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The Role of Inequality in Poverty Measurement

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  • Sabina Alkire, James Foster

Abstract

The adjusted headcount ratio, or MPI, is widely used by countries and international organizations to track multidimensional poverty and coordinate policy. Several characteristics have encouraged its rapid diffusion: applicability to ordinal data, ease of communication, a practical identification of the poor based on multiple deprivations, and a dimensional breakdown that informs and coordinates policy. Sen (1976) and others have argued that poverty should also be sensitive to inequality among the poor. This paper provides a new axiom that embodies this perspective in the multidimensional context and defines an M-gamma family containing a range of measures satisfying the axiom. Like the FGT or P-alpha class of monetary measures, it has three main members: the headcount ratio to evaluate the prevalence of poverty, the adjusted headcount ratio to account for its intensity, and the 'squared count' measure that reflects severity and inequality among the poor. We note that any inequality sensitive measure must violate the dimensional breakdown axiom and investigate Shapley decomposition methods as an alternative. Unfortunately, these methods can yield counterintuitive result; however, the squared count measure avoids this critique and its Shapley breakdown reduces to an easy to compute formula that supplements the traditional breakdown for the MPI with information relevant to inequality among the poor. An example from Cameroon illustrates our method of using M-gamma measures in tandem to evaluate multidimensional poverty while accounting for inequality and dimensional contributions.

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  • Sabina Alkire, James Foster, 2019. "The Role of Inequality in Poverty Measurement," OPHI Working Papers 126, Queen Elizabeth House, University of Oxford.
  • Handle: RePEc:qeh:ophiwp:ophiwp126
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    Cited by:

    1. Alkire, Sabina & Oldiges, Christian & Kanagaratnam, Usha, 2021. "Examining multidimensional poverty reduction in India 2005/6–2015/16: Insights and oversights of the headcount ratio," World Development, Elsevier, vol. 142(C).
    2. Yangyang Shen & Sabina Alkire, 2022. "Exploring China's Potential Child Poverty," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 30(1), pages 82-105, January.
    3. Bao, Yanxi & Liao, Tingxuan, 2024. "Multidimensional poverty and growth: Evidence from India 1998–2021," Economic Modelling, Elsevier, vol. 130(C).
    4. Anh Thu Quang Pham & Pundarik Mukhopadhaya, 2022. "Multidimensionl Poverty and The Role of Social Capital in Poverty Alleviation Among Ethnic Groups in Rural Vietnam: A Multilevel Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 159(1), pages 281-317, January.

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