issues in measuring and modelling poverty - ravallion 1996

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Issues in Measuring and Modelling Poverty

Author(s): Martin RavallionSource: The Economic Journal, Vol. 106, No. 438 (Sep., 1996), pp. 1328-1343Published by: Wileyon behalf of the Royal Economic SocietyStable URL: http://www.jstor.org/stable/2235525.

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2/17

TheEconomicournal,

o6 (September),

328-1343.

C

Royal

Economic Society

I996. Published

by Blackwell

Publishers,

Io8

Cowley

Road,

Oxford OX4 iJF, UK and

238 Main

Street,

Cambridge, MA

02142, USA.

ISSUES IN

MEASURING

AND MODELLING

POVERTY

Martin

Ravallion*

I.

INTRODUCTION

For

over ioo

years now,

samplesurveys

of

household

iving

conditionshave

been used

to

addresspublic

concernsabout

poverty, and to

inform

public

action.

Seebohm

Rowntree's hreesurveys n

York,England,

spanning

a

50

year periodfrom I899,

influencedboth

poverty

analysis

and the

formation

of

Britishwelfarepolicy (Atkinson,

i989,

Chapter4). Once rare, nationally

representative

iving-standards

urveys re

now common n

both rich andpoor

countries.

All

high-income

ountries,

nd roughly

wo-thirds

f

the

developing

and

transitional

ountries,

now

have

a

more or less

nationally-representative

sample

survey nstrumentwhich

collectshousehold-level

ata

on

consumption

expenditures

nd/or income sourcesat

varying requencies,romonce

a year

to

once

everyfiveyears

or

so.

Povertymeasures roduced romthese

data are

keenly

watched

and debated.

They are

also increasingly

elied on in

policy

discussionsranging from the design of targeted interventions or fighting

povertyto

debates

on

the

social

impact of

economy-widepolicies.

This

paper s not

a

comprehensive

urveyof the issues

hat

arise

n

usingsuch

data;

some

important

applications

re

ignored,

such as

making

nternational

comparisons f

livingstandards,and

using survey

data in

the evaluationof

specific

policy

interventions.

Rather,

the

paper

is an

extended commenton

some

current

practices

n

poverty

analysisusing

surveydata. Section

I

starts

with

measurement

ssues, Section

II

looks

at

models of

poverty,while

data

needs

are

discussed

n

Section

III. Each

sectionbeginswith a

summary

f

what

wouldappear o be the 'mainstream' reven 'ideal' in currentpractices,and

then

discusseswhat

I

see

as the most

pressing

ssues.

II.

MEASURES

Current

ractice

Common

practice tarts

by identifying

single

monetaryndicatorof

household

welfare;

et

the

indicator

value

for

the

i'th householdbe

denoted

yi.

This tends

to be either total expenditureon consumptionor total income over some

period.

Next a set of

povertyines,

denoted

zi,

are defined.

These

estimate he cost

to

the household

of the

level of welfare

needed

to

escape

poverty,

i.e. it is

agreed,

at

least

implicitly,

that lower

values of

yi/zi

mean

that a

typical

*

For

their

comments

I

am

grateful to Pranab

Bardhan,

Tim

Besley, Stephen

Howes,

Stephen Jenkins,

Peter

Lanjouw, Amartya Sen,

and

Dominique

van

de Walle.

[ I328

I

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3/17

[SEPT. I996]

MEASURING

AND

MODELLING POVERTY

I329

member of the

household is

absolutely

poorer. Practice varies in

terms of

the

information used in

setting the z's.

'Best practice' is to

adjust for

differences in

the

prices faced (over

time or space, in as

much detail as data

permit) and

household

demographics.

(Alternatively one can

introduce the

deflators at the

first stage of defining y and have only one z;

poverty measures found

in practice

are

homogeneous of

degree zero so that the

order of

these steps makes no

difference.)

Another method is to

set the

zi's

as a constant

proportion of the

mean for some

sub-group to which

i

belongs,

or each

date.

Finally an aggregate

poverty measure is

identified,

which summarizes

the

information contained in the

measured y's and

z's. The most

common

measure

is the

headcount index,

given by the

proportion of the

population for whom

yi/zi

issues in measuring and modelling poverty - ravallion 1996

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