Poverty alleviation still occupies a top position in many countries’ economic and political agendas. Although income has a central role in defining poverty and well-being, poverty should, more generally, be framed as a multidimensional phenomenon. Examples of these dimensions are housing, literacy and life expectancy. The scope of this chapter is to present a discussion on the axiomatic approach to the measurement of multidimensional poverty and material deprivation, where the former should encompass all dimensions of well-being, while the latter concerns only the functioning failures related to material living conditions. The chapter ends with a discussion of the main indices proposed in the literature on the measurement of these phenomena.
Satya R. Chakravarty and Nachiketa Chattopadhyay
Satya R. Chakravarty, Nachiketa Chattopadhyay and Jacques Silber
This chapter estimates the number of poor in various countries in Asia by applying an ‘amalgam poverty line’, which is a weighted average of an absolute poverty line (such as $1.25 per day or $1.45 per day) and a reference income (such as the mean or the median income). The number of poor is computed under various values of the weight applied to the absolute poverty line, namely 100 percent, 90 percent, 66 percent and 50 percent. The chapter provides estimates of the headcount ratio and poverty gap ratio under the various scenarios for 25 different countries or regions examined.
Satya R. Chakravarty, Nachiketa Chattopadhyay, Jacques Silber and Guanghua Wan
Given a poverty line, a person who is non-poor (poor) currently may not be treated as non-poor (poor) in a vulnerable situation. This chapter looks at the impact of vulnerability on the poverty line. The poverty line is adjusted in the presence of vulnerability such that the utility of a person at the current poverty line and that at the adjusted poverty line become identical. Using an additive model of vulnerability, it is shown that if the utility function obeys constant Arrow–Pratt absolute risk aversion, then the harmonized poverty line is a simple absolute augmentation of the current poverty line. On the other hand, under a multiplicative model of vulnerability with constant Arrow–Pratt relative risk aversion, the revised poverty line is a simple relative augmentation of the current poverty line. The chapter contains empirical illustrations which assume that constant relative risk aversion applies to countries involved in the Asia-Pacific region. Upward adjustment of the poverty line under increased vulnerability, as captured through the value of the risk aversion parameter, is also observed.