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Poverty Measures and Nutrition. Public action to combat hunger has to take note of the causal links and of the gaps in those links, Dreze and Sen (1991,

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Presentation on theme: "Poverty Measures and Nutrition. Public action to combat hunger has to take note of the causal links and of the gaps in those links, Dreze and Sen (1991,"— Presentation transcript:

1 Poverty Measures and Nutrition

2 Public action to combat hunger has to take note of the causal links and of the gaps in those links, Dreze and Sen (1991, Hunger and Public Action). Poverty at the individual and/or household level represents a serious constraint on economic activity. A lack of economic opportunities feeds into poverty. These lack of opportunities can be reenforced by income inequality.

3 Poverty Measures and Nutrition Income inequality though represents one (very important) component of economic inequality defined by Ray (1998, p.p170) as: …the fundamental disparity that permits one individual certain material choices, while denying another individual those very same choices. (emphasis added). What Ray is really saying is that those factors that determine material choices are of importance here such household wealth, income.

4 Poverty Measures and Nutrition Questions to be addressed How do we measure poverty? Who are the poor? What determines poverty?

5 Poverty Measures and Nutrition How do we measure poverty? Poverty can be both absolute and relative. See Martin Ravallion, (1994) Poverty Comparisons. Absolute Poverty:Those people who do not have adequate nutritional intake per day, or do not have adequate shelter or clothing in order to survive are deemed to be in absolute poverty. Is traditionally measured by introducing largely ad hoc poverty lines. E.g. the World Bank reports the number of people in countries below a $1 or $2 a day as a proportion of the total population. Better but more expensive method is to calculate nutritionally based poverty lines – World Health Organisation.

6 Poverty Measures and Nutrition (Q)Is it simply that more income means better life expectancy? Diminishing returns to income – think obesity and other rich world diseases. Known as the Preston Curve. Income per capita Life Expectancy at birth

7 Poverty Measures and Nutrition Chronic Poverty – those who never get out of absolute poverty. See Chronic Poverty Research Centre, for more information on this type of poverty.

8 Poverty Measures and Nutrition Relative Poverty:The relative position of some economic unit (e.g. individual, household, racial group) compared to another economic unit. A person can be relatively poor but not absolutely poor – is really to do with distribution of income in a country. E.g. Economic growth will generally result in a reduction of absolute poverty but will only change relative poverty if there is a change in distribution of income. (Woolard and Leibbrandt, 2001, pp. 47).

9 Poverty Measures and Nutrition Absolute Poverty Lines Poverty line measures signal to researchers where poverty is and becomes the first place to start in analyzing poverty in a certain country, within a certain economic group etc….. Examples of Poverty Lines: (1)$1 a day and $2 a day lines that the World Bank and United Nations Development Programme (UNDP) use. (2)Calories per capita or per household Both measures are absolute in that people can be lifted out of poverty if they can increase income or calories and poverty can be eradicated.

10 Poverty Measures and Nutrition Relative Poverty Lines Calculate a poverty line that is based on the income level of the population. Relative poverty cannot be eradicated unless income inequality is addressed. (1)Standard percentage of people earnings below 50% of the median or mean wage: can vary the 50% figure down to 10% or 25%. Note: If income increases for all then relative poverty will still be apparent since you will always have some who fall below 50% of the new (higher) median income level.

11 Poverty Measures and Nutrition Estimating the poverty gap: Applied examples A number of general poverty measures from Foster, Greer and Thorbecke (1984), Econometrica, Vol 52(3), pp.761-66. The FGT poverty index is defined as, Where n is the total sample size, z is the chosen poverty line, and is the standard of living indicator for person i, normally denoted as income. The parameter measures the sensitivity of the index to transfers between the poor units.

12 Poverty Measures and Nutrition The conditional term means that individual is income must be below the chosen poverty line. The poverty gap measure (PG) is generated when =1. Hence (1) becomes,

13 Poverty Measures and Nutrition So if the majority of n poor individuals are along way short of the poverty line (z) then would be large and the number of people with a large depth of poverty is high. Example 1 i=90,25,30,5,45,70,20,20,15,15,10,10 Let z=100 =1/12(0.1+0.75+0.7+0.95+0.55+0.3+0.8+0.8+0.85+0.85+0.9+0.9), So, Poverty Gap Index = 8.45/12=0.704

14 Poverty Measures and Nutrition Example 2 When i=90,90,95,90,90,96,85,70,50,60,90,30 Let z=100 =1/12(0.1+0.1+0.05+0.1+0.1+0.04+0.15+0.3+0.5+0.4+0.1+0.3), So, Poverty Gap Index = 2.24/12=0.187 So the PG index does not merely count how may people are poor (since in both examples 12 people are below the ad hoc poverty line) but reveals the depth of poverty……those in example 1 suffer greater poverty depth than those in example 2.

15 Poverty Measures and Nutrition What can then be calculated is the minimum financial cost of alleviating poverty by setting =0 and using the summation part of the FGT index i.e. the sum of the value of resources required to place each agent in the society just above the poverty line. This is formally represented simply as, An easier calculation than (3) is taken from Kanbur (1987, Measurement and alleviation of poverty, IMF Staff Papers Vol 34(1)) who simply uses.

16 Poverty Measures and Nutrition Critique of Poverty Lines Generally, ad hoc shares of the average income per person are taken to locate a poverty line. For example, taking a poverty line as 50% of the mean/median income level. One weakness with such an approach is that the number of people in poverty is determined solely by where the poverty line is placed (Deaton, 1997). Hence a number of poverty lines must be estimated to give a clearer idea of what really is going on. Another weakness is that such poverty lines DO NOT measure the depth of poverty.

