Lecture 2-1 Defining and Measuring Poverty

Lecture 2-1 Defining and Measuring Poverty - Lecture 2-1...

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Unformatted text preview: Lecture 2-1 Defining and Measuring Poverty Instructor: Dr. Jin Wang Feb 11 th , 2011 An overview of the poverty definition, official poverty measure and critiques ¡ Definitions: ¢ Absolute Poverty vs. Relative Poverty ¡ Poverty Measure: ¢ Headcount Index vs. Poverty Gap Index ¡ Case study: ¢ How does the World Bank measure global poverty? ¢ How does UK measure its poverty? ¢ How does mainland China measure its poverty? ¢ How does Hong Kong measure its poverty? What is poverty? ¡ Can we say a person in Hong Kong is poor if they have a living standard that is obviously higher than the average person, for example, in Africa? ¡ Is it an absolute concept that is the same across the world or ¡ Is it a relative concept that depends on the incomes of others in the area? To Define and Measure Poverty ¡ Key Steps to define Poverty ¢ Defining an indicator of living standard ¢ Establishing a minimum acceptable living standard to separate the poor from the non-poor ( the poverty line ) ¢ Generating summary measures of the extent of poverty. Step 1: The Indicator of Living Standard and its Distribution ¡ The most frequently used indicator is: ¢ Candidate 1: Income ¢ Candidate 2: Consumption Expenditure ¢ The practical choice depends on data availability. Step 2: Poverty line ¡ The poverty line as a benchmark : the poor are those whose expenditure (or income) falls below a poverty line. ¡ How to choose a poverty line? ¡ The choice of the poverty line (and measure) depends crucially on being absolute or relative poverty. Absolute Poverty ¡ Absolute Poverty: ¢ having less than an objectively defined threshold. ¡ Many countries calculate absolute poverty lines by calculating how much it costs to obtain enough food, ¢ usually in terms of meeting a calorie norm of around 2000 cal per person per day (as suggested by nutritional experts at the Food and Agricultural Organization of the United Nations) Calorie Engel Curve: a method to determine absolute poverty line Log (Per capita Calorie Consumption) Log (per capita expenditure) Calorie Engel Curve ¡ The Calorie Engel Curve plots the logarithm of calorie consumption against the logarithm of total household expenses per capita. Calorie Engel Curve: to determine absolute poverty line ¡ By looking at what people actually spend, we can find the income (or total expenditure) level at which, on average, people get 2,000 calories. ¡ The critical level will be the poverty line. Those people whose expenditure falls below that is classified as poor. Poverty line based on the Engel Curve Log (Per capita Calorie Consumption) Log (per capita income) Calorie Engel Curve Log (2,000 Calories) Poverty Line Calorie-based Poverty Lines ¡ Calorie-based poverty lines are widely used around the world....
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This note was uploaded on 02/14/2012 for the course ISOM isom111111 taught by Professor Hong during the Spring '11 term at HKUST.

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Lecture 2-1 Defining and Measuring Poverty - Lecture 2-1...

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