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Multidimensional Poverty Measurement: The Way Forward? James E. Foster The George Washington University and OPHI NAS Food Security Workshop February 16, 2011

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Page 1: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Multidimensional Poverty Measurement: The Way Forward?

James E. Foster The George Washington University and OPHI

NAS Food Security WorkshopFebruary 16, 2011

Page 2: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Why Multidimensional Poverty?

Missing DimensionsJust low income?

Capability ApproachConceptual framework

DataMore sources

ToolsUnidimensional measures into multidimensional

DemandGovernments and other organizations

Page 3: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Hypothetical Challenge

A government would like to create an official multidimensional poverty indicatorDesiderata

It must understandable and easy to describe It must conform to a common sense notion of povertyIt must fit the purpose for which it is being developedIt must be technically solidIt must be operationally viableIt must be easily replicable

What would you advise?

Page 4: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Not So Hypothetical

2006 MexicoLaw: must alter official poverty methods Include six other dimensions

education, dwelling space, dwelling services, access to food, access to health services, access to social security

2007 OxfordAlkire and Foster “Counting and Multidimensional Poverty Measurement”

2009 MexicoAnnounces official methodology

Page 5: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Continued Interest

2008 BhutanGross National Happiness Index

2010 ChileMajor conference (May)

2010 LondonRelease of MPI by UNDP and OPHI (July)

2010 ColombiaMajor conference (July)

2009-2011 Washington DCWorld Bank (several), IDB, USAID, CGD

2008-2011 OPHIWorkshops on: Missing dimensions; Weights; Country applications;Applications to governance, quality of education, corruption, fair trade, and targeting; Robustness

Page 6: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Our Proposal - Overview

Identification – Dual cutoffsDeprivation cutoffsPoverty cutoff

Aggregation – Adjusted FGT

Background papersAlkire and Foster “Counting and Multidimensional Poverty Measurement” forthcoming Journal of Public EconomicsAlkire and Santos “Acute Multidimensional Poverty: A new Index for Developing Countries” OPHI WP 38

Page 7: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Review: Unidimensional Poverty

Framework – Sen 1976 identification and aggregationGoal – Poverty measure P(.)

Variable – income consumption or other aggregateIdentification – poverty line unchanged since RowntreeAggregation – Foster-Greer-Thorbecke 1984

see also Foster, Greer, and Thorbecke 2010 - forthcoming Journal of Economic Inequality

Page 8: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Review: Unidimensional Poverty

Example Incomes y = (7,3,4,8) Poverty line z = 5

Deprivation vector g0 = (0,1,1,0) Headcount ratio P0 = μ(g0) = 2/4

Normalized gap vector g1 = (0, 2/5, 1/5, 0)Poverty gap = P1 = μ(g1) = 3/20

Squared gap vector g2 = (0, 4/25, 1/25, 0)FGT Measure = P2 = μ(g2) = 5/100

Decomposable across population groups WBPolicy implications Bourguignon and Fields 1990

Page 9: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Multidimensional Data

Matrix of achievements for n persons in d domains

Page 10: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Multidimensional Data

Matrix of achievements for n persons in d domains

Domains

Persons

y =

13.1 14 4 115.2 7 5 012.5 10 1 020 11 3 1

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 11: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Multidimensional Data

Matrix of achievements for n persons in d domains

Domains

Persons

z ( 13 12 3 1) Cutoffs

y =

13.1 14 4 115.2 7 5 012.5 10 1 020 11 3 1

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 12: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Multidimensional Data

Matrix of achievements for n persons in d domains

Domains

Persons

z ( 13 12 3 1) Cutoffs

These entries fall below cutoffs

y =

13.1 14 4 115.2 7 5 012.5 10 1 020 11 3 1

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 13: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Deprivation Matrix

Replace entries: 1 if deprived, 0 if not deprived

Domains

Persons

y =

13.1 14 4 115.2 7 5 012.5 10 1 020 11 3 1

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 14: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Deprivation Matrix

Replace entries: 1 if deprived, 0 if not deprived

Domains

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 15: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Normalized Gap Matrix

Matrix of achievements for n persons in d domains

Domains

Persons

z ( 13 12 3 1) Cutoffs

These entries fall below cutoffs

y =

13.1 14 4 115.2 7 5 012.5 10 1 020 11 3 1

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 16: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Normalized Gap Matrix

Normalized gap = (zj - yji)/zj if deprived, 0 if not deprived

Domains

Persons

z ( 13 12 3 1) Cutoffs

These entries fall below cutoffs

y =

13.1 14 4 115.2 7 5 012.5 10 1 020 11 3 1

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 17: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Normalized Gap Matrix

