Poverty
Inequality
Ends (objective)
Means (functional)
Ends (objective)
Means
(functional)
Inequality
Distribution of Income Distribution of Wealth Distribution of any other Attributes
Poverty
Lack of Income How much? General condition of people who are badly off and encompasses many aspects of want and disadvantages (Chambers) What are these wants and disadvantages? A severe failure of basic capabilities (Sen)
Absolute or Relative?
Something Definitely Absolute
Adequate level of Food, Clothing and Shelter Minimum Level of Nutrition Whether Acceptable Level can be given Absolute Meaning independent of the Contours of the Society? Ownership of Television? Minimal Standards of Leisure? Access to Scientific Education? Private Means of Transportation? etc. etc.
7
Lack of access to credit because of lack of collateral Collateral - Insurance against the genuine failure of the project - Is a means to prevent intentional default on the part of the borrower - The possibility of lost collateral reduces the incentive to walk away without repaying
12
13
Income or Expenditure?
Income may understate the level of living A family may be able to dissave or borrow Current level of expenditure may not be constrained by current level of income On the contrary income may overstate the level of living, where money alone is not sufficient to buy the necessary goods Rationing Unavailability of goods This leads to the argument that Income is a better criterion as it is a measure of opportunities open to a family
14
Income or Expenditure-II?
Standards of Living -Attaining a specified level of consumption goods or Minimum rights to resources - Level of entitlement Two are in fact confounded Income is the focus of the rights approach But its use on a standard of living approach must be seen as a proxy for consumption (not necessarily consumption per se)
15
Temporary or Chronic?
Chronic Poverty is a Structural Problem Temporary Poverty is because of Bad Economic Shocks
16
Household or Individual?
Household Data ignores intra-household distribution of Consumption Females, Elderly, Non-earner
17
19
21
22
Rights Issue
Concerned only with Poverty attaching no weight to Inequality above the Poverty Line Attach weight to the reduction of Inequality as a goal of policy but give priority to the elimination of Poverty Concerned about both the goals and are willing to trade gains in one direction to losses in another direction Attach no significance to Poverty, simply regard it as a component of the wider cost of Inequality
23
Measurements
Inequality , Poverty and Human Development
24
Inequality Indicators
Range Coefficient of Variation Kuznet ratio Lorenz Curve/ Lorenz Ratio/ Gini Coefficient 1) G1=Lorenz Ratio Pi the Cumulative Population Share Qi the cumulative Income Share Area Below the Lorenz Curve = {(Pi+1)-Pi))*(Qi+1)+(Q(i)} [ i= 0 to L-1] L is total number of Income Classes ( Class Intervals) G1= 1/(1/2)[(1/2)-Area Below the Lorenz Curve ] = 1{(Pi+1)-Pi))*(Qi+1)+(Q(i)} [ i= 0 to L-1]
25
Poverty Indicators
1)Poverty Ratio = ( Number of People Below Poverty Line=HC)/Total No. of People(=n) = Head Count Ratio =HCR = PR 2) Consumption Gap = Difference Between the per capita consumption of the Poor and the Poverty Line = ( Z-yi) [i= 1,2,3----- to q ] [ yi< Z] = CG Where, Z is the poverty line and yi is the income of ith poor people = 1/q fi( Z-yi) [i=1,2,3----l] where l is number of classes below poverty line ( For Group data)
26
3) Income Gap Ratio = IGR= 1- ( Average Income of the Poor/ Poverty Line) = (p-yi )/p*HC 4) Poverty Gap Ratio = PGR=PR*IGR = n/N [1-(y pBar/y*) Y pBar = average income of poor Y*= Poverty line If n increases PGR increases If IGR increases PGR increases
Sens Index ( For raw data) = SI Sens Index = PR*[ IGR+ (1-IGR)*LRP] Where, LRP is Lorenz Ratio of Poor Persons
27
29
31
Income Index
Adjusted Income= Natural Log of Current Income(CI) Lowest Per Capita Income in last generation That Could Have been $100 Log(CI) log(100) = Amount by which the Country has exceeded this lowest goalpost Consider this in relation to the maximum that a country could reasonably aspire to over the coming generation. UNDP takes this at $40000PPP Income Index={log(CI)-log(100)}/{log(40000)-log(100)}
32
33
Education Index
Adult literacy Index (ALI) weight 2/3 Gross Enrollment Index (GEI) weight 1/3
34
35
GEI= {79.9-0}/{100-0}=0.799
36
37
38
HDI
It reveals that a Country can do much better than might be expected at a low level of income Substantial Income gains accomplish relatively little in Human Development
39
1 3 5 7 8 16 18 26 49
38454 30331 29541 29251 39676 29300 30821 20499 24056 12027
4 14 16 18 2 17 13 31 24
3 11 11 11 -6 -1 -5 -5 -25
Cuba
Mauritius
0.826
0.800
50
63
43
73
-7
10
40
Russia Brazil Thailand Saudi Arabia Armenia China Sri Lanka Vietnam Kyrgyzstan India Mynamar
0.797 0.792 0.784 0.777 0.768 0.768 0.755 0.709 0.705 0.611 0.581
Pakistan
0.539
134
2225
128
-6
Togo
Zimbabwe
-3 -18 7 -1 13 -7
42