1. Poverty Measurement and Analysis
Suresh Babu
International Food Policy Research Institute

2. Conceptual Framework of Linking Poverty & Nutrition
Nutrition Security
Adult development
and
Labor productivity
Dietary Intake
Macro-nutrients
Micro-nutrients
Immediate
Causes
Health Status
Access to food
Household income/ expenditures on food
Health environment & services
Access & quality of health, sanitation & water
Maternal & child care practices
Quality & quantity of care
Policies that encourage
-food production
income generation
transfer food in-kind
Policies & programs that increase
-caregivers access
-caregivers resource control
-caregivers knowledge, adoption & practice
Policies that improve
-adequate sanitation
-safe water supply
-health care availability
-environmental safety/ shelter
Underlying
Causes
Political & legal Institutions
Political commitment, legal structures for implementing food laws
Basic
Causes
Resource control, ownership, use
Resource use & pricing policies
Potential resources
Poverty/natural resources availability/ agricultural technology

3. Immediate Causes Nutrition Security Dietary Intake Macro-nutrients
Adult development
Nutrition Security
Labor productivity
Dietary Intake
Macro-nutrients
Micro-nutrients
Health Status
Health environment & services
Access & quality of health, sanitation & water
Access to food
Household income/ expenditures on food
Maternal & child care practices
Quality & quantity of care

4. Underlying Causes Policies that encourage -food production
income generation
transfer food in-kind
policies that improve
-adequate sanitation
-safe water supply
-health care availability
-environmental safety/ shelter
Policies & programs that increase
-caregivers access
-caregivers resource control
-caregivers knowledge, adoption & practice

5. Basic Causes Political & legal institutions
Political commitment, legal structures for implementing food laws
Resource control, ownership, use
Resource use & pricing policies
Potential resources
Poverty/natural resources availability/ agricultural technology
Sources: Adapted from UNICEF (1998); Haddad (1999); and Smith and Haddad (2000)

6. Introduction to Poverty Analysis
Why poverty analysis?
Who wants poverty information?
Role of policymakers & policy analysts
Poverty estimates for policy analysis
Poverty estimates for policy evaluation
Cost-effectiveness of poverty analysis

7. What is Poverty?
Poverty is “welfare level below a reasonable minimum.”
Poverty has various dimensions
Income poverty
Security poverty
Education poverty
Health – Nutrition Poverty
Multiple deprivation
Poor people’s perception of poverty level

8. What do we mean by “Poverty”?
The primary focus is on individuals or groups suffering from multiple deprivations
Education poor
Core Poor
Health Poor
Security Poor
Income Poor

9. Poverty Lines and Poverty Measurement
Two Issues in Generating Poverty Estimates
Fixing a poverty line: Identification
Measuring poverty: Aggregation

10. Methods of Fixing Poverty Lines
Cost-of-basic-needs method (Food-share method)
Cost of basic food needs
Cost of basic non-food needs
Food-energy method
Expenditure level that meets the food energy requirement
Based on calorie-income relationships
Fitting and tracing calorie-expenditure graph

11. Cost-of-Basic-Needs Method
Total Poverty Line = Z
Z=ZF + ZN
ZF = Food Poverty Line
ZN=Non-food Poverty Line

12. How to calculate the Food Poverty Line
Calculate average household (HH) size
Find minimum requirement of daily per-capita calories for WHO
Find the typical food bundle of the relative poor HH
Calculate the calories of this food bundle
Determine the cost of this food bundle
WHO’s average minimum
ZF = calorie requirement
calories in average food bundle for
relatively poor HH
Cost of the average food bundle *

13. How to Calculate the Non-food Poverty Line
Find typical Household (HH) on the food poverty line.
Calculate the non-food expenditures of the HH.
xF = per capita expenditures on food
XN = per capita expenditure on non-food
X = total per capita expenditure
ZN = E {XN|xF= ZF} for the poor
(Non-food poverty line is the per capita non-food expenditure level when the per capita food expenditure level is equal to the food poverty line)
ZN = E {XN|x= ZF} for the ultra (extreme) poor
(The non-food poverty line is given by the per capita non-food expenditure when the total expenditure is equal to the food poverty line. The food poverty line in essence becomes the total poverty line for the ultra poor)
Z = ZF + ZN

