HANDBOOK ON POVERTY STATISTICS: CONCEPTS METHODS AND ...

HANDBOOK ON POVERTY

STATISTICS: CONCEPTS, METHODS

AND POLICY USE

SPECIAL PROJECT ON POVERTY STATISTICS UNITED NATIONS STATISTICS DIVISION

DECEMBER 2005 1

PREFACE ..................................................................................................................................................... 6

ABOUT THE AUTHORS............................................................................................................................ 8

CHAPTER 1. INTRODUCTION.............................................................................................................. 14

1.1 A BROAD CONSULTATIVE PROCESS.............................................................................................. 15 1.2 ROADMAP.................................................................................................................................... 17

CHAPTER II. CONCEPTS OF POVERTY............................................................................................ 23

INTRODUCTION......................................................................................................................................... 23 2.1 BASIC APPROACHES..................................................................................................................... 27 2.1.1 POVERTY LINES........................................................................................................................... 29 2.1.2 ABSOLUTE VERSUS RELATIVE POVERTY ...................................................................................... 32 2.1.3 COST OF BASIC NEEDS APPROACH .............................................................................................. 33 2.1.4 HOUSEHOLDS AND INDIVIDUALS: ADULT EQUIVALENCE AND SCALE ECONOMIES ....................... 35 2.1.5 ADJUSTMENT FOR NON-FOOD NEEDS ........................................................................................... 39 2.1.6 SETTING AND UPDATING PRICES .................................................................................................. 41 2.2 INTERNATIONAL COMPARISONS................................................................................................... 43 2.3 TOWARD HARMONIZATION.......................................................................................................... 47 REFERENCES............................................................................................................................................. 50

CHAPTER III. POVERTY MEASURES ................................................................................................ 52

INTRODUCTION......................................................................................................................................... 52 3.1 DESIRABLE FEATURES OF POVERTY MEASURES ........................................................................... 54 3.2 FOUR COMMON MEASURES.......................................................................................................... 57 3.2.1 HEADCOUNT MEASURE................................................................................................................ 58 3.2.2 POVERTY GAP.............................................................................................................................. 60 3.2.3 WATTS INDEX.............................................................................................................................. 64 3.2.4 SQUARED POVERTY GAP .............................................................................................................. 66 3.3 COMPARING THE MEASURES........................................................................................................ 67 3.4 EXIT TIME AND THE VALUE OF DESCRIPTIVE TOOLS..................................................................... 71 3.5 BROADER CONCERNS................................................................................................................... 78 3.5.1 COMPARISONS WITHOUT POVERTY MEASURES ............................................................................ 78 3.5.2 MEASUREMENT ERROR................................................................................................................ 79 3.6 CONCLUSIONS ............................................................................................................................. 81 REFERENCES............................................................................................................................................. 84

CHAPTER IV. COUNTRY PRACTICES IN COMPILING POVERTY STATISTICS .................... 85

INTRODUCTION......................................................................................................................................... 85 4.1 INCOME- OR EXPENDITURES-BASED MEASUREMENT APPROACHES .............................................. 86 4.1.1 SPECIFY A FOOD POVERTY THRESHOLD ....................................................................................... 87

4.1.2 FOOD BASKET CONSTRUCT AND FOOD POVERTY LINE ( fpl ) ...................................................... 92

4.1.3 ALTERNATIVE APPROACHES TO COSTING A FOOD BASKET: PRICE PER KCALORIE AND HOUSEHOLD

LEVEL fpl ............................................................................................................................................... 95

4.1.4 COMPUTING THE TOTAL POVERTY LINE ( tpl )............................................................................. 96

A. List of specified essential non-food needs...................................................................................... 97

B. Regression

98

C. Engel's coefficient ....................................................................................................................... 100

D. Comparative performance of the three procedures..................................................................... 101

4.1.5 UPDATING POVERTY MEASURES AND ESTIMATING POVERTY TRENDS........................................ 103

4.1.6 RELATIVE AND SUBJECTIVE INCOME/EXPENDITURES BASED POVERTY LINES ............................ 107

4.2 DIRECT MEASURES OF FOOD POVERTY ...................................................................................... 109

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4.2.1 ESTIMATING THE EMPIRICAL CUMULATIVE DISTRIBUTION FUNCTION (CDF) OF PER CAPITA ENERGY CONSUMPTION ........................................................................................................................................ 109 4.2.2 HOUSEHOLD SIZE FOR PER CAPITA CALCULATIONS ................................................................... 113 4.2.3 ESCHEWING PER CAPITA CALCULATIONS................................................................................... 116 4.3 NON-INCOME MEASUREMENT METHODS.................................................................................... 117 4.4 CONCLUSION ............................................................................................................................. 120 REFERENCES........................................................................................................................................... 125

