Setting the Post-2015 Development Agenda: Is Multidimensional Poverty Measurable?

1. Setting the Post-2015 Development Agenda: Is Multidimensional Poverty Measurable? Jonathan Haughton Suffolk University, Boston MA 02108, USA jhaughton@suffolk.edu http://web.cas.suffolk.edu/faculty/jhaughton/ Knowledge Globalization Conference, Shijiazhuang, May 30-31, 2014

2. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

3. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

4. Millennium Development Goals Emerged: 23 conferences. Agreed Sept. 2000 by 147 countries 8 goals, 21 targets, 60 indicators, over 1990-2015 Concentrate world attention on development China: reports; fast poverty reduction Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

5. 1: Eradicate Extreme Poverty and Hunger • Target 1.A: Halve, between 1990 and 2015, the proportion of people whose income is less than USD1.25 a day • Met by 2010: 700m fewer extremely poor; 43% to 21% • But still 1.2bn poor, including c. 90 m in China • Target 1.C: Halve, between 1990 and 2015, the proportion of people who suffer from hunger • Reachable by 2015: 19% in 1990-92 to 13% in 2010-12 • FAO: 870 million people undernourished. • Including 100m children under 5 Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

6. >850 surveys, 127 LDCs; PovcalNet (WB) Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

7. Gallup poll version Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

8. Poverty in China: Gallup results Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

9. Consensus: SDGs yes, … • Sustainable development goals (SDGs): Why? • Clarify what developed countries can do (Mohieldin 2013) • Global commons/public goods Financial architecture / trade / peace & security / environment / communicable diseases / knowledge / statistical capacity • ODA: more, more effective • Clarify what LDCs can do • Institutional quality • Targeting • Financial sector deepening / inclusion • Tax effort and equity • U.N. Open Working Group on SDGs Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

10. … and poverty still central • OWG “Eradication of poverty in all its forms remains the overriding priority and a necessary condition for sustainable development.” • Pogge & Rippin “… broad agreement that the fight against poverty ought to take centre stage in any new development agenda.” • World Bank “Working for a world free of poverty” Propose: Reduce headcount poverty rate to 3% by 2030 Remember: • One reason is to target interventions Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

11. Targeting Example: Social Protection in Indonesia • Context: 12% poor (29 million out of 240 million) • Post Asian Financial Crisis (1997) strategy: Food; jobs; access to health, education; credit for small enterprises. [Basri & Papanek] • Political support for targeting poverty National Team for the Acceleration of Poverty Reduction (TNP2K), VP. Think tank Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

12. High leakage currently: Modest programs Targeting not great Raskin: Rice for the poor. Also conditional cash transfers; and PNPM (cash for work) Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

13. Indonesia: New Effort to Identify the Poor • Poverty mapping: identify poor areas • Construct proxy means testing methods By district (n=500); based on detailed survey data Index = f(housing info, assets, hhsize, education, work status, …) • Collect data on proxies e.g. 43% of households, 2011; + census data; + local community data. • Identify poor, unify database, issue cards. • Allow system for appeals; revisions; updates Are SDGs needed to promote such initiatives? Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

14. Goal: 3% by 2030? 2030: 2/3 poor in fragile states Chandy, Ledlie, Panciakoa, 2013 Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

15. “Growth is good for the poor” (Dollar & Kraay 2002) Refers to monetary poverty Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

16. Inequality is bad for the poor (Ravallion) Getting to 3% will be hard Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

17. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

18. Basics: What is poverty? • “pronounced deprivation in well-being” • Monetary approach • Emphasize “command over commodities”; individuals then make choices. Based on income or expenditure. Excludes non-market items (e.g. public services, liberties). • Multiple poverties • Food poor; shelter poor; health poor; education poor. More paternalistic. • Capabilities • Sen: poverty is lack of capability to function in society. Can lack income, education, health, security, self-confidence, liberties. “Multidimensional” Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

19. Conventional approach • Measure wellbeing using income or consumption/capita • Or per adult equivalent • Pick poverty line • Often linked with caloric needs plus non-food essentials • Aggregate: • Foster-Greer-Thorbecke Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

20. Other measures • Sen-Shorrocks-Thon • Watts • Time Taken to Exit Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

21. Choice of measure matters only a little for ranking (#6 here) Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

22. International Comparisons: WB/Chen & Ravallion • Pick poverty line Based on basic needs lines in poorest countries USD1.25/person/day in 2005 prices Appropriate? • Use PPP exchange rate: get poverty line in local currency for some specified year Accurate? • Use CPI to create poverty line in nominal local currency, annually since 1981 Poor basket? • Measure poverty rate from survey data; if necessary estimate using Lorenz curves • Interpolate poverty rates for intervening years • Aggregate to get world poverty rate Pogge & Reddy: Use basic needs country by country? Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

23. Focus on chronically poor? Types of poverty (measured with panel data) • Chronically poor: = average consumption < z • Persistently poor: consumption always < z Subset of chronically poor • Transient poor: consumption sometimes < z, but not on average • Never poor: consumption never < z Goal: End chronic poverty? Matters for targeting (given high mobility): A, B need income; C needs insurance. Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

