Poverty gap index

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The poverty gap index is a measure of the degree of poverty in a country. It is defined as "extent to which individuals on average fall below the poverty line, and expresses it as a percentage of the poverty line." [1]

Contents

The poverty gap index is an improvement over the poverty measure head count ratio, which simply counts all the people below a poverty line in a given population and considers them equally poor. [2] Poverty gap index estimates the depth of poverty by considering how far the poor are from that poverty line on average. [3]

The poverty gap index sometimes referred to as 'poverty gap ratio' or 'pg index' is defined as an average of the ratio of the poverty gap to the poverty line. [4] It is expressed as a percentage of the poverty line for a country or region. [5]

Significance

The most common method measuring and reporting poverty is the headcount ratio, given as the percentage of the population that is below the poverty line. For example, The New York Times in July 2012 reported the poverty headcount ratio as 11.1% of American population in 1973, 15.2% in 1983, and 11.3% in 2000. [6] One of the undesirable features of the headcount ratio is that it ignores the depth of poverty; if the poor become poorer, the headcount index does not change. [7]

Poverty gap index provides a clearer perspective on the depth of poverty. It enables poverty comparisons. It also helps provide an overall assessment of a region's progress in poverty reduction and the evaluation of specific public policies or private initiatives. [8]

Calculation

The poverty gap index (PGI) is calculated as, [5]

or

where is the total population, is the total population of poor who are living at or below the poverty line, is the poverty line, and is the income of the poor individual . In this calculation, individuals whose income is above the poverty line have a gap of zero.

By definition, the poverty gap index is a percentage between 0 and 100%. Sometimes it is reported as a fraction, between 0 and 1. A theoretical value of zero implies that no one in the population is below the poverty line. A theoretical value of 100% implies that everyone in the population has zero income. In some literature, poverty gap index is reported as while the headcount ratio is reported as . [9]

Features

The poverty gap index can be interpreted as the average percentage shortfall in income for the population, from the poverty line. [5]

If you multiply a country's poverty gap index by both the poverty line and the total number of individuals in the country you get the total amount of money needed to bring the poor in the population out of extreme poverty and up to the poverty line, assuming perfect targeting of transfers. For example, suppose a country has 10 million individuals, a poverty line of $500 per year, and a poverty gap index of 5%. Then an average increase of $25 per individual per year would eliminate extreme poverty. $25 is 5% of the poverty line. The total increase needed to eliminate poverty is US$250 million—$25 multiplied by 10 million individuals.

The poverty gap index is an important measure beyond the commonly used headcount ratio. Two regions may have a similar head count ratio, but distinctly different poverty gap indices. A higher poverty gap index means that poverty is more severe.

The poverty gap index is additive. In other words, the index can be used as an aggregate poverty measure, as well as decomposed for various sub-groups of the population, such as by region, employment sector, education level, gender, age, or ethnic group.

Limitations

The poverty gap index ignores the effect of inequality between the poor. It does not capture differences in the severity of poverty amongst the poor. As a theoretical example, consider two small neighborhoods where just two households each are below the official poverty line of US$500 income per year. In one case, household 1 has an income of US$100 per year and household 2 has an income of US$300 per year. In second case, the two households both have annual income of US$200 per year. The poverty gap index for both cases is same (60%), even though the first case has one household, with US$100 per year income, experiencing a more severe state of poverty. Scholars, therefore, consider poverty gap index as a moderate but incomplete improvement over poverty head count ratio. [10]

Scholars such as Amartya Sen suggest poverty gap index offers a quantitative improvement over simply counting the poor below the poverty line, but remains limited at the qualitative level. Focusing on precisely measuring income gap diverts the attention from qualitative aspects such as capabilities, skills and personal resources that may sustainably eradicate poverty. A better measure would focus on capabilities and consequent consumption side of impoverished households. [11] These suggestions were initially controversial, and have over time inspired scholars to propose numerous refinements. [2] [12] [13] [14]

The Foster–Greer–Thorbecke metric is the general form of the PGI. The formula raises the summands to the power alpha, so that FGT0 is the headcount index, FGT1 the PGI and FGT2 the squared PGI.

Squared poverty gap index, also known poverty severity index or , is related to poverty gap index. It is calculated by averaging the square of the poverty gap ratio. By squaring each poverty gap data, the measure puts more weight the further a poor person's observed income falls below the poverty line. The squared poverty gap index is one form of a weighted sum of poverty gaps, with the weight proportionate to the poverty gap. [9]

Sen index, sometimes referred to , is related to poverty gap index (PGI). [2] [15] It is calculated as follows:

where, is the head count ratio and is the income Gini coefficient of only the people below the poverty line.

