Lecture 3: Concepts and Indicators Flashcards
Poverty Line Approach
average of national poverty lines of a set of 28 poor countries
Headcount ratio
proportion of population earning an income (Y) below the poverty line (Z). So H measures the incidence of poverty.
Poverty Gap
the average income shortfall across the entire population. This measures the gap between each person’s income to the ‘poverty line’ income, expressed as percent of Z. So the PG approach measures the depth of poverty
What measures the headcount ratio
incidence of poverty
what measures the poverty gap
depth of poverty
Squared Poverty Gap
same as the Poverty Gap approach, but the ‘gaps’ are squared first. This results in extreme shortfalls counting more strongly, so PG2 measures the severity of the poverty
What measures the squared poverty gap
the severity of the poverty
poverty line income
sum of food and non-food component. For the food component, the WHO says that a person needs a daily minimum intake of 2.100 calories
why are national poverty lines higher in richer societies?
in richer societies there are higher economic standards. higher economic standards induce the preference drift, which leads to an expanding list of ‘essentials’
why is calculating from household consumption to poverty per capita not done through dividing the total household consumption by number of members?
- The cost of basic needs are lower for larger families (economies of scale)
- Needs differ across age categories (children versus adults)
Poverty dynamics
the poverty rate is a ‘pool’ with an in- and outflow
Transient poor
people who go in or out the poverty ‘pool’
descend or escape
chronic poor
people stay into the poverty ‘pool’
What does the Gini Index measure
it measures the concentration of income across the entire population
Gini index = 0
full equality (all members have identical incomes)
Gini Index = 1
extreme inequality (winner-takes-all)
what does the Lorenz Curve
curve traces the distribution of income, from which the Gini Index is calculated
From which is the Gini Index calculated
the distribution of income, which is traced by the Lorenz Curve
Palma index
measure of inequality that divides the share received by the richest 10% by the share of the poorest 40%
development
freedom to live the life that one values
Human Development / Quality of Life approach
More direct focus on transformation of income into ‘basic needs’ achievements (health, clean water & sanitation, decent housing, education)
Freedom restricted by one’s resources (money, land), but also by one’s capabilities to convert these resources into desired outcomes
Human Development Index
Elements in the HDI are the living standard (income per capita), health (life expectancy at birth) and education (school enrolment and years in school).
in what way does the Multidimensional Poverty index mimic the Human Development Index
in the way that there are 3 dimensions that carry equal weight in overall score
Happiness / Subjective Well-Being approach
says that progress should be judged by people themselves rather than outside experts.
Two philosophical ideas in the Happiness / Subjective Well-Being approach
- Eudaimonia
- Hedonic Calculus
Eudaimonia
(the good life / virtuous life as end goal – Aristoteles) = requires reflection on life and a long-term evaluation.
Hedonic calculus / utilitarianism
(actions driven by balancing pleasure against pain – Bentham) = focus on emotion and short term experience.
Critiques on the Subjective Well-Being Approach
the approach is not reliable. This is because
- Poor can ‘fool’ themselves to think they are happy in order to cope with misery and lack of freedom
- Happiness evaluations are sensitive to changes in reference point in time and space (past and future self / unfortunate or fortunate others)
preference drift
expanding list of ‘essentials’ because of a country that has a higher standard (rich country)
hedonic adaptation or hedonic treadmill
the two criticisms on happiness / subjective well being approach
- fool themselves thinking they are happy
- happiness measurements sensitive to change
