Chapter 2b Flashcards
Absolute Poverty
Rate of people who are not able to mobilize sufficient resources to secure their basic needs
International benchmark :
–1 US$/1,25 US$ and from Oct. 2015 1,90 US$ per day
Purchasing Power Parity (PPP)
number of units of a foreign country’s currency required to purchase the identical quantity of goods and services in the local (LDC) market as $1 would buy in the US
Development of absolute poverty:
•Absolute number of people living in absolute poverty is nearly unchanged due to population growth
decline to 15 percent in 2006, but increase after food crises starting in 2008
Relative Poverty
One person’s fulfillment of basic needs is considerably lower compared to a reference group
Does relative poverty imply absolute poverty?
no! In case of relative poverty, there will always be poverty as long as there is inequality in income
Poverty line
seperates the poor from the non poor.
we can either use one, or lower/upper bounds
Problems with poverty line
alone does not show the intensity of poverty and allocation between the poor
•Determining a “correct” poverty line is problematic
–Individual or household, differences in consumption requirements (which line fulfills everybody’s minimum needs? adult and child, man and women…)
–Different goods baskets (difficult for international comparison)
–Price differences for rural and urban areas, international price differences (PPP)
Headcount ratio: pros and cons
pro : easy to understand
con:
extent not acconted for
distribtion below poverty line not mentioned
complicated measure for non income indicators
Total poverty gap : pros and cons
pros: takes intensity into account. how poor are the poor
measures total income necessary to get to the poverty line
poverty in rural areas
strongly correlated with low quantities of land
rural economy depends on agriculture
remote rural areas are insolated from markets
poor infrastructure
migration : slum formation : hope for better life
