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Characterizing Poverty

Overview
Many Dimensions of Poverty
A Web of Causes
Measuring Poverty

Measuring Poverty

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 poverty line;(16)
  • 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 shortcomings (21) 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 structured questionnaire.


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 decision.

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.

7 MERITS AND LIMITATIONS OF THE INCOME-BASED POVERTY MEASURE

Merits
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 over time.

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 population.

Limitations
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 household.

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


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