Normalized gap = (zj - yji)/zj if deprived, 0 if not deprived

Domains

Persons

g1 =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0.08 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 18: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Squared Gap Matrix

Squared gap = [(zj - yji)/zj]2 if deprived, 0 if not deprived

Domains

Persons

g1 =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0.08 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 19: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Squared Gap Matrix

Squared gap = [(zj - yji)/zj]2 if deprived, 0 if not deprived

Domains

Persons

g2 =

0 0 0 00 0.176 0 1

0.002 0.029 0.449 10 0.006 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 20: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification

Domains

Persons

Matrix of deprivations

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 21: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Counting Deprivations

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 22: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Counting Deprivations

Q/ Who is poor?

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 23: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Union Approach

Q/ Who is poor?A1/ Poor if deprived in any dimension ci ≥ 1

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 24: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Union Approach

Q/ Who is poor?A1/ Poor if deprived in any dimension ci ≥ 1

Domains c

Persons

Difficulties

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 25: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Union Approach

Q/ Who is poor?A1/ Poor if deprived in any dimension ci ≥ 1

Domains c

Persons

Difficulties Single deprivation may be due to something other than poverty (UNICEF)

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 26: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Union Approach

Q/ Who is poor?A1/ Poor if deprived in any dimension ci ≥ 1

Domains c

Persons

Difficulties Single deprivation may be due to something other than poverty (UNICEF)Union approach often predicts very high numbers - political constraints

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 27: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Intersection Approach

Q/ Who is poor?A2/ Poor if deprived in all dimensions ci = d

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 28: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Intersection Approach

Q/ Who is poor?A2/ Poor if deprived in all dimensions ci = d

Domains c

Persons

Difficulties

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 29: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Intersection Approach

Q/ Who is poor?A2/ Poor if deprived in all dimensions ci = d

Domains c

Persons

DifficultiesDemanding requirement (especially if d large)

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 30: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Intersection Approach

Q/ Who is poor?A2/ Poor if deprived in all dimensions ci = d

Domains c

Persons

DifficultiesDemanding requirement (especially if d large)Often identifies a very narrow slice of population

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 31: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Dual Cutoff Approach

Q/ Who is poor?A/ Fix cutoff k, identify as poor if ci > k

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 32: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Dual Cutoff Approach

Q/ Who is poor?A/ Fix cutoff k, identify as poor if ci > k (Ex: k = 2)

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 33: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Dual Cutoff Approach

Q/ Who is poor?A/ Fix cutoff k, identify as poor if ci > k (Ex: k = 2)

Domains c

Persons

Note Includes both union and intersection

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 34: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Dual Cutoff Approach

Q/ Who is poor?A/ Fix cutoff k, identify as poor if ci > k (Ex: k = 2)

Domains c

Persons

Note Includes both union and intersectionEspecially useful when number of dimensions is large

Union becomes too large, intersection too small

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 35: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Identification – Dual Cutoff Approach

Q/ Who is poor?A/ Fix cutoff k, identify as poor if ci > k (Ex: k = 2)

Domains c

Persons

Note Includes both union and intersectionEspecially useful when number of dimensions is large

Union becomes too large, intersection too smallNext step - aggregate into an overall measure of poverty

g0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 36: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 37: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Censor data of nonpoor

Domains c

Personsg0 =

0 0 0 00 1 0 11 1 1 10 1 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0241

Page 38: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Censor data of nonpoor

Domains c(k)

Persons

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 39: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Censor data of nonpoor

Domains c(k)

Persons

Similarly for g1(k), etc

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 40: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Headcount Ratio

Domains c(k)

Persons

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 41: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Headcount Ratio

Domains c(k)

Persons

Two poor persons out of four: H = ½ ‘incidence’

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 42: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Critique

Suppose the number of deprivations rises for person 2

Domains c(k)

Persons

Two poor persons out of four: H = ½ ‘incidence’

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 43: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Critique

Suppose the number of deprivations rises for person 2

Domains c(k)

Persons

Two poor persons out of four: H = ½ ‘incidence’

g0(k) =

0 0 0 01 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 44: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Critique

Suppose the number of deprivations rises for person 2

Domains c(k)

Persons

Two poor persons out of four: H = ½ ‘incidence’No change!

g0(k) =

0 0 0 01 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 45: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Critique

Suppose the number of deprivations rises for person 2

Domains c(k)

