poverty

1. Presented By: Saiyad Eman Shafique
Submitted To: Dr. Manoj
VBSPU University
Department of Applied Psychology
2020-2021
POVERTY & DEPRIVATION

2. POVERTY
Poverty is the deprivation of food, shelter, money and clothing when people can’t
satisfy their basic needs. Poverty can be understood simply as a lack of money or
more broadly in terms of barriers to everyday human life.
 Poverty is the other economic problem facing most of the nations in the world.
There is no unique definition of poverty.
 This is based on the national definition as well as the international standards of
US $1/day/person and US $2/day/person. Lately poverty definition is changed to
US $4/day/person.

3. DEFINITION OF POVERTY
 According to David Kurten , Poverty also involve social disintegration and
environmental degradation which he describe as forming the three fold
human crisis in the world today.
 According to Mobile Orshansky who developed the poverty measurements
used by the U.S. government, “ Poor is to be deprived of those goods, services
and pleasures which others around us take for granted.”

4. NEED OF POVERTY ESTIMATION
 Poverty estimates are vital input to design, monitor and implement
appropriate anti-poverty policies.
• Analysis of poverty profiles by regions, socio-economic groups
• Determinants - factors affecting poverty
• Relative effects of factors affecting poverty
• Allocation of resources to different regions and to various poverty
reduction programs.
 Precise estimates of poverty neither easy nor universally acceptable. Yet,
can act as a broad and reasonably policy guide.

5. POVERTY LINE
 The poverty threshold or poverty line is the minimum level of income deemed adequate in
a given country.
 In practice, like the definition of poverty, the official or common understanding of the
poverty line is significantly higher in developed countries than in developing countries.
 The common international poverty line has in the past been roughly $1 a day. In 2008, the
World Bank came out with a revised figure of $1.25 at 2005 purchasing-power parity (PPP).
 Determining the poverty line is usually done by finding the total cost of all the essential
resources that an average human adult consumes in one year.
 The largest of these expenses is typically the rent required to live in an apartment, so
historically, economists have paid particular attention to the real estate market and housing
prices as a strong poverty line affecter.

6. TYPES OF POVERTY
 Absolute Poverty: It occurs when people cannot
obtain adequate resources (measured in terms of
calories or nutrition) to support a minimum level of
physical health. (same everywhere, and can be
eradicated as demonstrated by some countries)
 Relative Poverty: It occurs when people do not
have the minimum level of living standards as
determined by a government. (varies from country to
country, sometimes within the same country)

7. INDIAN POVERTY LINE
 A minimum level of living necessary for physical and social development of a
person.
 Estimated as: total consumption expenditure level that meets energy (calorie)
need of an average person.
• PL comprises of both food and non-food components of consumption.
• Considers non-food expenditure actually incurred corresponding to this total
expenditure.
• Difficult to consider minimum non-food needs entirely on an objective basis

8. RELATION BETWEEN CALORIE INTAKE
& PER CAPITA EXPENDITURE
0
500
1000
1500
2000
2500
3000
3500
0 100 200 300 400 500 600 700 800 900 1000
Per Capita Consumption Expenditure per Month
(Rupees)
Per
Capita
Calorie
Intake
per
day

9. EXAMPLE OF SIZE DISTRIBUTION OF
CONSUMPTION EXPENDITURE
MPCE %Population
0-150 3.2
150-200 4.0
200-250 6.5
250-300 8.6
300-340 10.0 (half of 10% are below poverty line 320)
340-400 11.3
400-450 8.6
450-500 9.2
500-550 9.3
550-650 11.4
650-800 8.9
800-1000 5.0
Above 1000 4.0
All classes 100.0
MPCE: Monthly Per Capita Consumption Expenditure
Poverty Line: Rs. 320 per capita per month
HCR= 3.2+4.0+6.5+8.6+5.0 = 27.3%

10. MEASURES OF POVERTY
 Head Count Ratio (HCR),
 Poverty Gap (PG) and
 Squared Poverty Gap (SPG)
n
m
HCR 
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m
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m
i
i
z
y
z
n
SPG
m= no. of poor population, n = total population,
z= poverty line, yi =income of i-th person

11. MEASURES OF POVERTY
There are Various measures of the extent of poverty :
 The head count index.
 The poverty gap index.
 The squared poverty gap (poverty severity) index.

