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Towards a multidimensional poverty index for Germany

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Abstract

This paper proposes a more comprehensive multidimensional poverty index for an advanced economy like Germany. Drawing on the capability approach as conceptual framework, I apply the Alkire–Foster method to the German context. Special attention is paid to the conceptual integration. Specifically, I argue for including material deprivation and employment as important dimensions, but against using an additional lack-of-income indicator. The results are consistent with previous findings and also offer new insights. In particular, I find specific poverty profiles (e.g., for the elderly), but also that gaps in poverty between subpopulations change over time. Importantly, the results suggest that genuine multidimensional measures add unique insights, which neither a single indicator, nor a dashboard approach can offer. Finally, the analysis reveals multidimensional and income-poverty measures to disagree on who is poor. The subsequent analysis of this mismatch lends empirical support to abandon a lack-of-income dimension.

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Notes

  1. Note, however, that some authors criticise multidimensional poverty measurement in general (Ravallion 2011) or specific aspects Silber (2011), whereas others have suggested different approaches (e.g., Datt 2013) which, however, usually adopt a union-approach for identification, see also Alkire et al. (2015) for an overview.

  2. Accordingly the chosen specification vary significantly: Busch and Peichl (2010) use only education, health, and income; Nowak and Scheicher (2016) use mostly five dimensions, however, with only 1 indicator per dimension. While Rippin (2016) expands the specification to six dimensions, with partly several indicators per dimensions, e.g, social participation still remains unconsidered.

  3. I use SOEP data v29.1, provided by the DIW; see Wagner et al. (2007) for more details. The data used in this paper was extracted using the add-on package PanelWhiz for Stata. PanelWhiz (http://www.panelwhiz.eu) was written by Dr. John P. Haisken-DeNew (john@PanelWhiz.eu). See Haisken-DeNew and Hahn (2010) for details. The PanelWhiz-generated DO file to retrieve the data used here is available from me upon request. Any data or computational errors in this paper are my own.

  4. Exploiting the panel setup of the data, implies a different concept of the samples’ underlying population, i.e. the individuals living in Germany during the complete period investigated. Hence, such a setup ignores several groups by construction including migrants, individuals who become 18, die or otherwise leave the SOEP during the period investigated. Suppa (2016) exploits the panel setup of the data.

  5. For introductions to the capability approach see, e.g., Robeyns (2003, 2011), Alkire (2009).

  6. On poverty as capability deprivation, see in particular Sen (1992, ch. 7) and Sen (1999b, ch. 4).

  7. See also, e.g., Stiglitz et al. (2009), Atkinson et al. (2002), Marlier and Atkinson (2010).

  8. Note that even housing indicators may not only affect “shelter” and “privacy” but also, say, health.

  9. See, e.g., Bundesregierung (2013, pp. 461–491) or Wissenschaftszentrum Berlin für Sozialforschung (WZB) (2013).

  10. This indicator is used frequently to study the influence of constructs like “scholarly culture” of the parental household on children’s educational attainments (see, e.g., Evans et al. 2010), and is, moreover, applied by the OECD as well (see, e.g., OECD 2014).

  11. Though related to agency, both concepts are distinct. Agency refers to the ability to set one’s own goals and eventually strive for them, e.g., to opt for an austere and spiritual life style (e.g., (Sen 1992), ch. 4). In contrast, practical reason refers also to technical and operational decisions. However, deprivation in practical reason may well entail deprivation in agency.

  12. Poorer people, for instance extract a focus dividend as they are found to be robust to commonly found framing effects (Mullainathan and Shafir 2013, ch. 4, survey the evidence).

  13. Shah et al. (2012), Mani et al. (2013) provide more evidence and elaborate this line of thought.

  14. The absence of wealth items indicates what Mullainathan and Shafir (2013, ch. 3) call slack. In their suitcase-packing metaphor, slack is space accidentally left here and there. Among other things, slack also provides room to fail, i.e., less disastrous consequences of erroneous actions.

  15. If one still wanted to add an income dimension the question how to choose a reasonable cutoff remains, but then in presence of the other dimensions already included.

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Acknowledgements

The author gratefully acknowledges funding by the German Research Foundation (DFG), Grant No. RI441/6-1. Moreover, this paper benefited from very helpful comments and suggestions made by participants at the annual conferences of the Human Development and Capability Association (2014), the International Society for Quality of Life Studies (2014), the Society for the Advancement of Socio-Economics (2015), the International Institute of Public Finance (2015), the Verein für Socialpolitik (2015) and by participants of the UNECE Seminar on Poverty Measurement (2015), the SOEP Brownbag Seminar (2015) and one anonymous referee. All remaining errors are my own.

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  1. Department of Economics, TU Dortmund, 44221, Dortmund, Germany

    Nicolai Suppa

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Suppa, N. Towards a multidimensional poverty index for Germany. Empirica 45, 655–683 (2018). https://doi.org/10.1007/s10663-017-9385-3

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