Watts index, sometimes referred to , is related to poverty gap index (PGI). [15] It is calculated as follows:

The terms used to calculate are same as in poverty gap index (see the calculation section in this article).

Poverty gap index by country

The following table summarizes the poverty gap index for developed and developing countries across the world.

Poverty gap ratio for various countries [16] [17] [18]
CountryPoverty
line
($/month) [a]
Head count
ratio
(%)
Poverty
gap
index
(%)
Year
Flag of Albania.svg  Albania 5222.914.182020
Flag of Angola.svg  Angola 3854.3129.942000
Flag of Argentina.svg  Argentina [b] 380.920.652010
Flag of Armenia.svg  Armenia 381.280.252008
Flag of Australia (converted).svg  Australia 95912.42.932010
Flag of Austria.svg  Austria 10246.61.812010
Flag of Azerbaijan.svg  Azerbaijan 380.430.142008
Flag of Bangladesh.svg  Bangladesh 3843.2511.172010
Flag of Belarus.svg  Belarus 380.10.12008
Flag of Belgium (civil).svg  Belgium 9308.81.802010
Flag of Belize.svg  Belize 3812.215.521999
Flag of Benin.svg  Benin 3847.3315.732003
Flag of Bhutan.svg  Bhutan 3810.221.812007
Flag of Bolivia.svg  Bolivia 3815.618.642008
Flag of Bosnia and Herzegovina.svg  Bosnia and Herzegovina 380.040.022007
Flag of Botswana.svg  Botswana 3831.2311.041993
Flag of Brazil.svg  Brazil 3503.913.622015
Flag of Burkina Faso.svg  Burkina Faso 3844.614.662009
Flag of Burundi.svg  Burundi 3881.3236.392006
Flag of Cambodia.svg  Cambodia 3822.754.872008
Flag of Cameroon.svg  Cameroon 389.561.22007
Flag of Canada (Pantone).svg  Canada 105612.12.962010
Flag of Cape Verde.svg  Cape Verde 3821.026.052001
Flag of the Central African Republic.svg  Central African Republic 3862.8331.262008
Flag of Chad.svg  Chad 3861.9425.642002
Flag of Chile.svg  Chile 381.350.692009
Flag of the People's Republic of China.svg  China [c] 3816.254.032005
Flag of Colombia.svg  Colombia 388.163.782010
Flag of the Comoros.svg  Comoros 3846.1120.822004
Flag of Costa Rica.svg  Costa Rica 383.121.792009
Flag of Cote d'Ivoire.svg  Cote d'Ivoire 3823.757.52008
Flag of the Czech Republic.svg  Czech Republic 5155.81.372010
Flag of Denmark.svg  Denmark 9555.31.292010
Flag of Djibouti.svg  Djibouti 3818.845.292002
Flag of the Dominican Republic.svg  Dominican Republic 382.240.522010
Flag of the Democratic Republic of the Congo.svg  Congo, Dem. Rep. 3887.7252.82005
Flag of the Republic of the Congo.svg  Congo, Rep. 3854.122.82005
Flag of Ecuador.svg  Ecuador 384.62.12010
Flag of Egypt.svg  Egypt 381.690.42008
Flag of Estonia.svg  Estonia 388.94.42009
Flag of Ethiopia.svg  Ethiopia 38399.62005
Flag of Fiji.svg  Fiji 385.91.12009
Flag of Finland.svg  Finland 8757.31.482010
Flag of France.svg  France 8617.11.442010
Flag of Gabon.svg  Gabon 384.8.92005
Flag of The Gambia.svg  Gambia 3833.611.72003
Flag of Germany.svg  Germany 918113.672010
Flag of Georgia.svg  Georgia 3815.34.62008
Flag of Ghana.svg  Ghana 3828.69.92006
Flag of Greece.svg  Greece 72012.63.362010
Flag of Guatemala.svg  Guatemala 3813.54.72006
Flag of Guinea.svg  Guinea 3843.315.2007
Flag of Guinea-Bissau.svg  Guinea-Bissau 3848.916.62002
Flag of Guyana.svg  Guyana 388.72.81998
Flag of Haiti.svg  Haiti 3861.732.32001
Flag of Honduras (2022-).svg  Honduras 3817.99.42009
Flag of Hungary.svg  Hungary 4077.11.662010
Flag of Iceland.svg  Iceland 9427.12.552010
Flag of Ireland.svg  Ireland 93414.83.082010
Flag of India.svg  India 3832.77.52010
Flag of Indonesia.svg  Indonesia 3818.13.32010
Flag of Iran.svg  Iran 381.450.342005
Flag of Iraq.svg  Iraq 382.80.422007
Flag of Italy.svg  Italy 70011.43.082010
