A joint analysis of correlates of poverty intensity, incidence, and gap with application to Malawi

The paper proposes partial elasticities of the Sen-Shorrocks-Thon Index of poverty intensity which can be decomposed into elasticities of the poverty headcount and the poverty gap ratio. These partial effects are important because they can be used to jointly identify the determinants of the poverty headcount, the poverty gap ratio, and poverty intensity, which in turn can be used to suggest possible policy or behavioral responses which might be implemented to reduce poverty. The proposed partial elasticities are illustrated by analysing poverty in Malawi using data from the Third Integrated Household Survey. The empirical results indicate that the magnitudes of the elasticities for the poverty headcount are consistently larger than those for the poverty gap. This means that the dominant channel through which poverty intensity can be affected is the headcount. In terms of policy, this suggests that redistributive policy interventions that aim to reduce the incidence of poverty would significantly also reduce poverty intensity.