Incidence of Poverty in Pakistan:

Methods and Measurement

Fowad Murtaza
Department of Economics
University of Essex

IDEAs Workshop/Conference at Tsinghua University, Beijing, China,

June 3-9, 2007

Incidence of Poverty in Pakistan: Methods and Measurement 1

 Presentation Contents

1. Motivation

2. Methodology

3. Results and Future work

Incidence of Poverty in Pakistan: Methods and Measurement 2

 1. Motivation

 In the absence of an official and widely

acceptable poverty line in Pakistan, the
motivation is to review different poverty
measurement approaches and indicators; and
respectively develop the indices of poverty
and conduct poverty analyses in Pakistan.

Incidence of Poverty in Pakistan: Methods and Measurement 3

 2. Methodology

The methodology for the poverty analysis is divided into 6 steps:

1. data source

2. indicator of well being

3. unit of analysis

4. selection and calculation of poverty line

5. poverty indexes

6. checking the robustness

Incidence of Poverty in Pakistan: Methods and Measurement 4
2.1 Data Source

Household Integrated Economic Survey (HIES) data conducted by the Federal

Bureau of Statistics, Government of Pakistan for year (2000-01)

2.2 Indicator of Wellbeing

Monetary indicator; i.e. consumption expenditure of households

5 sub consumption aggregates:

1. food items
2. fuel and utilities
3. housing
4. frequent non food expenses
5. other non food expenses

Incidence of Poverty in Pakistan: Methods and Measurement 5

2.3 Unit of Analysis

Individuals not households i.e consumption

per capita

2.4 Selection and calculation of Poverty

Line

 Absolute Poverty Line

 Food Energy Intake (FEI)/Caloric Approach

(a monetary expenditure necessary to reach the
minimum calorie intake, and it also includes a
minimum expenditure of non-food items)
Incidence of Poverty in Pakistan: Methods and Measurement 6
2.4 (cont..)

At least three steps required in adopting the calorie

approach:

• minimum calorie intake per day (2350 calories per adult

per day set by Government of Pakistan);
• transformation of the calorie intake in monetary
terms (regression);
• inclusion of other non food minimum expenditure
in relation to the minimum food expenditure.

Incidence of Poverty in Pakistan: Methods and Measurement 7

2.5 Poverty Index

Most common and preferred measure: Headcount Ratio (Incidence of Poverty)

• Head-count:
1 if wi < z
P0i = p 0 ( wi ) = 
0 if wi ≥ z
N
1
HC =
N
∑ p (w )
i =1
0 i

Where z is the poverty line, wi is the per adult equivalent consumption

expenditure of the individual i, and N is the total population

Incidence of Poverty in Pakistan: Methods and Measurement 8

 Poverty Line = Rs728.51 per capita per month

POVERTY INDICES FOR PAKISTAN (2000-01)

Head Count (%) Poverty Gap (%) Severity of Poverty

(%)

PAKISTAN 35.09 7.21 2.19

Urban 23.13 4.62 1.38

Rural 39.97 8.27 2.53

Incidence of Poverty in Pakistan: Methods and Measurement 9

 Relative Poverty Incidence:

Incidence of Relative Poverty

(2000-01)
Head Count Index
(%)
poverty line=50% of per capita 57.80
monthly consumption

poverty line=60% of per capita 67.76

monthly consumption

poverty line=66% of per capita 73.61

monthly consumption
Incidence of Poverty in Pakistan: Methods and Measurement 10
2.6 Checking the Robustness of Poverty Indices

 For robustness analysis for different poverty lines, I sketch cumulative

distribution functions.

Incidence of Poverty in Pakistan: Methods and Measurement 11

Robustness Check of Estimated Poverty Line

1.0

Rural

0.8

Urban
0.6

0.4

0.2
n
ry%
fp
o
e
tivm
u
la
c

0.0

0 300 600 900 1200 1500

real per capita ae monthly consumption

Incidence of Poverty in Pakistan: Methods and Measurement 12

 Food Deficient Population = 69.69%
(i.e. population using less than 2350 calories
daily)

Incidence of Poverty in Pakistan: Methods and Measurement 13

3. Further work...

1. Inclusion of more data sets

2. Develop poverty profiles and correlates

3. Analyze the determinants of poverty

4. Inequality and income distribution

5. Sectoral poverty decomposition

6. Growth and poverty reduction etc

7. Government policies and poverty alleviation (MDGs)

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Thank YOU!

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