Measures of Poverty. Foster-Greer-Thorbecke(FGT) index Example: Consider an 8-person economy with the following income distribution

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1 Foster-Greer-Thorbecke(FGT) index Example: Consider an 8-person economy with the following income distribution Individuals Income Poverty line= 1 Recall that Headcount Headcount ratio, Normalized poverty gap, Squared poverty index (poverty severity), Measures of Poverty Outcome-based Measures Human Development Index (capita income, life expectancy at birth, level of educational attainment) HDI ---0 lower level of human development HDI ---1 higher level of human development Gender Development Index (GDI) - measures gender gaps in human development achievements by accounting for disparities between women and men in 3 basic dimensions of human development health, knowledge and living standards using the same component indicators as in the HDI (HDR 2016) 1

2 Measures of Poverty Gender Empowerment Measures (GEM) - measures relative female representation in economic and political power Human Poverty Index (HPI) (deprivation of life, basic education, overall economic provisioning) - a low HPI is good (i.e., a smaller percentage of population is deprived), while a higher HPI reflects a greater deprivation - Used by UNDP from ; replaced by MPI in 2010 Multidimensional Poverty Index (MPI) - most prominent application of the multidimensional poverty measurement - poverty cannot be measured by income alone Amartya Sen s capability framework- what matters fundamentally is not the things a person has or the feelings these provide but what a person is, or can be, and does, or can do. Alkireand Foster extended the FGT index to multiple dimensions Multidimensional Poverty Index (MPI) - incorporates 3 dimensions at the household level: health, education, and wealth i. reflect problems often mentioned by the poor ii. have been long considered important by the development community iii. well-established philosophically as human rights or basic needs - A poor person is identified through the dual cutoff method i. cutoff level within each dimension ii. cutoff of the number of dimensions in which a person must be deprived to be deemed multidimensionally poor 2

3 Indicators and weights used in estimating the MPI Dimension Indicators Weight Health whether child has died in the family 1/6 whether any adult or child in the family is malnourished 1/6 Education whether not even one household member has completed five years of schooling 1/6 whether any school-age child is out of school for grades one through eight 1/6 Standard of living lack of electricity 1/18 insufficiently safe drinking water 1/18 inadequate sanitation 1/18 inadequate flooring 1/18 unimproved cooking fuel 1/18 lack of more than one of five assets telephone, radio, television, bicycle, and motorbike or similar vehicle 1/18 Source: Alkire and Foster, 2011 individuals are identified as multidimensionallypoor when their family is deprived by a weighted sum of0.3 or more Multidimensional Poverty Index (MPI) the actual MPI for the country (or region or group) is computed with the adjusted headcount ratio, A A = x A where = headcount ratio(the percentage of people living in multidimensional poverty) A= the average intensity of deprivation (the percentage of weighted indicators for which poor households are deprived on average) Multidimensional Poverty Index in selected countries Country Survey Year MPI Percent Poor (H M ) Thousand s Poor Poverty Intensity (A) Philippines , Indonesia , Vietnam 2010/ , Lao PDR , Source: UNDP Human Development Report

4 Community-Based Monitoring System (CBMS) Simple Composite Index (SCI) (Philippines) Basic Needs CBMS Core Poverty Indicators Health 1 Proportion of children under 5 years old who died 2 Proportion of women deaths due to pregnancy-related causes Nutrition 3 Proportion of children 0-5 years old who are malnourished Housing 4 Proportion of households living in makeshift housing 5 Proportion of households who are informal settlers Water and 6 Proportion of households without access to safe water supply Sanitation 7 Proportion of households without access to sanitary toilet facilities Basic Education 8 Proportion of children 6-11 years old who are not in elementary school 9 Proportion of children years old who are not in secondary school Income 10 Proportion of households with income below the poverty threshold 11 Proportion of households with income below the food threshold 12 Proportion of households that experienced hunger due to food shortage Employment 13 Proportion of persons who are unemployed Peace and Order 14 Proportion of persons who were victims of crime Note: CBMS core poverty indicators follow official standard definitions used by the Philippine Statistical System.Source: Reyes, et al.(2014a) The CBMS-SCI summarizes the characteristics of each household by simply counting the number of unmet needs or unattained indicators as listed in the Table. 1. Rural dwellers e.g., landless tenants or those who own very small parcels of land; low-paid farmworkers urban modern-sector bias in government expenditures has been observed over the past several decades in most developing countries (especially toward the relatively affluent modern manufacturing and commercial sectors) 2. Women(due to current and past discrimination) less access to education lower earning capacity (also, large earning differentials between men and women) limited control over their spouses income (also, legislation and social custom in some countries prohibit women from owning property or signing financial contracts without a husband s signature) 4

5 2. Women(due to current and past discrimination) less access to formal sector employmentand social security bias against females in areas such as nutrition, medical care, educationand inheritance(based on existing studies of intrahouseholdallocation) -> women are perceived to have less potential for contributing financially to family survival 3. Children poorer households tend to be the bigger families children born into poor families have lesser opportunities, lowersurvival rate during infancy, less health care and education opportunities, have to share limited family resources with more siblings 4. Elderly in developing countries, they depend solely on their families to look after them; little or no support for elderly population 4. Ethnic minorities, indigenous populations can face serious economic, political and social discrimination (40% of the world s nation-states have more than 5 sizable ethnic populations, at least one faces discrimination) higher chances of being malnourished, illiterate, in poor health and unemployed e.g., Mexico-more than 80% indigenous population is poor vs. 18% for nonindigenous population 5

6 Targeting the poor using an appropriate tool in identifying the qualified beneficiaries of any social assistance/safety net program main goal is to correctly identify which households (or individuals) are poor and which are not (Manasan & Cuenca, 2007) Targeting the poor Types: a. self-targeting open to everyone but designed in such as way that the more economically disadvantaged are the ones who benefit b. administrative targeting group of people (project staff) verify who is qualified to benefit from the program based on a criterion (e.g., means testing, proxy means testing, community-based targeting, categorical or indicator-based targeting) Need for more disaggregated data (e.g., CBMS census data) key to a good targeting mechanism is if these errors are as much as possible minimized Example: PhilHealth Sponsored Program (Philippines) aims to provide medical privileges to the marginalized sector of the Philippine society; open to qualified indigents belonging to the lowest 25% of the Philippine population the government shoulders the monthly contribution of the qualified beneficiaries to achieve universal health insurance coverage (by enrolling around 13.5 million poor beneficiaries) 6

7 Households that have access to the PhilHealthProgram in 13 selected barangays in the Philippines Source: Reyes, Sobreviñas and de Jesus (2013) Only 16.2% of those in the poorest quintile have access to the program Exclusion rates for PhilHealthProgram in 13 selected barangays in the Philippines PMT= Proxy Means Testing Source: Reyes, Sobreviñas and de Jesus (2013) Exclusion rate among income-poor households is at 81.8% while exclusion of PMT-poor households is at 82.2% Note: Some targeted assistance programs can also suffer from substantial leakages. Additional Reference Reyes, C., Sobreviñas, A. and de Jesus, J. (2013). The Impact of the Global Financial Crisis on Poverty in the Philippines, in C.M. Reyes, A.B. Sobreviñas and. M. Baris, Jr. (eds.), Monitoring and Mitigating the Impact on Poverty of the Global Financial and Economic Crisis, pp , De La Salle University, Manila, Philippines 7