A Unified Approach to Measuring Poverty and Inequality: Theory and Practice (World Bank Training Series)

Authors: James Foster, Suman Seth, Michael Lokshin Zurab
Publisher: World Bank Publications
Keywords: world, bank, training, series, practice, theory, approach, measuring, poverty, inequality, unified
Number of Pages: 322
Published: 2013-05-10
ISBN-10: 0821384619
ISBN-13: 9780821384619

Book Description:

’A Unified Approach to Measuring Poverty and Inequality: Theory and Practice’ is an introduction to the theory and practice of measuring poverty and inequality, as well as a user’s guide for analyzing income or consumption distribution for any standard household dataset using the World Bank’s ADePT software. The approach taken here considers income standards as building blocks for basic measurement, then uses them to construct inequality and poverty measures. This unified approach provides advantages in interpreting and contrasting the measures and in understanding the way measures vary over time and space. Several recent initiatives have lowered the cost of accessing household datasets. The ADePT software enables users to analyze microdata from household surveys and other sources and generate print-ready, standardized tables and charts. It can also be used to simulate the impact of economic shocks, cash transfers and other policy instruments on poverty, and inequality. The software automates analysis, helps minimize human errors, and encourages development of new economic analysis methods. Of interest to teachers and students as well as to policy practitioners, ’A Unified Approach to Measuring Poverty and Inequality’ will empower researchers to plumb greater depths in searching for regularity in larger and larger datasets. This book should help to enrich discussion and analysis relating to the World Bank’s recent effort toward defining new targets and indicators for promoting work on eradicating poverty and enhancing shared prosperity.

Foreword .................................................................................................... xi

Preface ....................................................................................................... xv

Chapter 1

Introduction ................................................................................................ 1

The Income Variable ..........................................................................................4

The Data ..............................................................................................................4

Income Standards and Size .................................................................................5

Inequality Measures and Spread .......................................................................13

Poverty Measures and the Base of the Distribution .........................................26

Note ...................................................................................................................44

References ..........................................................................................................44

Chapter 2

Income Standards, Inequality, and Poverty ......................................... 45

Basic Concepts ..................................................................................................49

Income Standards ..............................................................................................54

Inequality Measures ...........................................................................................81

Poverty Measures .............................................................................................105

Exercises ..........................................................................................................144

Notes ................................................................................................................149

References ........................................................................................................151

Contentsvi

Contents

Chapter 3

How to Interpret ADePT Results ......................................................... 155

Analysis at the National Level and Rural/Urban Decomposition .................157

Analysis at the Subnational Level ..................................................................170

Poverty Analysis across Other Population Subgroups ....................................183

Sensitivity Analyses ........................................................................................199

Dominance Analyses .......................................................................................207

Advanced Analysis ..........................................................................................216

Note .................................................................................................................223

Reference .........................................................................................................223

Chapter 4

Frontiers of Poverty Measurement ...................................................... 225

Ultra-Poverty ...................................................................................................225

Hybrid Poverty Lines.......................................................................................226

Categorical and Ordinal Variables .................................................................228

Chronic Poverty ..............................................................................................229

Multidimensional Poverty ...............................................................................230

Multidimensional Standards ...........................................................................234

Inequality of Opportunity ...............................................................................238

Polarization ......................................................................................................240

References ........................................................................................................241

Chapter 5

Getting Started with ADePT ................................................................. 245

Conventions Used in This Chapter ...............................................................246

Installing ADePT ............................................................................................246

Launching ADePT ..........................................................................................247

Overview of the Analysis Procedure...............................................................248

Specify Datasets ...............................................................................................249

Map Variables ..................................................................................................252

Select Tables and Graphs ...............................................................................254

Generate the Report .......................................................................................257

Examine the Output ........................................................................................258

Working with Variables ..................................................................................258

Setting Parameters ..........................................................................................264

Working with Projects ....................................................................................264

Adding Standard Errors or Frequencies to Outputs .......................................265vii

Contents

Applying If-Conditions to Outputs ................................................................266

Generating Custom Tables .............................................................................268

Appendix ................................................................................................. 271

Income Standards and Inequality ...................................................................271

Censored Income Standards and Poverty Measures .......................................273

Elasticity of Watts Index, SST Index, and CHUC Index to 

Per Capita Consumption Expenditure .........................................................275

Sensitivity of Watts Index, SST Index, and CHUC Index to Poverty Line ..... 277

Decomposition of the Gini Coefficient ..........................................................278

Decomposition of Generalized Entropy Measures ..........................................280

Dynamic Decomposition of Inequality Using the Second Theil Measure ....282

Decomposition of Generalized Entropy Measure by Income Source .............284

Quantile Function ...........................................................................................286

Generalized Lorenz Curve ..............................................................................288

General Mean Curve.......................................................................................289

Generalized Lorenz Growth Curve .................................................................290

General Mean Growth Curve .........................................................................291

References ........................................................................................................292

Index ........................................................................................................ 293

Figures

 2.1: Probability Density Function ..................................................................51

 2.2: Cumulative Distribution Function .........................................................52

 2.3: Quantile Function ...................................................................................53

 2.4: Quantile Function and the Quantile Incomes .......................................59

 2.5: Quantile Function and the Partial Means ..............................................62

 2.6: Generalized Means and Parameter a......................................................66