Flag of Jamaica.svg  Jamaica 380.210.022004
Flag of Japan.svg  Japan 95014.95.172010
Flag of Jordan.svg  Jordan 380.120.032010
Flag of Kazakhstan.svg  Kazakhstan 380.110.032009
Flag of Kenya.svg  Kenya 3843.416.92005
Flag of Kyrgyzstan.svg  Kyrgyzstan 386.41.52008
Flag of Laos.svg  Laos 384412.12002
Flag of Latvia.svg  Latvia 380.140.12008
Flag of Lesotho.svg  Lesotho 3843.420.82003
Flag of Liberia.svg  Liberia 3883.840.92007
Flag of Lithuania.svg  Lithuania 380.160.12008
Flag of Luxembourg.svg  Luxembourg 15118.11.622010
Flag of North Macedonia.svg  Macedonia 380.290.042008
Flag of Madagascar.svg  Madagascar 3881.343.32010
Flag of Malawi.svg  Malawi 3873.932.32004
Flag of Maldives.svg  Maldives 381.480.142008
Flag of Mali.svg  Mali 3850.416.42010
Flag of Mauritania.svg  Mauritania 3823.46.82008
Flag of Mexico.svg  Mexico 19218.46.972010
Flag of the Federated States of Micronesia.svg  Micronesia 3831.216.32000
Flag of Moldova.svg  Moldova 380.390.082010
Flag of Montenegro.svg  Montenegro 380.120.082008
Flag of Morocco.svg  Morocco 382.5.542007
Flag of Mozambique.svg  Mozambique 3859.625.12008
Flag of Namibia.svg  Namibia 3831.99.52004
Flag of Nepal.svg    Nepal 3824.85.62010
Flag of the Netherlands.svg  Netherlands 11687.71.612010
Flag of New Zealand.svg  New Zealand 80310.83.632010
Flag of Nicaragua.svg  Nicaragua 3811.92.42005
Flag of Niger.svg  Niger 3843.612.42008
Flag of Nigeria.svg  Nigeria 386833.72010
Flag of Norway.svg  Norway 11096.82.002010
Flag of Pakistan.svg  Pakistan 38213.52008
Flag of Panama.svg  Panama 386.62.12010
Flag of Papua 2.svg  Papua 3835.812.31996
Flag of Paraguay.svg  Paraguay 387.23.2010
Flag of Peru.svg  Peru 384.91.32010
Flag of the Philippines.svg  Philippines 3818.43.72009
Flag of Poland.svg  Poland 33814.65.202010
Flag of Portugal.svg  Portugal 51212.93.742010
Flag of Romania.svg  Romania 380.410.192009
Flag of Russia.svg  Russia [19] 6114.35.092006
Flag of Rwanda.svg  Rwanda 3863.226.62011
Flag of Sao Tome and Principe.svg  São Tomé and Príncipe 3828.27.92001
Flag of Senegal.svg  Senegal 3833.510.82005
Flag of Serbia.svg  Serbia 380.260.172009
Flag of Sierra Leone.svg  Sierra Leone 3853.420.32003
Flag of Slovakia.svg  Slovakia 3688.12.072010
Flag of South Africa.svg  South Africa 3813.82.32009
Flag of South Korea.svg  South Korea 80914.65.262010
Flag of Spain.svg  Spain 74914.14.512010
Flag of Sri Lanka.svg  Sri Lanka 38712007
Flag of Sudan.svg  Sudan 3819.85.52009
Flag of Suriname.svg  Suriname 3815.55.91999
Flag of Eswatini.svg  Swaziland 3840.616.2010
Flag of Sweden.svg  Sweden 8635.31.312010
Flag of the Syrian revolution.svg  Syria 381.710.22004
Flag of Switzerland (Pantone).svg   Switzerland 11488.73.372010
Flag of Tajikistan.svg  Tajikistan 386.61.22009
Flag of Tanzania.svg  Tanzania 3867.928.12007
Flag of Thailand.svg  Thailand 380.370.052009
Flag of East Timor.svg  East Timor 3837.48.92007
Flag of Togo (3-2).svg  Togo 3838.711.42006
Flag of Trinidad and Tobago.svg  Trinidad and Tobago 384.21.12008
Flag of Tunisia.svg  Tunisia 381.350.282005
Flag of Turkey.svg  Turkey 21117.55.762010
Flag of Turkmenistan.svg  Turkmenistan 3824.871998
Flag of Uganda.svg  Uganda 3838.0112.22009
Flag of Ukraine.svg  Ukraine 380.060.042009
Flag of the United Kingdom.svg  United Kingdom 10278.32.062010
Flag of the United States.svg  United States [d] 123217.16.552010
Flag of Uruguay.svg  Uruguay 380.20.072008
Flag of Venezuela.svg  Venezuela 386.63.72006
Flag of Vietnam.svg  Vietnam 3816.93.82008
Flag of Yemen.svg  Yemen 3817.54.22005
Flag of Zambia.svg  Zambia 3868.5372006