12. HEAD COUNT INDEX
 The most widely used measure is the headcount index.
 It simply measures the proportion of the population that is counted as poor.
Head count index (HCR) = No. of poor /Total no. of population
n
m
HCR 

13. SIGNIFICANCE OF HEAD COUNT INDEX
 The most common method of measuring and reporting poverty is the
headcount ratio, given as the percentage of population that is below the
poverty line.
 One of the undesirable features of the headcount ratio is that it ignores the
depth of poverty; if the poor becomes poorer, the headcount index does
not change.
 Poverty gap index provides a clearer perspective on the depth of
poverty.

14. WEAKNESS OF HEAD COUNT INDEX
 It does not take the intensity of poverty into account.
 Survey does not indicate how poor the poor are, and hence does not
change if people below the poverty line become poorer.
 The poverty estimates should be calculated for individuals and not the
households.

15. POVERTY GAP INDEX
 Poverty gap index is a measure of the intensity of poverty. It is defined as
the average poverty gap in the population as a proportion of the poverty
line.
 The poverty gap index is an improvement over the poverty measure
headcount ratio which simply counts all the people below a poverty line, in
a given population, and considers them equally poor.
 Poverty gap index estimates the depth of poverty by considering how far,
on the average, the poor are from that poverty line.

16. CALCULATION OF POVERTY GAP INDEX
Poverty gap index (PGI) is calculated as,
where is the total population of poor who are living at or below the poverty line and is
the income of the poor household .
 In this calculation, all households whose income is above the poverty line are not
considered, because PGI is a measure of depth of poverty below the poverty line .
 By definition, poverty gap index is a percentage between 0 and 100%.
 Sometimes it is reported as a fraction, between 0 and 1. A theoretical value of zero
implies that all the extremely poor people are exactly at the poverty line.
 A theoretical value of 100% implies all the extremely poor people have zero income.

17. SQUARED POVERTY GAP INDEX
 Squared poverty gap index, also known poverty severity index or , is related to
poverty gap index.
 It is calculated by averaging the square the poverty gap ratio. By squaring each
poverty gap data, the measure puts more weight the further a poor person’s observed
income falls below the poverty line.
 The squared poverty gap index is one form of a weighted sum of poverty gaps, with
the weight proportionate to the poverty gap.
 Sen index, sometimes referred to , is related to poverty gap index (PGI).It is calculated
as follows:
 Where H is the headcount ratio and Gz is the income Gini coefficient of only the
people below the poverty line.
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2
1
1 
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m
i
i
z
y
z
n
SPG

18. GINI COEFFICIENT
 The Gini coefficient is usually defined mathematically based on the Lorenz
curve , which plots the proportion of the total income of the population (y axis)
that is cumulatively earned by the bottom x% of the population. The line at 45
degrees thus represents perfect equality of incomes.
 If perfect equality, Gini coefficient takes value 0
 If perfect inequality, equals 1.
 Internationally, Gini coeff. Normally ranges between 0.25 & 0.7
)
(
1
1

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m
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i QC
QC
P
L

19. GINI COEFFICIENT & AGRREGATE
MEASURES OF INEQUALITY
 The Gini coefficient can then be thought of as the ratio of
the area that lies between the line of equality and the
Lorenz curve over the total area under the line of equality .
 The Gini coefficient can theoretically range from 0 to 1; it is
sometimes expressed as a percentage ranging between 0
and 100. In practice, both extreme values are not quite
reached.
 A low Gini coefficient indicates a more equal distribution,
with 0 corresponding to complete equality, while higher Gini
coefficients indicate more unequal distribution, with 1
corresponding to complete inequality.

