Poverty Measures and Nutrition

Poverty Measures and Nutrition

• “Public action to combat hunger has to take note of the causal links
and of the gaps in those links”, Dreze and Sen (1991, Hunger and Public
Action).

• Poverty at the individual and/or household level

represents a serious constraint on economic activity.

• A lack of economic opportunities feeds into poverty.

• These lack of opportunities can be reenforced by

income inequality.
Poverty Measures and Nutrition

Income inequality though represents one (very important)

component of economic inequality defined by Ray (1998,
p.p170) as:

“…the fundamental disparity that permits one individual certain

material choices, while denying another individual those very
same choices.” (emphasis added).

What Ray is really saying is that those factors that determine

material choices are of importance here such household wealth,
income.
Poverty Measures and Nutrition
Questions to be addressed

How do we measure poverty?

Who are the poor?

What determines poverty?

Poverty Measures and Nutrition

How do we measure poverty?

Poverty can be both absolute and relative. See Martin Ravallion, (1994)
Poverty Comparisons.

Absolute Poverty: Those people who do not have adequate nutritional

intake per day, or do not have adequate shelter or clothing in order to survive
are deemed to be in absolute poverty.

Is traditionally measured by introducing largely ad hoc poverty lines. E.g. the

World Bank reports the number of people in countries below a $1 or $2 a day
as a proportion of the total population.

Better but more expensive method is to calculate nutritionally based poverty

lines – World Health Organisation.
 Poverty Measures and Nutrition

(Q) Is it simply that more income means better life expectancy?

Life Expectancy at
birth

Income per capita

Diminishing returns to income – think obesity and other ‘rich world’ diseases. Known
as the Preston Curve.
 Poverty Measures and Nutrition

Chronic Poverty – those who never get out of

absolute poverty.

See Chronic Poverty Research Centre,

www.chronicpoverty.org

for more information on this type of poverty.

Poverty Measures and Nutrition
Relative Poverty: The relative position of some
economic unit (e.g. individual, household, racial group)
compared to another economic unit. A person can be
relatively poor but not absolutely poor – is really to do
with distribution of income in a country.

E.g. Economic growth will generally result in a reduction of

absolute poverty but will only change relative poverty if there is a
change in distribution of income. (Woolard and Leibbrandt, 2001,
pp. 47).
Poverty Measures and Nutrition

Absolute Poverty Lines

Poverty line measures signal to researchers where poverty is and becomes the first
place to start in analyzing poverty in a certain country, within a certain economic
group etc…..

Examples of Poverty Lines:

(1) $1 a day and $2 a day lines that the World Bank and United Nations
Development Programme (UNDP) use.

(2) Calories per capita or per household

Both measures are absolute in that people can be lifted out of poverty if they can
increase income or calories and poverty can be eradicated.
Poverty Measures and Nutrition

Relative Poverty Lines

Calculate a poverty line that is based on the income level of the

population. Relative poverty cannot be eradicated unless
income inequality is addressed.

(1) Standard percentage of people earnings below 50% of the

median or mean wage: can vary the 50% figure down to 10%
or 25%.

Note: If income increases for all then relative poverty will still
be apparent since you will always have some who fall below
50% of the new (higher) median income level.
 Poverty Measures and Nutrition

Estimating the poverty gap: Applied examples

A number of general poverty measures from Foster, Greer

and Thorbecke (1984), Econometrica, Vol 52(3), pp.761-66.

The FGT poverty index is defined as,

n
P = 1 / n  (( z − yi ) / z ) yi  z
i =1

Where n is the total sample size, z is the chosen poverty line, and yi is
the standard of living indicator for person i, normally denoted as income.
The parameter measures the sensitivity of the index to transfers between
the poor units.
 Poverty Measures and Nutrition

The conditional term means that individual i’s income must be below the
chosen poverty line.

The poverty gap measure (PG) is generated when  =1.

