Beyond MDG Dashboards: Consideration of Joint Distribution in Measuring Poverty

1. Beyond MDG Dashboards: Consideration of Joint Distribution in Measuring Poverty Evidence and Measures of Progress in International Development RSS 2013 International Conference, Newcastle UK Suman Seth September 5, 2013

2. Outline • Why is there a need to consider joint distribution and a multidimensional framework for measuring poverty • The Multidimensional Poverty Index: A Proposal • Methodology • Illustrations • MPI 2.0 and the post 2015 discussion

3. Why New Emphasis on Poverty Measurement? • What we have: Technical • Increasing data • Improving methodologies • What we need: Policy • Make growth to be inclusive through active policies • Go beyond income poverty (it is important but insufficient) • Go beyond dazzlingly complex dashboards of indicators • Understanding the joint distribution across deprivations • Path ahead: Ethical and Political • Political critique of current metrics; exploration • Measures in 2010 HDR sparked interest and debate • Post-2015 requires re-thinking Data and Measures

4. Economic Growth is Not Always Inclusive

5. Eradicating Income Poverty is not Sufficient (Global Monitoring Report Progress Status, 2013) Reduction in income poverty does not reduce other MDG deprivations automatically. Source: World Bank Data

6. MDG Dashboards Fail to Reflect Joint Distribution of Deprivations An example with four persons (deprived=1, non-deprived=0) Case 1 Case 2 In both cases, 25% deprived in each MDG indicator BUT, in Case 2, one person is severely deprived

7. Motivation for a Multidimensional Approach • “MDGs did not focus enough on reaching the very poorest” - High-Level Panel on the Post-2015 Development Agenda (2013) • Should be able to distinguish poorest from the less poor. How? • Deprived in many dimensions simultaneously? • “Acceleration in one goal often speeds up progress in others; to meet MDGs strategically we need to see them together” - What Will It Take to Achieve the Millennium Development Goals? (2010) • Emphasis on joint distribution and synergies • “While assessing quality-of-life requires a plurality of indicators, there are strong demands to develop a single summary measure” - StiglitzSenFitoussi Commission Report (2009) • One summary index is more powerful in drawing policy attention

8. Value-added of a Multidimensional Approach • What can a meaningful multidimensional measure do? • Provide an overview of multiple indicators at-a-glance • Show progress quickly and directly (Monitoring/Evaluation) • Inform planning and policy design • Target poor people and communities • Reflect people’s own understandings(Flexible) • High Resolution • – zoom in for details by regions, groups, or dimensions

9. The Multidimensional Poverty Index

10. Alkire Foster Methodology • Select dimensions, indicators and weights (Flexible) • Set deprivation cutoffs for each indicator (Flexible) • Apply to indicators for each person from same survey • Set a poverty cutoff to identify who is poor (Flexible) • Calculate Adjusted Headcount Ratio (M0) – for ordinal data (such as MDG indicators), – Reflects incidence, intensity Sabina Alkire and James Foster, J. of Public Economics 2011

11. Multidimensional Poverty Index (MPI) An adaptation of Alkire and Foster (2011) which can deal with the binary or categorical data and was introduced by Alkire and Santos (2010) and UNDP (2010) A person is identified as poor using a counting approach in two steps 1) A person is identified as deprived or not in each dimension using a set of deprivation cutoff 2) Based on the deprivation profile, a person is identified as poor or not Terms: deprived and poor are not synonymous

12. How is MPI Computed? The MPI uses the Adjusted Headcount Ratio: H: The percent of people identified as poor, it shows the incidence of multidimensional poverty A: The average proportion of deprivations people suffer at the same time; it shows the intensity of people’s poverty Alkire, Roche, Santos, and Seth (2013) . Formula: MPI = H × A

13. One implementation of the Global MPI (104 countries): Dimensions, Weights & Indicators

14. Identify Who is Poor A person is multidimensionally poor if she is deprived in 1/3 of the weighted indicators. (censor the deprivations of the non-poor) 39% 33.3%

15. Properties Useful for Policy The MPI • Can be broken down into incidence(H)and the intensity(A) • Is decomposable across population subgroups • Overall poverty is population-share weighted average of subgroup poverty • Overall poverty can be broken down by dimensions to understand their contribution

16. What Kind of Policy Analysis Can be Done?

17. Policy Relevance: Incidence vs. Intensity Country B: Country A: Povertyreductionpolicy (withoutinequaliyfocus) Policyorientedtothepoorest of thepoor Country B reduced the intensity of deprivation among the poor more. The final index reflects this. Source: Roche (2013)

18. Policy Relevance: Incidence vs. Intensity Very similar annual reduction in MPI Alkire and Roche (2013)

19. India (1999-2006): Uneven Reduction in MPI across Population Subgroups Slower progress for Scheduled Tribes (ST) and Muslims Religion Caste Alkire and Seth (2013)

20. Reduction in MPI across Indian States Slower reductions in initially poorer states Stronger reductions in Southern states We combined Bihar and Jharkhand, Madhya Pradesh and Chhattishgarh, and Uttar Pradesh and Uttarakhand

21. Comparison with Change in Income Poverty Headcount Ratio (p.a.)

22. Dimensional Breakdown Nationally?

23. Dimensional Breakdown in Six States?

24. Distribution of Intensities among the Poor Madagascar (2009) MPI = 0.357 H = 67% Rwanda (2010) MPI = 0.350 H = 69%

25. The MPI 2.0 and the Post-2015 discussion

26. MPI vs. $1.25-a-day Height of the bar: MPI Headcount Ratio Height at ‘•’ : $1.25-a-day Headcount Ratio

27. Measuring the Post-2015 MDGs • What we found from Global MPI • $1.25/poverty and MPI do not move together • MPI reduction is often faster than $1.25/day poverty • Political incentives from MPI are more direct

28. Measuring the Post-2015 MDGs Create an MPI 2.0 in post 2015 MDGs (Alkire and Sumner 2013) • To complement $1.25/day poverty • To reflect interconnections between deprivations • To track ‘key’ goals using data from same survey • To celebrate success Note: MPI is not a Composite Index like the HDI or the HPI

29. Multidimensional Poverty Index - MPI • Shows joint distribution of deprivations (overlaps) • Changes over time: informative • by region, social group, indicator (inequality) • National MPIs: tailored to context, priorities • MPI 2.0: comparable across countries • National MPI and Global MPI 2.0 can be reported like national income poverty and$1.25/day • Data needs: feasible – use 39 of 625 questions in DHS • Published: in annual Human Development Report of UNDP • Method: Alkire and Foster 2011 J Public Economics Examples: see www.ophi.org.uk

30. The Global Multidimensional Poverty Peer Network (Global MPPN) Angola, Bhutan, Brazil, Chile, China, Colombia, ECLAC, Ecuador, El Salvador, Dominican Republic, Germany, India, Iraq, Malaysia, Mexico, Morocco, Mozambique, Nigeria, OECD, the Organization of Caribbean States, OPHI, Peru, Philippines, SADC, and Vietnam Joined by: President Juan Manuel Santos of Colombia Nobel Laureate AmartyaSen Launched: June 6, 2013

31. The Global Multidimensional Poverty Peer Network (Global MPPN) • On 24 September, 2013: event in the United Nations N Lawn Conf room 7 • Attendees: Ministers from Philippines, Nigeria, Mexico, Colombia, El Salvador, the Secretary of State of Germany, President of Colombia, Head of DAC at OECD, and others • Subject: Speak on an MPI 2.0 • The Network has decided to advocate a MPI 2.0 as part of the post-2015 process as a measure of income poverty is not enough, and nor is a dashboard.