CHAPTER V. STATISTICAL TOOLS AND ESTIMATION METHODS FOR POVERTY MEASURES BASED ON CROSS-SECTIONAL HOUSEHOLD SURVEYS.................................... 128

INTRODUCTION....................................................................................................................................... 128 5.1 CROSS-CUTTING ISSUES IN POVERTY MEASUREMENT ................................................................ 130 5.1.1 REASONS FOR FAVORING CONSUMPTION EXPENDITURE AS A WELFARE INDICATOR .................. 130 5.1.2 CONSISTENCY OF HOUSEHOLD SURVEY METHODS AND POVERTY COMPARISONS ...................... 135 5.1.3 CORRECTION METHODS FOR RESTORING COMPARABILITY TO INCOMPARABLE SURVEYS .......... 138 5.1.4 MEASUREMENT ERROR IN CROSS-SECTIONAL SURVEY DATA..................................................... 142 5.1.5 VARIANCE ESTIMATORS FOR COMPLEX SAMPLE DESIGNS.......................................................... 145 5.2 TYPES OF SURVEYS.................................................................................................................... 151 5.2.1 INCOME AND EXPENDITURE (OR BUDGET) SURVEYS .................................................................. 151 5.2.2 CORRECTING OVERSTATED ANNUAL POVERTY FROM SHORT REFERENCE PERIOD HIES AND HBS

DATA ......................................................................................................................................... 156 5.2.3 LIVING STANDARDS MEASUREMENT STUDY SURVEYS ............................................................. 159 5.2.4 CORE AND MODULE DESIGNS..................................................................................................... 163 5.2.5 DEMOGRAPHIC AND HEALTH SURVEYS..................................................................................... 164 5.3 PRICING AND UPDATING THE VALUE OF POVERTY LINES............................................................ 167 5.3.1 SPATIAL PRICE DEFLATORS........................................................................................................ 168 5.3.2 WHOSE COST OF LIVING?........................................................................................................... 172 5.3.3 USING PRICES TO IMPUTE THE VALUE OF CONSUMPTION ........................................................... 175 5.3.4 PRACTICAL ISSUES IN COLLECTING PRICE DATA ........................................................................ 177 5.4 ASSESSING INDIVIDUAL WELFARE AND POVERTY FROM HOUSEHOLD DATA .............................. 184 5.4.1 EQUIVALENCE SCALES .............................................................................................................. 186 5.4.2 THE ROTHBARTH METHOD OF MEASURING CHILD COSTS........................................................... 191 5.4.3 THE ENGEL METHOD OF MEASURING CHILD COSTS.................................................................... 194 5.4.4 THE ENGEL METHOD OF MEASURING SCALE ECONOMIES........................................................... 195 5.4.5 ADJUSTING POVERTY STATISTICS WHEN ADULT EQUIVALENTS ARE UNITS ................................ 197 5.4.6 METHODS FOR ESTIMATING THE INTRA-HOUSEHOLD ALLOCATION OF CONSUMPTION............... 198 5.4.7 COLLECTING NON-MONETARY DATA ON INDIVIDUALS TO ESTIMATE GENDER-SPECIFIC MEASURES

OF POVERTY .............................................................................................................................. 200 5.5 CONCLUSION ............................................................................................................................. 201 REFERENCES........................................................................................................................................... 203

CHAPTER VI. STATISTICAL ISSUES IN MEASURING POVERTY FROM NON-HOUSEHOLD SURVEYS SOURCES.............................................................................................................................. 206

INTRODUCTION....................................................................................................................................... 206 6.1 PROSPECTS FOR EXPANDING THE POVERTY DATABASE ............................................................. 208 6.2 LIMITATIONS OF HOUSEHOLD SURVEYS FOR POVERTY ASSESSMENT ....................................... 210 6.3 INTEGRATING DIFFERENT DATA TECHNIQUES AND SOURCES ................................................... 213 6.4 MULTI-DIMENSIONAL NATURE OF POVERTY............................................................................. 215 6.5 POVERTY MEASURES AND THE MILLENNIUM DEVELOPMENT GOALS ....................................... 218 6.5.1 RELEVANCE OF THE MDGS ....................................................................................................... 219 6.5.2 SIGNIFICANCE OF NON-MARKET GOODS AND SERVICES ............................................................. 220 6.6 PROBLEM OF DETERMINING CAUSES AND EFFECTS ................................................................... 221 6.7 DATA MINING FROM ADDITIONAL SOURCES OF INFORMATION................................................ 223 6.7.1 QUANTITATIVE SOURCES........................................................................................................... 223

A. Censuses, sample censuses, and partial censuses ...................................................................... 223 B. Ministerial reports and administrative records.......................................................................... 230