Hence (1) becomes,

n
P1 = 1 / n  (( z − yi ) / z ) yi  z
i =1

P1 = 1 / n[( z − y1) / z ) + ( z − y2 ) / z + ( z − y3 ) / z... + ( z − yn ) / z ] yi  z

 Poverty Measures and Nutrition

So if the majority of ‘n’ poor individuals are along way short of the poverty
line (z) then P1 would be large and the number of people with a large depth
of poverty is high.

Example 1
i=90,25,30,5,45,70,20,20,15,15,10,10
Let z=100

P1 =1/12(0.1+0.75+0.7+0.95+0.55+0.3+0.8+0.8+0.85+0.85+0.9+0.9),

So,
Poverty Gap Index = 8.45/12=0.704
 Poverty Measures and Nutrition
Example 2

When i=90,90,95,90,90,96,85,70,50,60,90,30

Let z=100

P1 =1/12(0.1+0.1+0.05+0.1+0.1+0.04+0.15+0.3+0.5+0.4+0.1+0.3),

So,

Poverty Gap Index = 2.24/12=0.187

So the PG index does not merely count how may people are poor (since in both
examples 12 people are below the ad hoc poverty line) but reveals the depth of
poverty……those in example 1 suffer greater poverty depth than those in example 2.
 Poverty Measures and Nutrition

What can then be calculated is the minimum financial cost of alleviating

poverty by setting P1 =0 and using the summation part of the FGT index i.e.
the sum of the value of resources required to place each agent in the society
just above the poverty line.

This is formally represented simply as,

n
 ( z − yi ) yi  z )
i =1

An easier calculation than (3) is taken from Kanbur (1987, “Measurement and
alleviation of poverty”, IMF Staff Papers Vol 34(1)) who simply uses nzP1 .
Poverty Measures and Nutrition

Critique of Poverty Lines

Generally, ad hoc shares of the average income per person are

taken to locate a poverty line. For example, taking a poverty line
as 50% of the mean/median income level.

One weakness with such an approach is that the number of

people in ‘poverty’ is determined solely by where the poverty line
is placed (Deaton, 1997). Hence a number of poverty lines must
be estimated to give a clearer idea of what really is going on.
Another weakness is that such poverty lines DO NOT measure
the depth of poverty.
Poverty Measures and Nutrition

Critique of Poverty Lines cont…

Poverty lines are static, capturing a position of poverty

at a certain point in time. However, it is highly likely
that poverty is dynamic in nature with people moving in
and out of poverty.

For a more realistic understanding of the nature of

poverty and who the poor are in a society the
researcher must delve much deeper.
Poverty Measures and Nutrition
Poverty: A Different Methodology
But poverty clearly has a more ‘human’ face and one
which many economists often overlook or choose to
skip over because it is very hard to quantify. No surprise
that the methodology used is then qualitative in nature.

McKay (2002, pp. 5) refers to participatory

investigations into poverty and inequality which
necessarily involves the researcher NOT sitting in
his/her ivory tower but actually living for a time in
villages/households and understanding the dynamics of
these micro-economies.
Poverty Measures and Nutrition

The role of children in the family, of gender differences, of who

works for money income and who does not, of access to any
public services that exist, of the dynamics of villages and tribes,
of who gets what when an elder dies…….the list is long and
interesting from a micro-economic perspective.
Poverty Measures and Nutrition
Who are the Poor?

The poor of any country share similar characteristics.

In developing countries the poor tend to be Black, female,

young, rural, unskilled and perhaps semi-skilled (this is
determined by the nature of economic growth, trade
liberalization policy, subsidies etc…).

The factors that determine who is poor include socio-economic

institutions, e.g. Indian caste system, apartheid, racism (still in
Malaysia).
Poverty Measures and Nutrition
What Determines Poverty?

Research indicates that the quality and quantity of education, urban-rural

location, racial group, gender, health and employment status all impact on
whether somebody is poor or not.

Other factors include socio-economic factors, the historical legacy of a

country, social customs, property rights, economic dependence, political
system/affiliations etc. This is where much debate lies.

There is a large, positive correlation between unemployment and poverty.

However the direction of causality is not straightforward.

Poverty Measures and Nutrition

Indeed one of the problems in researching poverty and the linkages between
poverty and the labour market is that an endogeneity (happening at the same
time) concern is raised immediately, i.e. Does employment status
determine poverty, or does poverty cause employment status?

