3. Poverty, Inequality and Development

P0

Headcount Index = Proportion of the population for whom consumption or income is less than the poverty line

P0 pros

easy to understand

P0 cons

doesn’t consider the gap to which people fall below

P1

Poverty Gap Index = Measures the degree to which individuals fall below the poverty lineP

P1 pros

Can be interprated as the cost if eliminating poverty

MPI

Multi-dimensional Poverty Index = income-based measures of poverty and development neglect dimensions of well-being

MPI’s categories

Education : Years of schooling : no household members has completed 6 years of school
Child school attendance : no school-aged child went up to 8th grade
Health : Child mortality : any child died in the last 5 years
Nutrition : any child or adult is undernourished

Standard of Living : Electricity : none

Sanitation : didn’t improve

Drinking water : no access or more than 30min away

Housing : inadequate housing material on roof, wall, floor

Cooking fuel : cooks daily with ground, charcoal or wood

Assets : don’t own at least 1 of : radio, tel, tv, car, bike, fridge

Inequality of outcomes

The distribution of income / wage

Inequality of resources

Initial Endowments of human and / or physical capital, of land or other assets

Inequality of opportunities

1 + 2 + measured by social mobility

Inequality of capabilities

Opportunities matter more than outcome

Lorenz Curve

The further from the equality line, the higher the degree of inequality

Gini Coefficient

Area between the line of equality and the Lorenz curve