See also

Notes

  1. This is on purchasing power parity basis, international dollar adjusted for inflation to 2005; To convert to $ per day income, divide by 30.4; for annual income multiply by 12.
  2. This data is for urban population only.
  3. This data is for rural population of China.
  4. The U.S. defines its poverty line on a dynamic basis and household size. As an example, for a family of 4 in a household, the poverty line was about $1,838 per month.

References

  1. "Poverty Gap". stats.areppim.com. Retrieved June 3, 2023.
  2. 1 2 3 Sen, Amartya (March 1976). "Poverty: An Ordinal Approach to Measurement". Econometrica . 44 (2): 219–231. doi:10.2307/1912718. JSTOR   1912718.
  3. Grusky, David B.; Kanbur, Ravi, eds. (2006). Poverty and Inequality. Studies in Social Inequality. Stanford, California: Stanford University Press. p. [ page needed ]. ISBN   978-0-8047-4843-8.
  4. Indicators for Monitoring the Millennium Development Goals (PDF). New York: United Nations. 2003. p. 9.
  5. 1 2 3 "Poverty Measures" (PDF). World Bank. 2009. Archived from the original (PDF) on July 10, 2012.
  6. Edelman, Peter (July 28, 2012). "Poverty in America: Why Can't We End It?". The New York Times . Retrieved November 20, 2020.
  7. Ravallion, Martin (June 1996). Issues in Measuring and Modeling Poverty (PDF). Policy Research Working Paper. Vol. 1615. Washington, D.C.: World Bank . Retrieved November 20, 2020.
  8. "Indicators of Sustainable Development". United Nations Department for Policy Coordination and Sustainable Development. 2004. Archived from the original on April 21, 2012. Retrieved August 10, 2012.
  9. 1 2 "Poverty Measures, Chapter 4" (PDF). Introduction to Poverty Analysis. Washington, D.C.: World Bank Institute. August 2005. Archived from the original (PDF) on July 10, 2012.
  10. Foster, James E. (May 1998). "Absolute versus Relative Poverty". The American Economic Review . 88 (2): 335–341. CiteSeerX   10.1.1.383.6488 . JSTOR   116944.
  11. Morrell, Dan (January–February 2011). "Who Is Poor?". Harvard Magazine . Retrieved November 22, 2020.
  12. Sen, Amartya (December 1985). "A Sociological Approach to the Measurement of Poverty: A Reply to Professor Peter Townsend". Oxford Economic Papers . 37 (4): 669–676. doi:10.1093/oxfordjournals.oep.a041716. JSTOR   2663049.
  13. Takayama, Noriyuki (May 1979). "Poverty, Income Inequality, and Their Measures: Professor Sen's Axiomatic Approach Reconsidered". Econometrica. 47 (3): 747–759. doi:10.2307/1910420. JSTOR   1910420.
  14. Jenkins, Stephen P.; Lambert, Peter J. (July 1997). "Three 'I's of Poverty Curves, with an Analysis of UK Poverty Trends". Oxford Economic Papers. 49 (3): 317–327. doi:10.1093/oxfordjournals.oep.a028611. JSTOR   2663596.
  15. 1 2 Vecchi, Giovanni (September 2007). "Poverty Measurement" (PDF). World Bank. Archived from the original (PDF) on March 3, 2016.
  16. "Poverty database". World Bank. 2012. Archived from the original on December 2, 2012.
  17. "Poverty and Inequality Platform (version 20240627_2017_01_02_PROD) [data set]". World Bank. 2024. Retrieved November 26, 2024.
  18. "Poverty rates and gaps". OECD Factbook 2010: Economic, Environmental and Social Statistics. Paris: OECD Publishing. 2010. pp. 236–237. doi:10.1787/factbook-2010-89-en. ISBN   9789264083561.
  19. Mosley, Paul; Mussurov, Altay (April 2009). "Poverty and Economic Growth in Russia's Regions" (PDF). Sheffield Economic Research Paper Series. University of Sheffield. ISSN   1749-8368.