14. Minimum daily caloric requirements by sector and gender Urban Rural
Age categories
Male
Female
Male
Female
0 to 1 year
820
820
820
820
>1 to 2 years
1,150
1,150
1,150
1,150
>2 to 3 years
1,350
1,350
1,350
1,350
>3 to 5 years
1,550
1,550
1,550
1,550
>5 to 7 years
1,850
1,750
1,850
1,750
>7 to 10 years
2,100
1,800
2,100
1,800
>10 to 12 years
2,200
1,950
2,200
1,950
>12 to 14 years
2,400
2,100
2,400
2,100
>14 to 16 years
2,600
2,150
2,600
2,150
>16 to 18 years
2,850
2,150
2,850
2,150
>18 to 30 years
3,150
2,500
3,500
2,750
>30 to 60 years
3,050
2,450
3,400
2,750
>60 years
2,600
2,200
2,850
2,450
Source:
Caloric requirements are from WHO (1985, Tables 42 to 49).
Notes:
Requirements used are for men weighing 70 kilograms and for women weighing 60 kilograms. Urban
individuals are assumed to need 1.8 times the basal metabolic rate (BMR), while rural individuals are assumed
to need 2.0 times the average BMR. Children under one year of age are assigned the average caloric need of
children either 3–6, 6–9, or 9–12 months old.

15. Poverty lines and spatial price indexes by region Food poverty line
Reference
poverty
line
Ultra
poverty
line
Relative
price
index
Region
Metropolitan
50.18
129
.19
75.36
1.000
Lower urban
45.94
101
.72
67.52
0.787
Lower rural
44.29 85
.38
0.661
64.71
Upper urban
45.19
101.36
67.51
0.785
82.81
Upper rural
40.36
53.37
0.641
Notes:
Poverty lines are monthly, per capita figures in Egyptian pounds. The Metropolitan poverty line is used as a
base line to create the relative price index, which is simply the ratio of each region's reference poverty line to
the base line.

16. Issues in the Poverty Line
Does a poverty line exists?
Can it be used & is it well accepted?
Are international standards for setting poverty lines accepted in all countries?
Can we use the same poverty line throughout a country?
Can the nutritional basket underlying the poverty line be derived from surveys?

17. Measures of Poverty Incidence of Poverty: poverty rate
Use the headcount rate to calculate the poverty rate of the % of population below the poverty line
Depth of Poverty – how far a person is below the poverty line
Poverty Gap – aggregation of depth of poverty
Poverty Severity – aggregation with weights

18. Head-count Index of Poverty
Proportion of population whose consumption (y) is less than the poverty line Z
Y1, Y2,..…Z, ..…Yn q
H =q/n
H = Head-count index
q = number of poor
n = size of the population
Eg: if n=100; q=50 then H=0.5 or 50%
Problems
Insensitive to the depth of poverty
H will not change when a poor persons welfare changes if he/she remains below the poverty line

19. Example of the Head-count Index Calculation
Income of 4 individuals in a sample: 1,2,3,4
Poverty Line Z = 3.0
H = q/n =3/4 = 0.75 or 75%

20. Head-count of Absolute Poverty for Bangladesh
Year
Sector
BBS Graph* Fitting Method +
Ahmed et al. (1991)+
Ravallion & Sen (1994)
Rahman & Haque (1988)
Hossain & Sen (1992)
Sen & Islam (1993)
Muqtada (1986)
1973/
1974
Rural
Urban
82.9
81.4 (5.6) -
65.3
62.5
71.3
n.a.
63.2
55.9
37.8
1981/
1982
73.8
66.0
71.8
79.1
50.7
n.a
48.4
1983/
1984
57.0
53.8
40.9
49.8
39.5
50.0
42.6
1985/
1986
51.0
56.0
51.6
66.8
45.9
30.8
47.1
29.1
41.3
30.6
1988/
1989
48.0
44.0
49.7
35.9
43.8
33.4
1991/
1992
46.8
52.9
33.6
+ food energy method
* BSS 1991 and BSS 1995

