This document discusses ECLAC's methodology for measuring multidimensional poverty in Latin America using both monetary and non-monetary indicators. It tests two multidimensional indexes, one based on basic needs and another that adds indicators of insufficient income and social exclusion. The analysis finds that income and non-income measures identify different populations as poor, with more divergence in countries with lower poverty rates. Including additional dimensions provides a more comprehensive view of poverty. Housing, energy, water, and social protection contribute more to poverty in countries with higher rates, while education and youth exclusion contribute more in countries with lower rates.

1. OECD/ECLAC
REGIONAL
CONSULTATION
Inclusive Growth in Latin America and the Caribbean
A MULTIDIMENSIONAL APPROACH TO
POVERTY MEASUREMENT IN LATIN
AMERICA

2. OBJECTIVES AND SCOPE
• ECLAC is exploring a multidimensional approach to
poverty measurement for Latin American countries.
• Using the methodology proposed by Alkire & Foster,
several dimensions, cut-offs and ways of aggregation
of dimensions are analyzed.
• Two multidimensional indexes are tested:
– The first uses the dimensions and indicators from the
Unsatisfied Basic Needs (UBN) approach:
– Housing (construction materials and overcrowding),
Water, Sanitation, Education (school attendance and
minimum years of schooling, Energy (electricity and
cooking fuel).
– The second adds indicators of insufficient incomes and
social exclusion to the basic needs core.

3. METHODOLOGY
• Weights for dimensions (W)
– There is no clear consensus for assigning higher or lower
weights for different measures of critical deprivations.
– Following most standard practices, the dimensions are
weighted equally.
• Value of multidimensional cut-off (k)
– The intersection approach (k = all deprivations)
increases the risk of exclusion error.
– The union approach (k = one or more deprivation)
increases the risk of inclusion error.
– We choose a value of k between both extremes, but
closer to the union approach: k=2 (two deprivations or
more)
• Unit of analysis: households

4. The measure based on basic needs has a
reasonable robustness. The ordering of countries
tends to be independent from k-values.
Latin America (17 countries). Adjusted Headcount Index (M0) and different K values , 2011
0.45
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
m0_10p m0_20p m0_30p m0_40p m0_60p m0_70p m0_80p m0_90p
Source: ECLAC.
ARG
BOL
BRA
CHL
COL
CRI
ECU
GUA
HON
MEX
NIC
PRY
PER
RDO
SAL
URY
VEN

5. The higher the poverty headcount rate (H), the
higher the intensity of poverty (A)
LatinAmerica (17 countries). Intensity (A) and incidence (H) of poverty , 2011
(percentages)
Source: ECLAC.
CHL
ARG
URY
VEN
CRI
BRA
ECU
COL
RDO
MEX
BOL HON
PER SAL
PRY
NIC
GUA
60
55
50
45
40
35
30
25
20
0 10 20 30 40 50 60 70 80
Intensity
Incidence

6. Income and non-income poverty measures tend to identify
different people as poor. The divergencies are higher in
countries with lower poverty rates.
Latin America (17 countries). Poverty incidence measured by monetary and non-monetary methods/a. ,
2011
100
90
80
70
60
50
40
30
20
10
0
Poor by the two methods Poor just by one method Non-poor
Source: ECLAC.
a. Income poverty includes both extreme and non extreme poor. ECLAC estimations for all countries, except Perú. Non income
poverty is measured by critical deprivations (BNI), with k=2.

7. INCLUDING ADDITIONAL DIMENSIONS
OF WELFARE
• Measures based on critical deprivations have a low
analytical capacity in LA countries where most basic
needs are generally satisfied.
• It makes sense to complement indicators of basic needs
with other dimensions:
– Lack of income (income below cost of food basket) decreases
the probability of errors of exclusion, particularly in countries
with a lower incidence of non monetary deprivations, and may
act as a proxy for inadequate food consumption.
– Aspects of social exclusion such as young people that neither
study nor work or lack of social protection (affiliation to health
insurance, affiliation to pension funds, access to old-age
pensions) are very relevant to understanding poverty.

8. Relatively speaking, the higher differences are
verified in countries with the lower incidences
of basic needs.
LatinAmerica (16 countries). Headcount poverty Index (H) by countries, 2011
(percentages)
2.2
9.6
90
80
70
60
50
40
30
20
10
Sources: ECLAC.
a. 2006 data
11
13.2
15.5 15.5
21
23.9 24.8
31.9
40.5
46.6
48 48.1
63.4 63.6
11.2
15.5
24.2
30.4
26.1
29.9
45.1
39.4
53
48.5
53.1
70.3
66.8 65.6
80.6
79
0
Chl Ury Arg Ven Bra Cri Ecu Col Rdo Mex Per Pry Els Bol Hon Gua/b.
BNI BNI+Incomes+Social Exclusion

9. Housing, energy, water/sanitation and social protection have
more influence in countries with higher poverty rates.
Education and youth exclusion have more influence in
countries with lower poverty rates.
América Latina (16 países). Contribution of each dimension to total poverty a, 2011
(percentages)
100
90
80
70
60
50
40
30
20
10
0
CHL URY ARG VEN BRA CRI ECU COL MEX RDO PER BOL SAL PRY GUA HON
Housing Water/Sanitation Energy Education Youth exclusion Social Protection Incomes
Source: ECLAC.
a Housing: inadequate materials and overcrowding. Energy: electricity and cooking fuel. Education: child attendance to school and educational
level of adult members. Youth Exclusion: youth neither studying nor working.Social Protection: affiliation to health insurance, affiliation to
pension fund and access to retirement .Incomes: households with per capita incomes below the indigence line

10. Pascual Gerstenfeld, Director, Statistics Division,
ECLAC, pascual.gerstenfeld@cepal.org