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8/10/2019 Issues in Measuring and Modelling Poverty - Ravallion 1996
1/17
Issues in Measuring and Modelling Poverty
Author(s): Martin RavallionSource: The Economic Journal, Vol. 106, No. 438 (Sep., 1996), pp. 1328-1343Published by: Wileyon behalf of the Royal Economic SocietyStable URL: http://www.jstor.org/stable/2235525.
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TheEconomicournal,
o6 (September),
328-1343.
C
Royal
Economic Society
I996. Published
by Blackwell
Publishers,
Io8
Cowley
Road,
Oxford OX4 iJF, UK and
238 Main
Street,
Cambridge, MA
02142, USA.
ISSUES IN
MEASURING
AND MODELLING
POVERTY
Martin
Ravallion*
I.
INTRODUCTION
For
over ioo
years now,
samplesurveys
of
household
iving
conditionshave
been used
to
addresspublic
concernsabout
poverty, and to
inform
public
action.
Seebohm
Rowntree's hreesurveys n
York,England,
spanning
a
50
year periodfrom I899,
influencedboth
poverty
analysis
and the
formation
of
Britishwelfarepolicy (Atkinson,
i989,
Chapter4). Once rare, nationally
representative
iving-standards
urveys re
now common n
both rich andpoor
countries.
All
high-income
ountries,
nd roughly
wo-thirds
f
the
developing
and
transitional
ountries,
now
have
a
more or less
nationally-representative
sample
survey nstrumentwhich
collectshousehold-level
ata
on
consumption
expenditures
nd/or income sourcesat
varying requencies,romonce
a year
to
once
everyfiveyears
or
so.
Povertymeasures roduced romthese
data are
keenly
watched
and debated.
They are
also increasingly
elied on in
policy
discussionsranging from the design of targeted interventions or fighting
povertyto
debates
on
the
social
impact of
economy-widepolicies.
This
paper s not
a
comprehensive
urveyof the issues
hat
arise
n
usingsuch
data;
some
important
applications
re
ignored,
such as
making
nternational
comparisons f
livingstandards,and
using survey
data in
the evaluationof
specific
policy
interventions.
Rather,
the
paper
is an
extended commenton
some
current
practices
n
poverty
analysisusing
surveydata. Section
I
starts
with
measurement
ssues, Section
II
looks
at
models of
poverty,while
data
needs
are
discussed
n
Section
III. Each
sectionbeginswith a
summary
f
what
wouldappear o be the 'mainstream' reven 'ideal' in currentpractices,and
then
discusseswhat
I
see
as the most
pressing
ssues.
II.
MEASURES
Current
ractice
Common
practice tarts
by identifying
single
monetaryndicatorof
household
welfare;
et
the
indicator
value
for
the
i'th householdbe
denoted
yi.
This tends
to be either total expenditureon consumptionor total income over some
period.
Next a set of
povertyines,
denoted
zi,
are defined.
These
estimate he cost
to
the household
of the
level of welfare
needed
to
escape
poverty,
i.e. it is
agreed,
at
least
implicitly,
that lower
values of
yi/zi
mean
that a
typical
*
For
their
comments
I
am
grateful to Pranab
Bardhan,
Tim
Besley, Stephen
Howes,
Stephen Jenkins,
Peter
Lanjouw, Amartya Sen,
and
Dominique
van
de Walle.
[ I328
I
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[SEPT. I996]
MEASURING
AND
MODELLING POVERTY
I329
member of the
household is
absolutely
poorer. Practice varies in
terms of
the
information used in
setting the z's.
'Best practice' is to
adjust for
differences in
the
prices faced (over
time or space, in as
much detail as data
permit) and
household
demographics.
(Alternatively one can
introduce the
deflators at the
first stage of defining y and have only one z;
poverty measures found
in practice
are
homogeneous of
degree zero so that the
order of
these steps makes no
difference.)
Another method is to
set the
zi's
as a constant
proportion of the
mean for some
sub-group to which
i
belongs,
or each
date.
Finally an aggregate
poverty measure is
identified,
which summarizes
the
information contained in the
measured y's and
z's. The most
common
measure
is the
headcount index,
given by the
proportion of the
population for whom
yi/zi