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# Measures of poverty

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### Measures of poverty

1. 1. Measures of poverty <ul><li>There are Various measures of the extent of poverty . </li></ul><ul><li>The head count index. </li></ul><ul><li>The poverty gap index. </li></ul><ul><li>The squared poverty gap (poverty severity) index. </li></ul>EC 250
2. 2. Head count index <ul><li>The most widely –used measure is the headcount index. </li></ul><ul><li>It simply measures the proportion of the population that is counted as poor. </li></ul><ul><li>Head count index=number of poor/total no. of population </li></ul><ul><li>With the greatest virtues of H.I that it is simple to construct it has three weaknesses: </li></ul><ul><li>It does not take the intensity of poverty into account. </li></ul><ul><li>It % of households are poor, it may be that 25% of individuals are poor. </li></ul><ul><li>But survey does not indicate how poor the poor are ,and hence does not change if people below the poverty line become poorer. </li></ul><ul><li>The poverty estimates should be calculated for individuals and not the households. if 20 data is always related to households, so in order to measure at individual level we must take a critical assumption that all members of the given household enjoy the same level of well-being. </li></ul>EC 250
3. 3. Poverty gap index <ul><li>This popular measure of poverty adds up the extent to which individuals on average fall below the poverty line,and expresses it as a percentage of poverty line. </li></ul><ul><li>more specifically ,we define Poverty gap as the poverty line less the actual income for poor individuals: the gap is considered to be zero for everyone else. </li></ul><ul><li>G= ( z – y ).I (y<z). </li></ul><ul><li>This measures the proportionate poverty gap in the population ( where the non poor have zero poverty gap). </li></ul>EC 250
4. 4. Poverty gap index <ul><li>It is considered to be helpful as it gives the cost of eliminating poverty (relative to the poverty line ) ,because it shows how much to be transferred to the poor to bring their incomes or expenditures up to the poverty line(as a proportion of the poverty line). </li></ul><ul><li>The minimum cost of eliminating poverty using targeted transfers is simply the sum of all the poverty gaps in a population; every gap is filled up to the poverty line. This is all possible subject to the perfect efficiency. </li></ul>EC 250
5. 5. Squared poverty gap ( poverty severity ) index <ul><li>It is a measure of poverty that takes into account inequality among the poor. </li></ul><ul><li>This is weighted sum of poverty gaps (as a proportion of the poverty line), </li></ul><ul><li>Where the weights are the proportionate poverty gaps themselves:a poverty gap of 10% of the poverty line is given a weight of 10% and apoverty gap (say) 20% is given a weight of 20%: this is in contrast of poverty gap index, where they are weighted equally. </li></ul><ul><li>The measure lacks intitive appeal and because it is not easy to iterpet it is not used very widely. </li></ul>EC 250
6. 6. INCIDENCE OF POVERTY <ul><li>The measures of poverty depth and poverty severity provide complimentary information on the incidence of poverty . </li></ul>EC 250
7. 7. Assignment no.2 <ul><li>Discuss the Incidence of poverty in Pakistan BEFORE AND AFTER FLOOD </li></ul><ul><li>Data and working of Poverty reduction strategies. </li></ul><ul><li>Submission and presentation21-4-11. </li></ul>EC 250
8. 8. Income inequalty EC 250 <ul><li>Measuring Inequality </li></ul><ul><ul><li>size distributions </li></ul></ul><ul><ul><li>Lorenz curves </li></ul></ul>
9. 9. The Lorenz Curve EC 250
10. 10. The Greater the Curvature of the Lorenz Line, the Greater the Relative Degree of Inequality EC 250
11. 11. Gini coefficients and aggregate measures of inequality EC 250
12. 12. Four Curves Possible Lorenz EC 250
13. 13. Poverty, Inequality, and Social Welfare <ul><li>What’s so bad about inequality? </li></ul><ul><li>Dualistic development and shifting Lorenz curves: some stylized typologies </li></ul><ul><ul><li>modern sector enlargement </li></ul></ul><ul><ul><li>modern sector enrichment </li></ul></ul><ul><ul><li>traditional sector enrichment </li></ul></ul>EC 250