A Class of Decomposable Poverty Measures
About: This article is published in Econometrica.The article was published on 1984-05-01. It has received 5417 citations till now. The article focuses on the topics: Poverty gap index & Multidimensional Poverty Index.
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TL;DR: In this article, the authors highlight the diversity of innovative mechanisms beyond group-lending contracts, the measurement of financial sustainability, the estimation of economic and social impacts, the costs and benefits of subsidization, and the potential to reduce poverty through savings programs rather than just credit.
Abstract: In the past decade, microfinance programs have demonstrated that it is possible to lend to low-income households while maintaining high repayment rates--even without requiring collateral. The programs promise a revolution in approaches to alleviating poverty and spreading financial services, and millions of poor households are served globally. A growing body of economic theory demonstrates how new contractual forms offer a key to microfinance success--particularly the use of group-lending contracts with joint liability. For the most part, however, high repayment rates have not translated into profits, and studies of impacts on poverty yield a mixed picture. In describing emerging tensions, the paper highlights the diversity of innovative mechanisms beyond group-lending contracts, the measurement of financial sustainability, the estimation of economic and social impacts, the costs and benefits of subsidization, and the potential to reduce poverty through savings programs rather than just credit. The promise of microfinance has pushed far ahead of the evidence, and an agenda is put forward for addressing critical empirical gaps and sharpening the terms of policy discussion.
2,421 citations
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TL;DR: This paper proposed a new methodology for multidimensional poverty measurement consisting of an identification method ρk that extends the traditional intersection and union approaches, and a class of poverty measures Mα.
Abstract: This paper proposes a new methodology for multidimensional poverty measurement consisting of an identification method ρk that extends the traditional intersection and union approaches, and a class of poverty measures Mα. Our identification step employs two forms of cutoff: one within each dimension to determine whether a person is deprived in that dimension, and a second across dimensions that identifies the poor by ‘counting’ the dimensions in which a person is deprived. The aggregation step employs the FGT measures, appropriately adjusted to account for multidimensionality. The axioms are presented as joint restrictions on identification and the measures, and the methodology satisfies a range of desirable properties including decomposability. The identification method is particularly well suited for use with ordinal data, as is the first of our measures, the adjusted headcount ratio. We present some dominance results and an interpretation of the adjusted headcount ratio as a measure of unfreedom. Examples from the US and Indonesia illustrate our methodology.
2,040 citations
Cites background from "A Class of Decomposable Poverty Mea..."
...5 The unidimensional FGT poverty measures were introduced in Foster, Greer, and Thorbecke, 1984....
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TL;DR: In this paper, the authors assess how much India's poor shared in the country's economic growth, taking into account its urban-rural and output composition, and find that output growth in the primary and tertiary sectors reduced poverty in both urban and rural areas but that secondary sector growth did not reduce poverty in either.
Abstract: Using a new series of consistent, consumption-based poverty measures spanning forty years, the author assess how much India's poor shared in the country's economic growth, taking into account its urban-rural and output composition. Rural consumption growth reduced poverty in both rural and urban areas. Urban growth brought some benefits to the urban poor, but had no impact on rural poverty. And rural-to-urban population shifts had no significant impact on poverty. Decomposing growth by output sectors, we found that output growth in the primary and tertiary sectors reduced poverty in both urban and rural areas but that secondary sector growth did not reduce poverty in either.
1,936 citations
TL;DR: The authors proposed a new methodology for multidimensional poverty measurement consisting of an identification method ρk that extends the traditional intersection and union approaches, and a class of poverty measures Mα.
1,677 citations
TL;DR: The authors developed an asset-based approach to poverty analysis that makes it possible to distinguish deep-rooted, persistent structural poverty from poverty that passes naturally with time due to systemic growth processes.
Abstract: Longitudinal data on household living standards open the way to a deeper analysis of the nature and extent of poverty. While a number of studies have exploited this type of data to distinguish transitory from more chronic forms of income or expenditure poverty, this paper develops an asset-based approach to poverty analysis that makes it possible to distinguish deep-rooted, persistent structural poverty from poverty that passes naturally with time due to systemic growth processes. Drawing on the economic theory of poverty traps and bifurcated accumulation strategies, this paper briefly discusses some feasible estimation strategies for empirically identifying poverty traps and long-term, persistent structural poverty, as well as relevant extensions of the popular Foster-Greer-Thorbecke class of poverty measures. The paper closes with reflections on how asset-based poverty can be used to underwrite the design of persistent poverty reduction strategies.
1,487 citations
References
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TL;DR: In this paper, the problem of comparing two frequency distributions f(u) of an attribute y which for convenience I shall refer to as income is defined as a risk in the theory of decision-making under uncertainty.
5,002 citations
TL;DR: In this paper, the authors proposed a new measure of poverty, which should avoid some of the shortcomings of the measures currently in use, and used an axiomatic approach to derive the measure.
Abstract: The primary aim of this paper is to propose a new measure of poverty, which should avoid some of the shortcomings of the measures currently in use. An axiomatic approach is used to derive the measure. The conception of welfare in the axiom set is ordinal. The information requirement for the new measure is quite limited, permitting practical use.
2,678 citations
"A Class of Decomposable Poverty Mea..." refers background or methods or result in this paper
...Such an approach to poverty analysis places requirements on the poverty measure in addition to those proposed by Sen [15, 16]....
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...Sen [15, 16] has formulated two axioms for a poverty measure to satisfy:...
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...The inequality measure associated with our poverty measure is shown to be the squared coefficient of variation and indeed the poverty measure may be expressed as a combination of this inequality measure, the headcount ratio, and the income-gap ratio in a fashion similar to Sen [15]....
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...Following Sen [15], poverty is a (normalized) weighted sum of the income shortfalls of the poor....
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TL;DR: In this paper, the authors consider a wide class of inequality indices and identify those which are additively decomposable, including the squared coefficient of variation and the two Theil's entropy formulas.
Abstract: This paper considers a wide class of inequality indices and identifies those which are additively decomposable. The sub-class of mean independent, additively decomposable measures turns out to be a single parameter family which includes the squared coefficient of variation and the two Theil's entropy formulas.
1,566 citations
"A Class of Decomposable Poverty Mea..." refers background in this paper
...In contrast, decomposability as applied to inequality measures involves a "betweengroup" term to account for differences among subgroup mean incomes [4, 17]....
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TL;DR: In this article, it was shown that Theil's coefficient (T) and the logarithm of the arithmetic mean over the geometric mean (L) are the only decomposable inequality measures such that the weight of the "within-components" in the total inequality of a partitioned population sum to a constant.
Abstract: A decomposable inequality measure is defined as a measure such that the total inequality of a population can be broken down into a weighted average of the inequality existing within subgroups of the population and the inequality existing between them. Thus, decomposable measures differ only by the weights given to the inequality within the subgroups of the population. It is proven that the only zero-homogeneous "income-weighted" decomposable measure is Theil's coefficient (T) and that the only zero-homogeneous "population-weighted" decomposable measure is the logarithm of the arithmetic mean over the geometric mean (L). More generally, it is proved that T and L are the only decomposable inequality measures such that the weight of the "within-components" in the total inequality of a partitioned population sum to a constant. More general decomposable measures are also analyzed.
999 citations
"A Class of Decomposable Poverty Mea..." refers background in this paper
...In contrast, decomposability as applied to inequality measures involves a "betweengroup" term to account for differences among subgroup mean incomes [4, 17]....
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