Persons

Two poor persons out of four: H = ½ ‘incidence’No change!Violates ‘dimensional monotonicity’

g0(k) =

0 0 0 01 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 46: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Return to the original matrix

Domains c(k)

Persons

g0(k) =

0 0 0 01 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 47: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Return to the original matrix

Domains c(k)

Persons

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 48: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Need to augment information

Domains c(k)

Persons

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

Page 49: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Need to augment information “deprivation share”

Domains c(k) c(k)/d

Persons

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

2 / 44 / 4

Page 50: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation

Need to augment information ‘deprivation share’‘intensity’

Domains c(k) c(k)/d

Persons

A = average intensity among poor = 3/4

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

2 / 44 / 4

Page 51: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

Adjusted Headcount Ratio = M0 = HA

Domains c(k) c(k)/d

Persons

A = average intensity among poor = 3/4

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

2 / 44 / 4

Page 52: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

Adjusted Headcount Ratio = M0 = HA = μ(g0(k))

Domains c(k) c(k)/d

Persons

A = average intensity among poor = 3/4

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

2 / 44 / 4

Page 53: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

Adjusted Headcount Ratio = M0 = HA = μ(g0(k)) = 6/16 = .375

Domains c(k) c(k)/d

Persons

A = average intensity among poor = 3/4

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

2 / 44 / 4

Page 54: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

Adjusted Headcount Ratio = M0 = HA = μ(g0(k)) = 6/16 = .375

Domains c(k) c(k)/d

Persons

A = average intensity among poor = 3/4Note: if person 2 has an additional deprivation, M0 rises

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

2 / 44 / 4

Page 55: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

Adjusted Headcount Ratio = M0 = HA = μ(g0(k)) = 6/16 = .375

Domains c(k) c(k)/d

Persons

A = average intensity among poor = 3/4Note: if person 2 has an additional deprivation, M0 rises

Satisfies dimensional monotonicity

g0(k) =

0 0 0 00 1 0 11 1 1 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

0240

2 / 44 / 4

Page 56: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

Observations

Page 57: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

ObservationsUses ordinal data

Page 58: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

ObservationsUses ordinal dataSimilar to traditional gap P1 = HI

HI = per capita poverty gap= headcount H times average income gap I among poor

Page 59: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

ObservationsUses ordinal dataSimilar to traditional gap P1 = HI

HI = per capita poverty gap= headcount H times average income gap I among poor

HA = per capita deprivation = headcount H times average intensity A among poor

Page 60: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

ObservationsUses ordinal dataSimilar to traditional gap P1 = HI

HI = per capita poverty gap= headcount H times average income gap I among poor

HA = per capita deprivation = headcount H times average intensity A among poor

Decomposable across dimensions after identification

M0 = ∑j Hj/d

Page 61: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation – Adjusted Headcount Ratio

ObservationsUses ordinal dataSimilar to traditional gap P1 = HI

HI = per capita poverty gap= headcount H times average income gap I among poor

HA = per capita deprivation = headcount H times average intensity A among poor

Decomposable across dimensions

M0 = ∑j Hj/dAxioms - Characterization via freedom

Page 62: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Adjusted Headcount Ratio

Note M0 requires only ordinal information.

Q/ What if data are cardinal? How to incorporate information on depth of deprivation?

Page 63: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted Poverty Gap

Augment information of M0 using normalized gaps

Domains

Persons

g1 (k) =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 64: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted Poverty Gap

Augment information of M0 using normalized gaps

Domains

Persons

Average gap across all deprived dimensions of the poor: G = (0.04+0.42+0.17+0.67+1+1)/6

g1 (k) =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 65: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted Poverty Gap

Adjusted Poverty Gap = M1 = M0G = HAG

Domains

Persons

Average gap across all deprived dimensions of the poor: G = (0.04+0.42+0.17+0.67+1+1)/6

g1 (k) =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 66: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted Poverty Gap

Adjusted Poverty Gap = M1 = M0G = HAG = μ(g1(k))

Domains

Persons

Average gap across all deprived dimensions of the poor: G = (0.04+0.42+0.17+0.67+1+1)/6

g1 (k) =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 67: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted Poverty Gap

Adjusted Poverty Gap = M1 = M0G = HAG = μ(g1(k))

Domains

Persons

Obviously, if in a deprived dimension, a poor person becomes even more deprived, then M1 will rise.

g1 (k) =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 68: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted Poverty Gap

Adjusted Poverty Gap = M1 = M0G = HAG = μ(g1(k))

Domains

Persons

Obviously, if in a deprived dimension, a poor person becomes even more deprived, then M1 will rise.