21. Poverty Gap Index (PGI)
Aggregate short-fall of the poor relative to the poverty line Z
Y1, Y2,…, Yq; Yq  Z
Poorest Least poor q
PG = 1/n Σ [(Z-Yi)/Z] = mean proportionate
i=1 poverty gap across the
whole population (zero gap
for the non=poor)

22. Example of Poverty Gap Calculation
Income of4 individuals in a sample: 1,2,3,4
Poverty line = Z = 3; n=4
PG = [(3-1)/3 + (3-2)/3]/4
= [(2/3) + (1/3)]/4
= [(3/3)/4]
= ¼ or 0.25
Poverty gap index does not capture differences in severity of poverty.

23. Why? Region A = (1,2,3,4) Region B = (2,2,2,4) Poverty line = Z = 3
HA = HB = 0.75
PGA = PGB = 0.25
Poverty gap will be unaffected by an income transfer from a poor person to another poor person who remains below the poverty line

24. Squared Poverty Gap Index (SPG)
Mean of the squared proportionate poverty gap
Reflects severity of poverty
Sensitive to the distribution among the poor q
SPG = 1/n Σ [(Z-Yi)/Z]2
i=1
Eg: Region A = (1,2,3,4) Region B = (2,2,2,4) with Z=3
SPGA = SPGB = 0.08
Poverty in region A > Poverty in region B
After speaking about slide look at overheads of Table 1, 2, 3

25. Poverty Analysis Income/Consumption Poverty Profile
Correlates poverty with:
Gender
Age
Residential location
Ethnic characteristics
Income source
Employment sources
Share of food/ non food consumption
Education outcomes
Malnutrition outcomes
After reviewing slide speak about overhead Table 4, 5 figure, table 6, 7, 8

26. Qualitative Analysis of Poverty
Role of informal sector?
Social analysis of poverty?
Institutional analysis of poverty reducing institutions
Intra-household distribution of resources

27. Use of Qualitative Methods
Subjective meaning of poverty
Intra-household dimensions of poverty
Poor people’s priorities for action
Social, political, and cultural factors, gender roles, and traditional beliefs
Participants help in designing household surveys
Assess the validity of HHS results at local level

28. Income or Consumption?
Consumption reflects income as well as past savings, access to credit markets, and seasonal variation in income
No records of income or seasonal fluctuations
Large informal sectors
Consumption data helps in deriving the poverty line

29. Measuring Income/ Consumption Poverty
Household data availability – tools
Measurement of income poverty
Quantitative analysis tools
Qualitative analysis tools
Income poverty dynamics – tools

30. Data Needs for Poverty Analysis
National level data
National accounts – GDP, consumption, savings, investment, imports, exports, etc.
Ministry of Finance, Central Statistical Agency
Budgets, price surveys, and data collection
Monthly, quarterly, and yearly

31. Data Needs for Poverty Analysis cont.
Local level data
Consumer and producer prices, climatic data, availability and use of markets and services
CSA, local service providers, regional departments
Price and market surveys
Monthly, yearly

32. Data Needs for Poverty Analysis cont.
Household – Individual level data
Household income, consumption, employment, assets, production, demography, etc.
CSA, sectoral ministries, NGOs, academics
Household survey, rapid assessments, monitoring and evaluation
Yearly, 2-3 years, every 5 years

33. Data Sources for Poverty Analysis
Administrative data
Population Census
Household surveys – LSMS, I&E, Labor, DHS, RRA
Qualitative and Participatory Assessments – ethnographic, village studies, beneficiary assessments, etc.

34. Types of Household Surveys
Single-topic surveys
Multi-topic surveys
Census data
Poverty monitoring surveys
Times series data
Panel data sets