 2.7: First-Order Stochastic Dominance Using Quantile Functions and 

Cumulative Distribution Functions ........................................................71

 2.8: Quantile Function and Generalized Lorenz Curve ................................72

 2.9: Generalized Lorenz Curve .......................................................................73

2.10: Growth Incidence Curves .......................................................................77

2.11: Growth Rate of Lower Partial Mean Income .........................................78

2.12: General Mean Growth Curves ...............................................................80

2.13: Lorenz Curve .........................................................................................102

2.14: Poverty Incidence Curve and Headcount Ratio ..................................136

2.15: Poverty Deficit Curve and the Poverty Gap Measure ..........................137viii

Contents

2.16: Poverty Severity Curve and the Squared Gap Measure .......................139

 3.1: Probability Density Function of Urban Georgia ..................................157

 3.2: Age-Gender Poverty Pyramid ...............................................................198

 3.3: Poverty Incidence Curves in Urban Georgia, 2003 and 2006 .............208

 3.4: Poverty Deficit Curves in Urban Georgia, 2003 and 2006 ..................209

 3.5: Poverty Severity Curves in Rural Georgia, 2003 and 2006 .................211

 3.6: Growth Incidence Curve of Georgia between 2003 and 2006 ............212

 3.7: Lorenz Curves of Urban Georgia, 2003 and 2006 ................................214

 3.8: Standardized General Mean Curves of Georgia, 2003 and 2006 .........216

 A.1: The Quantile Functions of Urban Per Capita Expenditure, 

Georgia ..................................................................................................287

 A.2: Generalized Lorenz Curve of Urban Per Capita Expenditure, 

Georgia ..................................................................................................288

 A.3: Generalized Mean Curve of Urban Per Capita Expenditure, 

Georgia ..................................................................................................290

 A.4: Generalized Lorenz Growth Curve for Urban Per Capita 

Expenditure, Georgia ............................................................................291

 A.5: General Mean Growth Curve of Urban Per Capita Expenditure, 

Georgia ..................................................................................................292

Tables

 3.1: Mean and Median Per Capita Consumption Expenditure, 

Growth, and the Gini Coefficient ........................................................158

 3.2: Overall Poverty ....................................................................................160

 3.3: Distribution of Poor in Urban and Rural Areas ...................................162

 3.4: Composition of FGT Family of Indices by Geography ........................164

 3.5: Quantile PCEs and Quantile Ratios of Per Capita Consumption 

Expenditure ...........................................................................................166

 3.6: Partial Means and Partial Mean Ratios ................................................168

 3.7: Distribution of Population across Quintiles .........................................169

 3.8: Mean and Median Per Capita Income, Growth, and the Gini 

Coefficient across Subnational Regions ...............................................171

 3.9: Headcount Ratio by Subnational Regions, 2003 and 2006 .................172

3.10: Poverty Gap Measure by Subnational Regions ....................................174

3.11: Squared Gap Measure by Subnational Regions ....................................175

3.12: Quantile PCE and Quantile Ratio of Per Capita Consumption 

Expenditure, 2003 .................................................................................177ix

Contents

3.13: Partial Means and Partial Mean Ratios for Subnational 

Regions, 2003 ........................................................................................178

3.14: Distribution of Population across Quintiles by Subnational 

Region, 2003 .........................................................................................180

3.15: Subnational Decomposition of Headcount Ratio, Changes between 

2003 and 2006 .......................................................................................181

3.16: Mean and Median Per Capita Consumption Expenditure, 

Growth, and Gini Coefficient, by Household Characteristics .............184

3.17: Headcount Ratio by Household Head’s Characteristics ......................185

3.18: Distribution of Population across Quintiles by Household Head’s 

Characteristics, 2003 .............................................................................187

3.19: Headcount Ratio by Employment Category .........................................189

3.20: Headcount Ratio by Education Level ...................................................191

3.21: Headcount Ratio by Demographic Composition .................................192

3.22: Headcount Ratio by Landownership ....................................................194

3.23: Headcount Ratio by Age Groups ..........................................................196

3.24: Elasticity of FGT Poverty Indices to Per Capita Consumption 

Expenditure ...........................................................................................199

3.25: Sensitivity of Poverty Measures to the Choice of Poverty 

Line, 2003 ..............................................................................................202

3.26: Other Poverty Measures ........................................................................203

3.27: Atkinson Measures and Generalized Entropy Measures by 

Geographic Regions, 2003 ....................................................................205

3.28: Consumption Regressions .....................................................................217

3.29: Changes in the Probability of Being in Poverty ...................................220

3.30: Growth and Redistribution Decomposition of Poverty Changes, 

Headcount Ratio ...................................................................................222

A.1: General Means and the Sen Mean ........................................................272

A.2: Censored Income Standards ..................................................................273

A.3: Elasticity of Watts Index, SST Index, and CHUC Index to 

Per Capita Consumption Expenditure...................................................275

A.4: Sensitivity of Watts Index, SST Index, and CHUC Index to the 

Choice of Poverty Line, 2003 ................................................................277

A.5: Breakdown of Gini Coefficient by Geography ......................................279

A.6: Decomposition of Generalized Entropy Measures by Geography .........280

A.7: Dynamic Decomposition of Inequality Using the Second 

Theil Measure ........................................................................................283

A.8: Decomposition of Generalized Entropy Measure by Income Source ........284




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