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C. Civil registration systems and electoral registers ...................................................................... 235 D. Core Welfare Indicators Questionnaire [CWIQ]........................................................................ 237 E. Special enquiries and official commissions ................................................................................ 241 6.7.2 QUALITATIVE STUDIES AND PARTICIPATORY ASSESSMENTS .................................................... 242 A. Understanding the story behind the numbers ............................................................................. 242 B. Participatory Assessments.......................................................................................................... 244 C. Qualitative methods.................................................................................................................... 246 D. Other non-quantitative methods................................................................................................. 250 6.7.3 NATIONAL ACCOUNTS............................................................................................................... 256 A. Comparability between national accounts and household survey estimate of final household consumption and the concept of household actual final consumption .............................................. 258 B. Conceptual adjustments of household final consumption expenditure between household budget survey and national accounts............................................................................................................ 264 C. Empirical adjustments of household-consumption expenditure between household budget surveys and national accounts ....................................................................................................................... 270 6.8 MAPPING POVERTY CHARACTERISTICS..................................................................................... 275 6.8.1 PIECING THE PUZZLE TOGETHER ................................................................................................ 275 6.8.2 DRAWING ON APPROPRIATE INDICATORS .................................................................................. 278 6.9 CONCLUSION ............................................................................................................................. 279 ENDNOTES .......................................................................................................................................... 286 E.1. Social transfers in kind (SNA, para. 9.72)................................................................................. 286 Social transfers in kind include: ....................................................................................................... 286 E.2. Household production for own final consumption..................................................................... 286 E.3. Additional data for measuring household final consumption.................................................... 287 REFERENCES........................................................................................................................................... 289

CHAPTER VII. POVERTY ANALYSIS FOR POLICY USE: POVERTY PROFILES AND MAPPING................................................................................................................................................. 292

INTRODUCTION....................................................................................................................................... 292 7.1 POVERTY MONITORING AND POVERTY PROFILES ....................................................................... 294 7.1.1 CAPABILITY DEPRIVATION ........................................................................................................ 302 7.1.2 PRODUCTIVE ASSETS HELD BY POOR AND NON-POOR ................................................................ 308 7.2 POVERTY MAPPING.................................................................................................................... 309 7.3 SOME LIMITATIONS IN POVERTY MAPPING AND ALTERNATIVE WITHOUT CENSUS DATA ............ 314 7.4 PRACTICAL ISSUES OF IMPLEMENTING GEOGRAPHICAL TARGETING .......................................... 318 REFERENCES........................................................................................................................................... 322 APPENDIX............................................................................................................................................... 323

CHAPTER VIII. ANALYSIS OF POVERTY DYNAMICS ................................................................ 324

INTRODUCTION....................................................................................................................................... 324 8.1 CONCEPTUAL ISSUES ................................................................................................................. 325 8.1.1 RELATIONSHIP BETWEEN INEQUALITY AND MOBILITY............................................................... 326 8.1.2 CHRONIC VS. TRANSIENT POVERTY ........................................................................................... 328 8.1.3 COMPARING INCOME GROWTH AMONG POOR AND NON-POOR HOUSEHOLDS .......................... 333 8.2 DATA ISSUES ............................................................................................................................. 334 8.2.1 PANEL DATA VERSUS REPEATED CROSS-SECTIONAL DATA...................................................... 334 8.2.2 MEASUREMENT ERROR ............................................................................................................. 336 8.3 RECOMMENDATIONS FOR DATA COLLECTION........................................................................... 342 8.4 ANALYTICAL METHODS WITH EXAMPLES .................................................................................. 345 8.4.1 REPEATED CROSS-SECTIONAL DATA (INCLUDING POVERTY MONITORING) ................................ 345 8.4.2 PANEL DATA FOR TWO POINTS IN TIME ...................................................................................... 352 8.5 CONCLUSION ............................................................................................................................. 365 REFERENCES........................................................................................................................................... 368

CHAPTER IX. CONCLUSION .............................................................................................................. 370

9.1 SUMMARY ................................................................................................................................. 370

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9.2 STATISTICAL ADDENDUM: THE UN GLOBAL SURVEY ON POVERTY MEASUREMENT PRACTICES 373 ANNEXES................................................................................................................................................. 375

A.1 LIST OF THE UNITED NATIONS STEERING COMMITTEE ON POVERTY STATISTICS ............................ 375 A.2 LIST OF THE COUNTRIES WHO PARTICIPATED IN THE REGIONAL WORKSHOPS ON POVERTY MEASUREMENT ....................................................................................................................................... 377 A.3 QUESTIONNAIRE OF THE UN GLOBAL SURVEY OF POVERTY MEASUREMENT PRACTICES AND STATISTICAL ADDENDUM ....................................................................................................................... 378

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