Satisfies monotonicity – reflects incidence, intensity, depth

g1 (k) =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 69: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted FGT

Consider the matrix of squared gaps

Domains

Persons

g1 (k) =

0 0 0 00 0.42 0 1

0.04 0.17 0.67 10 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 70: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted FGT

Consider the matrix of squared gaps

Domains

Personsg2 (k ) =

0 0 0 00 0.422 0 12

0.042 0.172 0.672 12

0 0 0 0

⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥

Page 71: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted FGT

Adjusted FGT is M2 = μ(g2(k))

Domains

Personsg2 (k ) =

0 0 0 00 0.422 0 12

0.042 0.172 0.672 12

0 0 0 0

⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥

Page 72: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted FGT

Adjusted FGT is M2 = μ(g2(k))

Domains

Persons

Satisfies transfer axiom – reflects incidence, intensity, depth, severity– focuses on most deprived

g2 (k ) =

0 0 0 00 0.422 0 12

0.042 0.172 0.672 12

0 0 0 0

⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥

Page 73: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted FGT Family

Adjusted FGT is Mα = μ(gα(τ)) for α > 0

Domains

Persons

gα (k) =

0 0 0 00 0.42α 0 1α

0.04α 0.17α 0.67α 1α

0 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 74: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Aggregation: Adjusted FGT Family

Adjusted FGT is Mα = μ(gα(τ)) for α > 0

Domains

Persons

Satisfies numerous properties including decomposability, and dimension monotonicity, monotonicity (for α > 0), transfer (for α > 1).

gα (k) =

0 0 0 00 0.42α 0 1α

0.04α 0.17α 0.67α 1α

0 0 0 0

⎢ ⎢ ⎢ ⎢ ⎢

⎥ ⎥ ⎥ ⎥ ⎥

Page 75: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Weights

Weighted identificationWeight on first dimension (say income): 2Weight on other three dimensions: 2/3

Cutoff k = 2 Poor if income poor, or suffer two or more deprivations

Cutoff k = 2.5 (or make inequality strict)Poor if income poor and suffer one or more other deprivations

Nolan, Brian and Christopher T. Whelan, Resources, Deprivation and Poverty, 1996

Weighted aggregationWeighted intensity – otherwise same

Page 76: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Caveats and Observations

IdentificationNo tradeoffs across dimensionsFundamentally multidimensional

Need to set deprivation cutoffsNeed to set weightsNeed to set poverty cutoff across dimension

AggregationNeutral

Ignores coupling of disadvantagesNot substitutes, not complements

Discontinuities

Page 77: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Sub-Sahara Africa: Robustness Across k

Burkina is always poorer than Guinea, regardless of whether we count as poor persons who are deprived in only one kind of assets (0.25) or every dimension (assets, health, education, and empowerment, in this example). (DHS Data used)

Batana, 2008- OPHI WP 13

Page 78: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Advantages

IntuitiveTransparentFlexible

MPI – Acute povertyCountry Specific Measures

Policy impact and good governanceTargeting

Accounting structure for evaluating policiesParticipatory tool

Page 79: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Revisit Objectives

DesiderataIt must understandable and easy to describe It must conform to a common sense notion of povertyIt must fit the purpose for which it is being developedIt must be technically solidIt must be operationally viableIt must be easily replicable

What do you think?

Page 80: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Thank you

Page 81: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Thank you

Page 82: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USAData Source: National Health Interview Survey, 2004, United States

Department of Health and Human Services. National Center for Health Statistics - ICPSR 4349.

Tables Generated By: Suman Seth.Unit of Analysis: Individual.Number of Observations: 46009. Variables:

(1) income measured in poverty line increments and grouped into 15 categories

(2) self-reported health(3) health insurance(4) years of schooling.

Page 83: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USA

Profile of US Poverty by Ethnic/Racial Group

Page 84: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USA

Profile of US Poverty by Ethnic/Racial Group

Page 85: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USA

Profile of US Poverty by Ethnic/Racial Group

Page 86: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USA

Profile of US Poverty by Ethnic/Racial Group

Page 87: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USA

Profile of US Poverty by Ethnic/Racial Group

Page 88: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USA

Profile of US Poverty by Ethnic/Racial Group

Page 89: Multidimensional Poverty Measurement: The Way Forward? - National … · 2014-08-13 · Gross National Happiness Index 2010 Chile Major conference (May) 2010 London Release of MPI

Illustration: USA