Michael Herrmann Division for Africa, LDCs and Special Programmes UNCTAD, Geneva, Switzerland

1. What is poverty and how is it measures?Poverty Dimensions, Indicators, Lines, Measurement, Data, Mapping and Analysis(Based on LDC Report 2002) Michael HerrmannDivision for Africa, LDCs and Special Programmes UNCTAD, Geneva, Switzerland

2. This presentation • Poverty dimensions and indicators • Rich descriptions versus operational definitions • Poverty lines • Relative versus absolute poverty • Poverty measures • Human versus monetary indicators • Poverty data • Household surveys versus national accounts • Poverty mapping and analysis • Poverty levels and poverty reduction • Conclusion • Key questions in poverty analysis

3. Poverty dimensions and indicators:Rich descriptions versus operational definitions "Poor quality of life is much more than just material poverty […] Poverty has many dimensions, and they combine to create and sustain powerlessness, lack of voice, and a lack of freedom of choice and action.” "Poor people confront their powerlessness every day, whether it is with rude and indifferent government officials or exploitative employer […] Powerlessness forces poor men and women to make agonizing choices taking on a dangerous job or starving, sending a child to school or feeding the family. For many women, home is not a haven. Domestic violence mars the lives of many women, who feel powerless to take action." Narayan, D., lead author of “Voices of the Poor: Crying out for Change”, World Bank 2000.

4. Poverty lines:Relative versus absolute indicators • Relative measure of poverty (inequality) • Deviation from mean income (Gini coefficient) • Absolute measure of poverty (survival): • Food intake method • Basic needs method • Capabilities to functionings • $1 and $2 (PPP,1985)

5. Poverty Measures:Human versus monetary indicators • UNDP’s Human Poverty Index: • Probability of not surviving to ages 40 • Share of adults who are illiterate • Share of population w/o access improved water source, and share of children under weight for age • Foster-Greer-Thorbecke class of poverty indices: • Head-count index (incidence), Percentage of people below poverty line • Poverty gap (average depth), Average distance of poor from poverty line • Squared poverty gap (individual depth): Inequality amongst persons below a poverty line Formulas on next slide.

6. Poverty Measures:Human versus monetary indicators General formula: Head-count index (incidence): α = 0: Poverty gap (average depth): α = 1: Squared poverty gap (individual depth): α = 2: yi: income/expenditure of individual i (adult equivalents) -- z: poverty line – N: total population -- k: number of poor people -- α: parameter showing the degree of aversion to inequality among the poor.

7. Poverty Measures:Human versus monetary indicators • Household income as poverty measure • Assumes that income equals consumption. • Household consumption as poverty measure • Acknowledges that income differs from consumption. • Poor countries have informal economy and low monetization • Poor people engage in barter exchange w/o using money

8. Poverty Data:Household surveys versus national accounts • Household-survey based poverty estimates • Different designs of surveys • Different cultural/ social attitude of interviewed persons • Different patterns of consumption • Etc. • National-accounts based poverty estimates • “Distribution data” from household surveys • “Level data” from national accounts • Poverty estimates consistent w/ national accounts • Consumption data in national accounts is residual

9. Poverty Data: Household surveys versus national accounts

10. Poverty Mapping and Analysis:Poverty levels and poverty reduction

11. Poverty Mapping and Analysis:Poverty levels and poverty reduction

12. Poverty Mapping and Analysis:Poverty levels and poverty reduction

13. Poverty Mapping and Analysis:Poverty levels and poverty reduction

14. Conclusion:Key questions in poverty analysis • What’s the appropriate focus? • Relative or absolute poverty • What’s the appropriate measure? • Human versus monetary • What’s the appropriate monetary measure? • Household income or household consumption • What’s the appropriate data? • Household survey or national accounts?