Multidimensional Poverty Measurement

Editor:

John Bishop, East Carolina University, USA. Satya Chakravarty, Indian Statistical Institute, USA. Conchita D’Ambrosio, University of Milano-Bicocca, Italy. David Gordon, University of Bristol, The United Kingdom. Jaya Krishnakumar, University of Geneva, Switzerland. This series will publish volumes that go beyond the traditional concepts of consumption, income or wealth and will offer a broad, inclusive view of inequality and well-being. Specific areas of interest will include Capabilities and Inequalities, Discrimination and Segregation in the Labor Market, Equality of Opportunities, Globalization and Inequality, Human Development and the Quality of Life, Income and Social Mobility, Inequality and Development, Inequality and Happiness, Inequality and Malnutrition, Inequality in Consumption and Time Use, Inequalities in Health and Education, Multidimensional Inequality and Poverty Measurement, Polarization among Children and Elderly People, Social Policy and the Welfare State, and Wealth Distribution. Volume 1

Poverty, Inequality and Development: Essays in Honor of Erik Thorbecke Volume 2

Poverty and Equity: Measurement, Policy and Estimation with DAD Volume 3 Lemmi, Achille and Betti, Gianni Fuzzy Set Approach to Multidimensional Poverty Measurement Volume 4 Wagle, Udaya Multidimensional Poverty Measurement: Concepts and Applications

ECONOMIC STUDIES IN INEQUALITY, SOCIAL EXCLUSION AND WELL-BEING

Editorial Advisory Board:

Jacques Silber, Bar Ilan University.

Duclos, Jean-Yves and Araar, Abdelkrim

de Janvry, Alain and Kanbur, Ravi

Udaya Wagle

Multidimensional PovertyMeasurement

Concepts and Applications

All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights.

Printed on acid-free paper

9 8 7 6 5 4 3 2 1

© 2008 Springer Science+Business Media, LLC

springer.com

Udaya WagleWestern Michigan University

Kalamazoo, MI USA

ISBN: 978-0-387-75874-9 e-ISBN: 978-0-387-75875-6 DOI: 10.1007/978-0-387-75875-6

Bar-Ilan University

Israel

Jacques Silber

Ramat Gan

Library of Congress Control Number: 2008922936

Series Editor

Author

To My Mother

Preface

The recent past has seen enormous interest and developments in multidi-mensional poverty measurement. Capitalizing on these recent develop-ments, this book proposes an innovative and comprehensive operational framework and applies it in specific contexts. The successful application of the framework to measure and examine poverty in Nepal and the United States, two very different contexts, provides an impetus for a more general discussion with its universal applicability. The aim of the book is to provide a theoretical and operational framework to accurately measure poverty so that the poverty measurement enterprise can improve from the deeply flawed, traditional attempts with purely economic measures to more ‘humane’ and ‘policy conscious’ attempts with utilization of compre-hensive information. I expect the concepts and applications included in this book to be useful to researchers as well as makers of public policies relating to poverty and redistribution.

I have greatly profited from many people and organizations in transforming an abstract idea into this final product. I would like to express my gratitude to Randy Albelda, Alan Clayton-Matthews, Maria E. Letona, Arthur Goldsmith, and Miren Uriarte, who provided critical support of the framework and its application during its formative stage. I must also acknowledge the valuable contributions emanating from formal and informal discussions with my colleagues including Caroline Coscia, Jen Douglas, Barbara Liggett, Robert McConnell, Matthew Mingus, Robert Peters, Victoria Ross, and James Visser. I have taught at many universities/colleges at the time in which this book project was in progress. I am particularly thankful to the direct and indirect research supports I have received from Marist College, University of Massachusetts, Boston, and Western Michigan University.

Many played critical roles in making the comprehensive household survey in Kathmandu a success. I am thankful to the city of Kathmandu for providing the materials needed for sampling as well as an official permission to collect the data. My sincere thanks go to Bishal, Madhusudan, Ram, Sunita, Sudarshan, Sarita, and Vaskar, who tirelessly conducted the interviews and helped with coding and data entry.

Preface

Data for the application of the multidimensional approach in the United States came from the General Social Survey. I am grateful to the National Opinion Research Center for providing these data through widely accessible open sources.

Parts of the content in this book have appeared in various journals. I am particularly appreciative of the opportunity provided by the editors of the Journal of Human development and Social Science Research which helped push the ideas forward and obtain meaningful feedback. I must also acknowledge the highly positive experience I have had while working with the editor at Springer, who quite impressively streamlined all my editorial and publishing concerns. This book has also benefited greatly from the insightful comments received from the three anonymous referees assigned by the editor.

