Abstract
This chapter develops an approach to poverty measurement based on the interpretation of poverty as a welfare loss. Following the standard approach in the normative theory of income inequality, poverty indices are derived here from a social evaluation function and some poverty thresholds. A welfare poverty index is defined as the relative welfare loss due to the insufficient welfare of those agents whose achievements do not reach the minimum established. The construction of those indices is formulated in a multidimensional context. We show that, under conventional assumptions, those indices can be expressed as the product of the incidence and the inequality-adjusted intensity of poverty. We include an application to the measurement or educational poverty using the data from PISA.
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Notes
- 1.
- 2.
We require homogeneity rather than homoceticity to be able to define the welfare poverty index appropriately.
- 3.
Note that this notion of scale is slightly different from that in Chap. 6. This is so because we want to keep track of the size of the total population and of the population of the poor.
- 4.
One should really write y e(y(j)) to be precise. Yet we shall use a less cumbersome notation.
- 5.
The geometric mean of the welfare dimensions has been characterized in terms of intuitive and simple properties (alternative characterizations appear in Foster et al. (2005), Herrero, MartÃnez, and Villar (2010) or Seth (2013), among others). The geometric mean exhibits better properties as a welfare indicator, as it does not imply constant rates of substitution between welfare dimensions.
- 6.
This index can also be regarded as a derivation of Watts (1968) poverty measure, under the assumption of equally important dimensions.
- 7.
This section is based on Villar (2016).
- 8.
Note, however, that this correlation refers to the link between low performance and socio-economic conditions between countries. Things are different when we analyse low performance within countries by social groups.
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Villar, A. (2017). Multidimensional Poverty and Welfare. In: Lectures on Inequality, Poverty and Welfare. Lecture Notes in Economics and Mathematical Systems, vol 685. Springer, Cham. https://doi.org/10.1007/978-3-319-45562-4_8
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