european capacity building initiativeecbi the oxford measure − of capability to pay 2012 ecbi...

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cbiThe Oxford Measure −

of Capability to Pay2012 ecbi Fellowships

Benito Müller

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for sustained capacity building in support of international climate change negotiations

pour un renforcement durable des capacités en appui aux négociations internationales sur les changements climatiques

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Capability as Ability to Pay − A Taxation Model

Capability = Gross Capability minus Capability Adjustment

Ck = GCk − Cak [cu : capacity unit]

taxable income = gross income minus tax allowances

Tax Liability vs Charity

Gross Capability Axioms (gdp = GDP/cap)

If gdpk = gdpm then GCk : GCm = GDPk : GDPm

If GDPk = GDPm then GCk : GCm = GDPk : GDPm

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Capability as Ability to Pay − A Taxation Model

Homogeneous World Solution (gdpk ≡ gdpm )

Gross Capability = National IncomeGCk ≈ GDPk

Oxford Gross Capability

Gross Capability = Progressively weighted National Income:

OGCk = γk × GDPk, with γk = gdpk / gdpworld [cu/$]

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$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

-$1,000

$1,000

$3,000

$5,000

$7,000

$9,000

$11,000

$13,000

$15,000GDP (2009 $ PPP)

GDP ($PPP, 2009) per capita

World per capita G

DP (2009): $10’643

$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000GDP and Gross Capabilities


Gross Capability Examples

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$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

-$1,000

$1,000

$3,000

$5,000

$7,000

$9,000

$11,000

$13,000

$15,000GDP (2009 $ PPP)

GDP ($PPP, 2009) per capita$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000 Gross Capabilities


World per capita G

DP (2009): $10’643

$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

-$5,000

$5,000

$15,000

$25,000

$35,000

$45,000

$55,000

$65,000GDP and Gross Capabilities


γEU = 3.0

γJP = 3.0

γCH = 0.6

γIN = 0.3

γUS = 4.3

Gross Capability Examples OGCk = γk × GDPk, [γk = gdpk / gdpworld ]

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$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

-$1,000

$1,000

$3,000

$5,000

$7,000

$9,000

$11,000

$13,000

$15,000GDP (2009 $ PPP)

GDP ($PPP, 2009) per capita$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000 Gross Capabilities


Gross Capability Examples OGCk = (γk)δ × GDPk, δ ≥ 0

0

1

2

3

4

5

6

7

8

9

US (γ = 4.3)

EU; Japan (γ = 3.0)

γδ

China (γ = 0.6)

India (γ = 0.29)δ

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$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

Gross Capability (δ = 0)


$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000



Gross Capability Examples

$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000

Gross Capabilities (δ = 0.8)


OGCk = (γk)δ × GDPk, δ ≥ 0

Reference level

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Oxford Measure − Capability Adjustment

Capability = Gross Capability minus Capability Adjustment

Adjustment for what?

The size of the domestic poverty problem

• Poverty Capability Adjustment PCAk

Measuring the size of the poverty problem − two dimensions:

• Poverty Headcount PHk [number of poor people]

• Poverty Intensity Index: PIk [scalar]

• Global Poverty Capability Allowance Π [cu/person]

• Differentiated Poverty Capability Allowance Πk = Π × PIk [cu/person]

PCAk = Πk × PHk [cu]

Multidimensional Poverty Index: MPIk [scalar]

PCAk = Π × Pk × MPIk , with Pk = population

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Oxford Measure − Global Capability Allowance Π

Poverty Capability Adjustment =

Global Capability Poverty Allowance (Π) ×

Population × Multidimensional Poverty Index

PCAk = Π × Pk × MPIk ,

Zero Capability Allowances (ZCAk)

OCMk = OGCk − Π × Pk × MPIk

0 = OGCk − ZCAk × Pk × MPIk

Π =def 3 × ZCALDC

$0 $1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

LDCs Africa(-)


Vanuatu

Bhutan

LDC average (ZCALDC)

3 × ZCALDC

Namibia

Swaziland

Angola

Congo

Africa(-) = Sub-Saharan w/o South Africa

Zero Capability Allowances

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$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000



Gross and Net Capability Examples

$0 $5,000$10,000$15,000$20,000$25,000$30,000$35,000$40,000$45,000$50,000


$0 $10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Net Capability (δ = 1; Π = 3×ZCALDC)

Reference level

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Net Capability: Sensitivity to Choice of Poverty Allowance Π

Cap

abil

ity

Inte

nsi

ty (

OC

Mk /G

DP

k)

Poverty Allowance Π = ZCALDC ×

LDC

1 2 3 4 5 6

92%

94%

96%

98%

100%

102%

104%

106%

0 1 2 3 4 5

-300%

-200%

-100%

0%

100%

200%

300%

400%

Slope = 1 Poverty Intensity −(Poverty Headcount × Poverty Intensity)/GDP

−(PHk × PIk )/ × GDPk

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Oxford Measure: Capability Headroom

$0 $500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

1

10

100

1,000


LDC aggregate

% (

Log

scal

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Djibouti 9%

δ = 1, Π = 3 × ZCALDC

Capability Headroom = − Capability/GDP [%] (for countries with negative capability)

Burundi 666%

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Oxford Measure − Sample Capabilities I

Non-zero C

apability

Zero Capability

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000 GDP ($PPP, 2009) per capita

Cap

abil

ity

EU

US

China

South Africa

Brazil

IndiaLDC aggr.

Russia

Saudi

Japan

Canada

AustraliaSwitzerland UAE

δ = 1, Π = 3 × ZCALDC

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Oxford Measure − Sample Capabilities II

Non-zero C

apability

Zero Capability$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000


China

Ethiopia Bangladesh

PakistanNigeria

Brazil

RussiaSpain

S. Korea

Mexico

TurkeyPoland

ArgentinaS. AfricaThailand

India

LDC Aggregate

Malaysia

Saudi

Czech R.

Greece

Belgium

Sweden

Canada

Australia

Netherlands

SwitzerlandUAE

IndonesiaEgypt

UkraineColombia

Kazakhstan

Italy

Austria

UKFranceδ = 1, Π = 3 × ZCALDC

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cbiThank you!

european capacity building initiativeecbi the oxford measure − of capability to pay 2012 ecbi...

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