L3 Sept 8-1.ppt

L3 Sept 8-1.ppt - Alternative Measures of Poverty 1...

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Unformatted text preview: Alternative Measures of Poverty 1 Official Definition Resources = all cash income, except EI TC Threshold = cost of TFP * 3 Poor = Resources < Threshold But, this is not the only way to measure poverty 2 Alternative Measures of Poverty Relative Poverty Consumption poverty Capabilities poverty Asset poverty Subjective 3 Relative Poverty I ndividual or household income is compared to income at some point in the overall distribution Commonly, half of the median (50 th percentile) As the median income increases, so does the poverty line 4 Relative vs. Absolute Absolute (US measure) Advantage is that it is simple and intuitive and it is sensitive to income growth in the economy. Disadvantage is that unless it is updated, it may not accurately reflect changes in standards of living. 5 Relative vs. Absolute Relative Advantage is that changes as living standards change. Disadvantage is that there will always be some who are poor, even if everyone is better off. The only way to reduce relative poverty is to decrease inequality. I ncome growth overall may not be reflected in a relative measure. 6 Adam Smith on Poverty Measurement I n a passage from The Wealth of Nations on the necessaries of daily life By necessaries, I understand not only the commodities which are indispensably necessary for the support of life, but what ever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. For Adam Smith, necessaries included linen shirts and leather shoes, although he notes that the Greeks and Romans lived comfortably 7 Poverty Thresholds for Four-Person Families, 1947-2000 8 Consumption Poverty Compare actual consumption to a basket of basic of necessities. The poor are those whose consumption is below the minimum Measure using expenditures instead of income I n developing countries, you may measure quantities (pounds of food eaten, etc) 9 Why look at consumption?...
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L3 Sept 8-1.ppt - Alternative Measures of Poverty 1...

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