17 Poverty Measures and Nutrition Critique of Poverty Lines cont… Poverty lines are static, capturing a position of poverty at a certain point in time. However, it is highly likely that poverty is dynamic in nature with people moving in and out of poverty. For a more realistic understanding of the nature of poverty and who the poor are in a society the researcher must delve much deeper.

18 Poverty Measures and Nutrition Poverty: A Different Methodology But poverty clearly has a more human face and one which many economists often overlook or choose to skip over because it is very hard to quantify. No surprise that the methodology used is then qualitative in nature. McKay (2002, pp. 5) refers to participatory investigations into poverty and inequality which necessarily involves the researcher NOT sitting in his/her ivory tower but actually living for a time in villages/households and understanding the dynamics of these micro-economies.

19 Poverty Measures and Nutrition The role of children in the family, of gender differences, of who works for money income and who does not, of access to any public services that exist, of the dynamics of villages and tribes, of who gets what when an elder dies…….the list is long and interesting from a micro-economic perspective.

20 Poverty Measures and Nutrition Who are the Poor? The poor of any country share similar characteristics. In developing countries the poor tend to be Black, female, young, rural, unskilled and perhaps semi-skilled (this is determined by the nature of economic growth, trade liberalization policy, subsidies etc…). The factors that determine who is poor include socio-economic institutions, e.g. Indian caste system, apartheid, racism (still in Malaysia).

21 Poverty Measures and Nutrition What Determines Poverty? Research indicates that the quality and quantity of education, urban-rural location, racial group, gender, health and employment status all impact on whether somebody is poor or not. Other factors include socio-economic factors, the historical legacy of a country, social customs, property rights, economic dependence, political system/affiliations etc. This is where much debate lies. There is a large, positive correlation between unemployment and poverty. However the direction of causality is not straightforward.

22 Poverty Measures and Nutrition Indeed one of the problems in researching poverty and the linkages between poverty and the labour market is that an endogeneity (happening at the same time) concern is raised immediately, i.e. Does employment status determine poverty, or does poverty cause employment status? Certainly you would expect that if somebody is employed in the formal sector as a salaried worker with job security (e.g. public sector civil servant) then they are less likely to either report being poor themselves and/or less likely to be categorized as being poor by some poverty line. However the importance too of the history of the individual is vital in determining whether he/she is in poverty. Of particular importance here are the institutional structure of a country, social customs and the household structure and dynamics.

23 Poverty Measures and Nutrition How does individual poverty impact on the individuals participation in the labour market? Given poverty does exist in a country there are several ways this can impact on participants behaviour in the labour market. (1)Liebenstein (1963) first made the direct link between poverty in the form of being under-nourished and productivity in the labour market. He found that if a person was under- nourished then this impacted negatively on productivity and assuming a wage labour market would mean a low wage, with MRP=W. Hence poverty can result in a negative nutritional impact on the worker which can result in lower productivity.

24 Poverty Measures and Nutrition It is unclear what the minimal calorie intake is and what the appropriate nutritional levels for workers should be in developing or indeed any country. There is an issue here involving the type of job somebody has (is it highly physical, and therefore requires far higher levels of foods) – see Strauss and Thomas (1988). What is NOT beyond doubt is that poverty can result in a lack of food, which can impact negatively on productivity and output that can be self-perpetuating.

25 Poverty Measures and Nutrition (2)Poverty can result in potential workers not being able to actively take part in the wage labour market because (1) physically cannot go where the jobs are (2) the opportunity cost of searching for work is too high (e.g. not able to subsistence farm and therefore could increase the risk of hunger). (3)Poverty within a household or within a community means less means by which to invest in (1) human capital and (2) physical capital. This means little chance of escaping poverty and indeed could result in a poverty trap emerging. (4)Ray (1998, pp.273) postulates that access to food is the same as access to income and if one of these factors is owned by an individual, he/she is likely NOT to be caught in a poverty trap. (5)As well as the physical side effects of being poor and lacking nutrition, there are also negative mental impacts that are related to increasing the likelihood of depression, mental apathy, and de-motivation.

26 Poverty Measures and Nutrition What should be emerging for the reader is the causal duality of poverty and employment. Not only do labour markets generate income and therefore create the principal potential source of nutrition and good health, but good nutrition in turn affects the capacity of the body to perform tasks that generate income Ray (1998, pp.274). The nature of the labour market, in particular the level of unemployment, has a large impact on the relationship between poverty and employment and hence the poverty trap. If a country suffers from poverty and high unemployment (e.g. South Africa) then there is massive slack in the labour market, meaning demand is low and supply is high for (certain kinds of?) labour.

27 References and Useful Websites References and Useful Websites Websites: United Nations Development Programme, World Bank, Department for International Development, Chronic Poverty Research Centre, Brooks World Poverty Institute, References: Deaton, A., (1997), THE ANALYSIS OF HOUSEHOLD SURVEYS: A Microeconomic Approach to Development Policy, John Hopkins University Press. Dreze, J., and Sen, A., (1991), Hunger and Public Action, WIDER Studies in Economics, Clarendon Press. Foster, Greer and Thorbecke (1984), A class of decomposable poverty measures, Econometrica, Vol 52(3), pp. 761-6. Foster and Shorrocks (1988), Poverty Orderings, Econometrica, Vol 56, pp. 173-7. Atkinson (1987), On the Measurement of Poverty, Econometrica, Vol 55(4), pp. 749-64. Ravallion, M., (1994) Poverty Comparisons, Routledge. Ray, D., (1998), Development Economics, Princeton University Press. Strauss, J., and Thomas, D., (1998), Health, Nutrition and Economic Developmentre, ent, Journal of Economic Literature 36:766-817.

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