Finally, my family has been the party most directly affected by this book project from its inception to the conclusion. My wife, Karuna, has examined every aspect of this project and provided invaluable clerical, moral, and sometimes editorial support. I am wholeheartedly grateful to the source of inspiration that she has constantly become at moments of excitement, frustration, pain, and pleasure. After all, my genuine love and familial bond with my wife and with our daughters, Ava and Ipsa, keeps me going with whatever I do.

URW

Kalamazoo, Michigan

viii

December 5, 2007

Contents

Preface vii List of Figures and Tables xi

1 Introduction 1 1.1 Overview 11.2 Concept 4 1.3 Organization of the Book 8

2 Three Related Concepts of Poverty 15 2.1 Overview 15 2.2 Economic Well-being 16 2.2.1 Political Economy Issues 20 2.2.2 Measurement Issues 26 2.3 Capability 30 2.3.1 Political Economy Issues 34 2.3.2 Measurement Issues 37 2.4 Social Inclusion 42 2.4.1 Political Economy Issues 45 2.4.2 Measurement Issues 50

3 Multidimensional Approach to Poverty 55 3.1 Overview 55 3.2 Conceptual Issues 56 3.2.1 Multidimensional Approach 58 3.2.2 Indicators of Poverty Dimensions 64 3.2.3 Identification of Poverty Status 66 3.3 Operational Framework 72 3.3.1 Unidimensional Operationalizations 73 3.3.2 Multidimensional Operationalization 77 3.3.3 Identification of Poverty Status 81 3.3.4 A Note on the Technique 84

4 Application I: Nepal 87 4.1 Overview 87 4.2 Empirical Analysis 88 4.2.1 Dataset 90 4.2.2 Model Estimation 90 4.2.3 Indicators of Poverty Dimensions 95

4.2.4 Multidimensionality of Poverty 98 4.2.5 Poverty Measurement Outcomes 101 4.2.6 Characteristics of Unidimensional Poverty 108 4.2.7 Characteristics of Multidimensional Poverty 114 4.3 Policy Implications 122 4.3.1 Focusing Poverty 122 4.3.2 Targeting the Poor 126

5 Application II: The United States 131 5.1 Overview 131 5.2 Empirical Analysis 132 5.2.1 Dataset 134 5.2.2 Model Estimation 135 5.2.3 Indicators of Poverty Dimensions 140 5.2.4 Multidimensionality of Poverty 143 5.2.5 Poverty Measurement Outcomes 147 5.2.6 Characteristics of Unidimensional Poverty 153 5.2.7 Characteristics of Multidimensional Poverty 160 5.3 Policy Implications 164 5.3.1 Focusing Poverty 5.3.2 Targeting the Poor 169

6 Conclusion 173 6.1 Overview 173 6.2 Multidimensionality of Poverty 173 6.3 Material Resources and Economic Growth 175 6.4 Inner Strength and Resources and Education 177 6.5 Relational Resources and Participation 179 6.6 Future Directions 181 Appendices 183

References 189

165

Index 207

Contents x

List of Figures and Tables

Figures

3.1 The multidimensional poverty model 63 3.2 The multidimensional poverty space 70 4.1 The final multidimensional poverty model (Kathmandu) 91 5.1 The final multidimensional poverty model (US) 136

Tables

4.1 Standardized loadings in the multidimensional poverty model (Kathmandu) 93

4.2 R-squared estimates (Kathmandu) 95 4.3 Correlations among poverty dimensions (Kathmandu) 100 4.4 Total standardized effects of poverty dimensions (Kathmandu) 100 4.5 Summary statistics on poverty dimensions (Kathmandu) 102 4.6 Unidimensional poverty incidence (Kathmandu) 105 4.7 Multidimensional poverty incidence (Kathmandu) 106 4.8 Correlations among the poverty measurement outcomes

(Kathmandu) 108 4.9 Unidimensional poverty among different demographic groups

(Kathmandu) 109 4.10 Poverty among demographic groups (Kathmandu) 114 4.11 Multidimensional poverty among different demographic groups

(Kathmandu) 116 5.1 Standardized loadings in the multidimensional poverty

model (US) 138 5.2 R-squared estimates (US) 141 5.3 Correlations among poverty dimensions (US) 144 5.4 Total standardized effects of poverty dimensions (US) 145 5.5 Summary statistics on poverty dimensions (US) 148 5.6 Unidimensional poverty incidence (US) 150 5.7 Multidimensional poverty incidence (US) 151 5.8 Correlations among poverty measurement outcomes (US) 152

5.9 Unidimensional poverty among different demographic groups (US) 155

5.10 Poverty incidence among demographic groups (US) 157 5.11 Multidimensional poverty among different demographic

groups (US) 158

xii List of Figures and Tables