# Number less than a set amount say 1 or 2 a day in ppp

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Number less than a set amount, say \$1 or \$2 a day in PPP Headcount index = the number of people below poverty line divided by total population (H/N) The poverty line is set at a level in real terms so can compare over time However changes in technology are impossible to avoid Limited – Doesn’t consider how far below the poverty line people are o Better measure: The total poverty gap (TPG) is the total amount of income necessary to raise everyone who is below the poverty line up to that line; equal to shaded area between poverty line and annual income profile of population Average Poverty Gap (APG)= TPG/N (where N = total population) Normalised Poverty Gap (NPG) = APG/Y p (size of poverty gap in relation to the poverty line) Average Income Shortfall (AIS) = TPG/H (where H = headcount of the poor) Normalised Income Shortfall (NIS) = AIS/ Y p o The Foster-Greer-Thorbecke Index: A measure that is sensitive to the degree of inequality (distribution of income) among the poor, which is important because the impact on poverty of economic shocks can differ greatly Satisfies four desirable properties: anonymity, population independence, monotonicity (adding income to poor = less poverty), and distributional sensitivity. (Note headcount ratio fails on distributional sensitivity, headcount fails on population independence) Increasingly used as a standard poverty measure as sensitive to depth and severity of poverty Other measures that do this include the Gini coefficient amongst the poor, and the coefficient of variation of incomes among the poor o The Human Poverty Index: Different to HDI (rankings can differ substantially) A low HPI is good, a higher reflects greater deprivation Measures poverty based on three deprivations: life (% that live to over 40), basic education (adult literacy), and overall economic provisioning (underweight children and access to safe water) o Ahluwalia-Chenery Welfare Index: Assigns a higher weight to income gains by lower-income individuals than to gains by higher-income individuals
Poverty, Inequality and Social Welfare What’s so bad about high inequality?