There are three commonly used methods of assessing poverty:
- construction of a poverty line and computation of
various poverty measures that take into account the
way actual household expenditures fall short of the
- rapid assessment and participatory appraisal, in
which community members rank households by wealth;(17)
- construction of a poverty index using a range of
qualitative and quantitative indicators (18).
POVERTY LINE BASED ON HOUSEHOLD
EXPENDITURES Standard practice is to use total expenditure
as the primary measure of a household's standard of
living (19). Nationally
representative household surveys such as the World Bank's
Living Standard Measurement Survey are typically used
to fix a poverty line and measure the incidence of poverty.
To assess whether household income is sufficient to meet
the food and other basic needs of all household members, a basket
of goods and services is constructed corresponding with local
consumption patterns. The value of this basket, at local consumer
prices and satisfying a pre-set level of basic needs for one person,
is called the "poverty line". If the per capita income of household
members is below the poverty line, the household and its members
are considered poor. But the results are hard to verify and may be
subject to distortion (see below).
PARTICIPATORY APPRAISAL AND RAPID ASSESSMENT These
two approaches seek input from community members using similar
techniques. The first calls for extensive participation by the
community and is intended for the longer term; its ultimate goal is
empowerment of the target group. Rapid assessments are meant
to provide data for a predetermined agenda in a very short time,
usually a one-day community visit.
Development programmes use both
methods extensively for targeting services to poorer
clients, and for the participatory design of projects
(20), but both have
Because the results depend on the subjective ratings
of community members, they are difficult to verify,
and it is difficult to compare results across locations
or programmes in a country (22)
International comparisons are even more difficult. These
approaches may find the poorest third in one village,
but may not identify communities in which the poorest
third of an entire region reside. Subjects' responses
may be distorted by their desire to receive benefits
such as access to financial services as a result of
the poverty assessment. Finally, participatory assessment
requires skillful communicators who will be more expensive
and harder to find than enumerators who only apply a
POVERTY INDEX BASED ON A RANGE OF INDICATORS A range
of indicators, for which credible information can be quickly and
inexpensively obtained, can identify different dimensions of poverty.
The indicators may be aggregated into a single index by using
a weighting scheme.
Many micro-finance institutions
in South and South-east Asia use a housing index to
target financial services to poorer clients (23).
Indicators, such as quality of roof or walls, can easily
be obtained through inspection, and misrepresentation
in responses can be minimized. The indicators can be
easily adjusted to local conditions. The weights assigned
to the different indicators making up the index may
be rather arbitrary, however. And the housing index
focuses on a single dimension of poverty. To provide
a full picture, indicators should be drawn from at least
four areas: human resources, housing, food security
and household assets (24).
CONCLUSION Income-based measures of poverty are objective,
highly amenable to quantitative analysis, and accurately describe
income poverty, provided household surveys are carefully administered.
However, they omit non-income factors in poverty, such as
achievements in health and education. They are also externally
imposed and do not provide the poor an opportunity to express
their own experience of poverty.
Indicator-based and participatory
approaches provide some alternatives. UNDP's Human Poverty
Index (HPI) (25),
for example, combines information on deprivation in:
longevity (percentage of people not expected to survive
to age 40); knowledge (percentage of adults who are
illiterate); and living standards (a composite index
of people without access to safe water, people without
access to health services, and underweight children
under 5). This aggregate poverty measure describes several
dimensions of poverty, but the assignment of equal weights
to the different components is essentially an arbitrary
Another approach is to elicit information directly from the
poor through group discussion and individual conversation, without
using any externally imposed definition of poverty.
Respondents may be asked to explain their own notions of poverty,
providing information on social and economic processes that standard
household survey data cannot provide, which can be used to
make policy, investment or regulatory decisions.
In the end, a judicious combination of income-based, indicatorbased
and participatory-based information should be used to assess
poverty and derive implications for policy. And institutions should
have incentives to use this information for planning purposes.
MERITS AND LIMITATIONS OF THE INCOME-BASED POVERTY MEASURE
Tractable definition. The method allows for a relatively
tractable definition of poverty and the use of explicit poverty
lines to delineate the poor from the rest of the population.
Precise, representative, comparable. Carefully conducted
household surveys provide a fairly precise and widely accepted
tool for measuring income poverty and assessing changes
Basing income poverty assessments on representative
sample surveys also makes it easy to derive aggregate measures
of poverty, such as the percentage of poor in the national
Cost. Large household surveys are expensive. Good surveys
spend heavily to ensure that information is accurate, because
measurement errors can easily throw estimates off.
Household composition. Surveys convert household data into
measures for individuals on a per capita basis, so results
depend on assumptions about household composition and
shed no light on gender-based and other inequities within the
Publicly provided goods and services. Household income
measures typically fail to account for public goods and services
like essential education and primary health.
Comparison difficulties. When survey instruments, definitions,
or sampling techniques change over time, comparisons
are difficult and potentially misleading.See Sources