Chronic Poverty and All that: The Measurement of Poverty Over Time

We explore how to measure poverty over time, by focusing on trajectories of poverty rather than poverty at a particular point in time. We consider welfare outcomes over a period in time, consisting of a number of spells. We offer a characterization of desirable properties for measuring poverty across these spells, as well as an explicit discussion of three issues. First, should there be scope for compensation so that a poor spell can be compensated for by a non-poor spell? Second, is there scope for discounting or should all spells be equally valued? Third, does the actual sequence of poor spells matter, for example whether they are consecutive or not? We offer a number of measures that implicitly offer different answers to these questions, in a world of certainty. Finally, we also offer an extension towards a forward-looking measure of vulnerability, defined as the threat of poverty over time, that incorporates risk. An application to data from Ethiopia shows that especially the assumption of compensation results in different inference on poverty.

[1]  James E. Foster,et al.  SUBGROUP CONSISTENT POVERTY INDICES , 1991 .

[2]  Bob Baulch,et al.  Economic mobility and poverty dynamics in developing countries , 2000 .

[3]  S. Dercon,et al.  Vulnerability to Poverty , 2007 .

[4]  Martin Ravallion,et al.  Is transient poverty different? Evidence for rural China , 2000 .

[5]  M. Rothschild,et al.  Increasing risk: I. A definition , 1970 .

[6]  James E. Foster,et al.  A class of chronic poverty measures , 2007 .

[7]  H. P. Binswanger.  Attitudes toward Risk: Theoretical Implications of an Experiment in Rural India , 1981 .

[8]  S. Chakravarty.  A New Index of Poverty , 1983, Poverty, Social Exclusion and Stochastic Dominance.

[9]  F. Bourguignon,et al.  The Measurement of Multidimensional Poverty , 2003 .

[10]  Stefan Dercon,et al.  Vulnerability, seasonality and poverty in Ethiopia , 2000 .

[11]  A. Sen.  On Economic Inequality , 1974 .

[12]  Asep Suryahadi,et al.  Assessing household vulnerability to poverty from cross-sectional data: a methodology and estimates from Indonesia ∗ , 2002 .

[13]  S. Anand,et al.  Disability-adjusted life years: a critical review. , 1997, Journal of health economics.

[14]  Ethan Ligon,et al.  Measuring Vulnerability , 2003 .

[15]  J. Pratt.  RISK AVERSION IN THE SMALL AND IN THE LARGE11This research was supported by the National Science Foundation (grant NSF-G24035). Reproduction in whole or in part is permitted for any purpose of the United States Government. , 1964 .

[16]  Diganta Mukherjee,et al.  Premature Mortality and Poverty Measurement , 2007 .

[17]  E. Thorbecke,et al.  A Class of Decomposable Poverty Measures , 1984 .

[18]  Kai-yuen Tsui,et al.  Multidimensional poverty indices , 2002, Soc. Choice Welf..