A Unified Approach to Measuring Poverty and Inequality
ownership of certain assets—to see what it means to be poor. This is part of a countrywide poverty profile that relies purely on the identification step. • What drives the dynamics of poverty? If panel data are available, one can explore the factors that seem to be forcing people into poverty or allowing them to escape. Even if two periods of data are not part of a panel (and hence not linked at the personal level), one can investigate how other general factors, such as food prices or economic conditions, affect the likelihood of being in poverty. • Is a given poverty program reaching its intended recipients? The leakage or coverage of poverty programs can be evaluated to gauge the likelihood that a recipient is not poor or that a poor person is a nonrecipient. • What affects and is affected by the condition of being poor? In some studies, the deprivation vector, or indicator function for poverty, is a key outcome variable. In other studies, it is an important dependent variable. The aggregation step goes beyond a simple identification of the poor and provides a quantitative measure of the extent of poverty for any given population group. A poverty measure can be used to monitor poverty in a country over time and space. Poverty profiles evaluate the structure of poverty in a country by considering how poverty varies across an array of population subgroups. Other applications include using a poverty measure as a basis for targeting social programs or for assessing their poverty impact. It is often thought that chronic poverty is qualitatively different from transient poverty. Panel data can allow the two to be evaluated in order to discern whether the poverty in a given region tends to be of one form or the other. Some people currently not in poverty may, nonetheless, be vulnerable to becoming poor. Poverty measures can be adapted to create measures of vulnerability to poverty. Optimal taxation exercises use a welfare function as the objective function with which to evaluate the competing objectives of a larger pie versus a more equitable distribution. For many policy exercises, it may make sense to focus on the poor by using a censored welfare function or a poverty measure: Are food subsidies more effective in improving poverty than income transfers? This and other questions can be addressed in theory or practice once a poverty measure has been chosen. The choice of poverty measure will affect the answers obtained.
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