20. LORENZ CURVE
 In economics ,the Lorenz curve is a
graphical representation of the
cumulative distribution function of
the empirical probability distribution
of wealth; it is a graph showing the
proportion of the distribution
assumed by the bottom y% of the
values.

21. CONTINUE..
 It is often used to represent income distribution, where it shows for the
bottom x% of households, what percentage y% of the total income they
have. The percentage of households is plotted on the x-axis, the percentage
of income on the y-axis.
 It can also be used to show distribution of assets. In such use, many
economists consider it to be a measure of social inequality. It was developed
by Max O. Lorenz in 1905 for representing inequality of the wealth
distribution.

22. GREATER THE CURVATURE OF LORENZ LINE, GREATER WILL BE
THE RELATIVE DEGREE OF INEQUALITY

23. FOUR POSSIBLE LORENZ CURVES
 The concept is useful in describing inequality
among the size of individuals in ecology, and in
studies of biodiversity, where cumulative
proportion of species is plotted against
cumulative proportion of individuals. It is also
useful in business modeling.
EXAPLE: In consumer finance, to measure the actual
delinquency Y% of the X% of people with worst
predicted risk scores.

24. LORENZ CURVES
 EXAMPLE: From Household income/expenditure Survey
Compute data on each household’s income/expenditure
Rank the families from lowest income to highest income.
% of Pop.
(Pi)
% of Inc. Cumulative
% of Pop.
Cummulative
% of Income
(QCi)
10 3.3 10 3.5
10 5.3 20 8.6
20 13.3 40 21.9
20 17.0 60 38.9
20 22.7 80 61.6
10 14.6 90 76.2
10 23.8 100 100

25. LORENZ CURVES
Cumulative %
of Income
Cumulative % of Population
X=Area of the hatched region
Gini coefficient = [X/50]100

26. FACTORS AFFECTING POVERTY
 Poverty depends on per capita household income which in turn affected by
employment, wage rate, land productivity, industrialisation, expansion of service
sector and other general growth and distribution factors
 Special role of :
1) Per capita agricultural income
2) Employment and real wage rate
3) Inflation rate and relative food prices
4) Government expenditure
 Per capita development expenditure
 Social sector expenditure

27. MEASURES OF POVERTY REDUCTION
 Increasing supply of basic needs.
 Increasing supply of food and other goods.
 Increasing supply of healthcare and education, water and energy utilities.
 Removing constraints on Government services
 Reversing brain drains.
 Controlling overpopulation.
 Increasing personal income.

28. POVERTY FACTS & FIGURES
The world bank estimated that:
1) Around 1.29 billion people were in absolute poverty in 2008.
2) About 400 million people in absolute poverty in India and 173 million
people in china.
3) Sub-saharan Africa at 47% had the highest incidence rate of absolute
poverty in 2008.
4) Between 1990 and 2010, about 663 million people moved above the
absolute poverty level.
5) Every year 11 million children living in poverty die before their 5th
birthday.
6) 1.02 billion people go to bed hungry every night.

29. DEPRIVATION
 Deprivation is the consequence of a lack of income and other resources,
which cumulatively can be seen as living in poverty. The relative deprivation
approach to poverty examines the indicators of deprivation, which are then
related back to income levels and resources.

30. DEPRIVATION INDICATORS
In order to measure absolute poverty amongst children, it is necessary to define
the threshold measures of severe deprivation of basic human needs for:
 Food
 Safe drinking water
 Sanitation facilities
 Health
 Shelter
 Education
 Information
 Access to services

31. MEASURES OF DEPRIVATION
 Physical: Quality of housing, Pollution levels, Crime, Vandalism, Graffiti.
 Social Indicators: Crime (reported/fear of), Levels of health and access to
healthcare, Standards of education, Proportion of population on subsidised
benefits, Proportion of single parent families.
 Economic Indices: Access to employment, unemployment,
underemployment, Levels of income.
 Political Measures: Opportunities to vote and take part in community
organisation.

32. THANK YOU