24. Transition Matrix: quintiles Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

25. Types of poverty in 4 Chinese provinces Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

26. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

27. Is poverty multidimensional? • Alkire and Santos 2012 • Some needs not supplied by markets • Capacity to convert income into functionings differs (e.g. health) • Poor people mention other needs • Sen 1999 Poverty is “deprivation of basic capabilities rather than merely the lowness of incomes” • Nussbaum 2003 Life expectancy / health & basic needs / freedom from violence / education and opportunities / emotional health & freedom from fear / mental health / social inclusion & freedom from discrimination / healthy environment & nature / leisure / political participation Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

28. Headline MPI 2.0? • Alkire & Sumner 2013 Use a multidimensional poverty index, not P0 Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

29. AF Multidimensional Poverty Index: Mechanics • Pick dimensions of deprivation e.g. schooling, health, electricity • Set cutoffs (“poverty lines”) for each e.g. Less than 5 years of schooling • Select weights for each dimension • Count (weighted) deprivations per person • Define the poor e.g. at least 3 deprivations; or deprived on at least 0.5 of weighted dimensions • Measure poverty: MPI = H × A H is % who are poor (“headcount”); A is average proportion of deprivations per poor person. Duclos et al. (2001) “No single such index [MPI aggregation] has been devised that has received unanimous approval” Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

30. Example (Alkire and Foster method) • Note: In this example, poverty is defined as having at least two deprivations. Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

31. UNDP implementation • Mirrors HDI. Ten indicators (with weights) • Education • Yrs schooling. Deprived if no one has 5 or more. (1/6) • School attendance. Deprived if not at school to class 8 (1/6) • Health • Child mortality. Deprived if any child died. (1/6) • Nutrition. Deprived if any household member malnourished (1/6) • Standard of living. Deprived if • No electricity (1/18); no improved sanitation (1/18); no access to safe drinking water (1/18); dirt floor (1/18); cooks with wood/charcoal (1/18); has no more than one consumer durable such as radio, phone, bike, etc. (1/18) • Poor if deprived in at least 1/3 of (weighted) indicators Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

32. Selected MPIs • Source: UNDP, Human Development Report 2013 Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

33. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

34. Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

35. Case: Urban Poverty in Vietnam • % poor based on income/capita: • HCMC: 2.1% Hanoi: 4.6% • Residents: 3.0% Migrants: 2.6% • Multidimensional poverty: 8 dimensions • Income; education; health; access to social security; housing quality; housing services; social inclusion; physical safety • At least 3 deprivations (k=3): • Headcount (H): HCMC: 28% Hanoi: 15% • Adjusted poverty headcount (MPI): HCMC: 12% Hanoi: 6% • Adjusted poverty headcount (MPI): Residents: 3% Migrants: 14% UNDP & Statistical Offices: Urban Poverty Assessment, 2010 Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

36. Multidimensional Poverty Index • The norm in Mexico (2009), Colombia (2011) • Challenges: • Data • Ideally, extensive survey data • In practice: UNDP implementation uses DHS (USAID/UN), MICS (UNICEF), WHS (WHO), and excludes income • What weights? [Contrast with prices] • What series, thresholds, overall poverty cutoff? • Atkinson & Lugo (2010, p. 14): “A multi-dimensional approach risks, however, diluting the message.” [Dashboard] Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

37. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

38. Aside: Is There a Middle Ground? • Dashboard shows marginal distributions only • MPI weights are problematic • Need to examine the joint distribution of poverty dimensions • Which country is poorer? • A, if marginals are used (or union approach) • B, if joint distribution is used (and intersection approach) Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

39. Diagram covers 120.3 m (total pop: 498 m in 2008) • Source: Atkinson & Marlier (eds.), 2010 • Is poverty rate: • 6.9 m (1.4%)? • 51.8 m (10.4%)? • 120.3 m (24.1%)? Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

40. Other measures • Bourguignon & Chakravarty (2003) • CES aggregation of poverty gaps for different dimensions • Requires continuous data • Requires weights and measures of substitutability • Unmet Poverty Gap approach • Was common in Latin America; # deprived on 1, 2, 3, … dimensions • Szekely: weights vary (“Voices of poor”) • Income: 2.4 • Child attends school: 1.8 • Education of head of household; sanitation: 0.6 each • Water; shelter: 0.6 each Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

41. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

42. Data availability is not yet adequate • Monitoring requires data • Data availability incomplete (Mohieldin) Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

43. Mohieldin (2014) Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

44. Measuring Hunger • De Weerdt et al. (2014) • FAO hunger measure: Food balance sheet + survey data on expenditure or income distribution • Use household data directly • But then details matter – results are very fragile Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

45. Tanzania food adequacy studies 7 randomly-chosen samples Details matter! Need for standardization Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

46. Outline • MDGs are ending; what will follow? • How measure poverty and hunger? • Conventional monetary metric? • Issues in making international comparisons • Multidimensional poverty • MPI 2.0 headline? • Other methods • Does it matter? • Correlations • The data problem • Recommendations Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014

47. Recommendations • For goal 1 of SDGs, use a monetary poverty target • 5% by 2030? Halve $2/day line? 3% chronic poor? • Complement with other development goals • i.e. don’t use MPI; would be double use of multidimensions • i.e. dashboard approach • Donor support for surveys • Link with administrative data • Improve price data • Standardize protocols for measuring, comparing, spending, especially on food Post-MDGs and poverty Knowledge Globalization Conference, Shijiazhuang, May 31, 2014