Certainly you would expect that if somebody is employed in the formal sector
as a salaried worker with job security (e.g. public sector civil servant) then
they are less likely to either report being poor themselves and/or less likely to
be categorized as being poor by some poverty line.

However the importance too of the history of the individual is vital in

determining whether he/she is in poverty. Of particular importance here are
the institutional structure of a country, social customs and the household
structure and dynamics.
Poverty Measures and Nutrition
How does individual poverty impact on the individual’s
participation in the labour market?

Given poverty does exist in a country there are several ways this
can impact on participants’ behaviour in the labour market.

(1) Liebenstein (1963) first made the direct link between

poverty in the form of being under-nourished and productivity
in the labour market. He found that if a person was under-
nourished then this impacted negatively on productivity and
assuming a wage labour market would mean a low wage, with
MRP=W. Hence poverty can result in a negative nutritional
impact on the worker which can result in lower productivity.
Poverty Measures and Nutrition
• It is unclear what the minimal calorie intake is and what
the appropriate nutritional levels for workers should be
in developing or indeed any country.

• There is an issue here involving the type of job

somebody has (is it highly physical, and therefore
requires far higher levels of foods) – see Strauss and
Thomas (1988).

• What is NOT beyond doubt is that poverty can result

in a lack of food, which can impact negatively on
productivity and output that can be self-perpetuating.
Poverty Measures and Nutrition
(2) Poverty can result in potential workers not being able to actively take
part in the wage labour market because (1) physically cannot go where the
jobs are (2) the opportunity cost of searching for work is too high (e.g. not
able to subsistence farm and therefore could increase the risk of hunger).

(3) Poverty within a household or within a community means less means by

which to invest in (1) human capital and (2) physical capital. This means
little chance of escaping poverty and indeed could result in a poverty trap
emerging.

(4) Ray (1998, pp.273) postulates that access to food is the same as access
to income and if one of these factors is owned by an individual, he/she is
likely NOT to be caught in a poverty trap.

(5) As well as the physical side effects of being poor and lacking nutrition,
there are also negative mental impacts that are related to increasing the
likelihood of depression, mental apathy, and de-motivation.
Poverty Measures and Nutrition
What should be emerging for the reader is the causal duality of poverty and
employment.

“Not only do labour markets generate income and therefore create the principal potential
source of nutrition and good health, but good nutrition in turn affects the capacity of the body
to perform tasks that generate income” Ray (1998, pp.274).

The nature of the labour market, in particular the level of unemployment, has
a large impact on the relationship between poverty and employment and
hence the poverty trap.

If a country suffers from poverty and high unemployment (e.g. South Africa)
then there is massive ‘slack’ in the labour market, meaning demand is low and
supply is high for (certain kinds of?) labour.
 References and Useful Websites
Websites:

United Nations Development Programme, www.undp.org

World Bank, www.worldbank.org

Department for International Development, www.dfid.gov.uk

Chronic Poverty Research Centre, www.chronicpoverty.org

Brooks World Poverty Institute, www.bwpi.manchester.ac.uk

References:

Deaton, A., (1997), THE ANALYSIS OF HOUSEHOLD SURVEYS: A Microeconomic Approach to Development Policy, John Hopkins University
Press.

Dreze, J., and Sen, A., (1991), Hunger and Public Action, WIDER Studies in Economics, Clarendon Press.

Foster, Greer and Thorbecke (1984), “A class of decomposable poverty measures”, Econometrica, Vol 52(3), pp. 761-6.

Foster and Shorrocks (1988), “Poverty Orderings”, Econometrica, Vol 56, pp. 173-7.

Atkinson (1987), “On the Measurement of Poverty”, Econometrica, Vol 55(4), pp. 749-64.

Ravallion, M., (1994) Poverty Comparisons, Routledge.

Ray, D., (1998), Development Economics, Princeton University Press.

Strauss, J., and Thomas, D., (1998), “Health, Nutrition and Economic Developmentre, ent”, Journal of Economic Literature 36:766-817.