeria?

13
Poverty Concepts and Measurements