1 - Poverty Flashcards
Two different ways of viewing development - narrow vs broader view:
A narrow way of looking at development is to say that it’s about levels and rates of growth. A broader way is to think of the quality of life and focus on the freedoms and “unfreedoms” that people may have.
The book’s view on development:
“Achieving development is about reaching a satisfactory level of human wellbeing, both on average and for everybody in a particular society”:
7 dimensions of underdevelopment:
- Low avg income and growth.
- Material poverty, hunger and food insecurity.
- Income inequalities
- Vulnerability to shocks and poverty traps.
- Lack in basic needs, health and educ.
- Natural resources scarcity.
- Low Q of life: freedoms, human rights, happiness.
Triangle of development 1
Describes the main objectives: low poverty, growth and small inequalities. They all affect each other and they all differ for different societies.
Tringle of development 2
The three main actors to make growth happen:
1. State
2. Market
3. Civil society
Important in different ways and all can fail. Complement each other, but can also substitute at some degree.
Two parameters we measure with poverty:
- Indicator of wellbeing (y): ex income or consumption.
- A cut-off (z)
Pros and cons with using consumption?
Pros:
- Closer to wellbeing than income.
- More smooth out over the year and over years.
Cons:
- HH-level, not individual.
- Measurement error - Cannot remember exact consump.
- How to measure different goods such as durables, home-prodcued, public etc?
Wellbeing: HH vs individual
Wellbeing is individual but hard to measure it that way - we consume mainly on the HH-level: such as food, electricity, public goods in every family.
Per capita consumption in the HH:
Ypc = Cf/n* + ph(Ch/n*^B)
This measures the private goods divided by adult equivalent (weight of adult-isch) + the price of public good times the consumption of goods with publicness that is divided by adult equivalents and raised to B.
B is the degree of private vs publicness.
0 public, 1 private.
What must be adjusted for being able to compare across time and space?
CPI so that inflation are accounted for and also PPP so that price levels in different countries are taken into consideration.
It’s harder than it sounds - what is a normal basket of goods? What is the counterpart of different goods in other countries. Small changes can have huge effects on the poverty rate.
Absolute poverty line:
An absolute value of a minimum income that one must have to live the most basic life. Subsistence level.
Relative poverty line:
The subsistence level related to the average income. A person is only poor if she/he is poor related to the society she/he lives in. Otherwise almost none should be considered poor in Sweden.
Related to cost of social inclusion.
Nutrition based poverty line
Start by looking at a downward sloping calorie-expenditure function (in the left side if y so that more calories=higher cost) then we find the point where calories=enough to survive, ex 2000, and follow that height over to the 45 degree budget constraint to see how much is needed to afford these calories. Lastly, also find the point at the Engel curve (for normal godos) - this is where we set z, the poverty line.
Weakly relative poverty line
A way of combining absolute and relative poverty lines - it rises when average income exceed the absolute poverty line. So it includes the cost of social inclusion and the fact that we relate our wellbeing to others. If the avg income rises in Swe but mine is the same –» I become relatively poorer so the line must change.
The absolute poverty line for the world
It is set by the World bank at PPP 1.25 dollar. (ps, problem with PPP as people around the world don’t consume same things).
