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INTRODUCTION TO POVERTY ANALYSIS - World Bank

INTRODUCTION TO POVERTY ANALYSIS World bank Institute August 2005 POVERTY Manual, All, JH Revision of August 8, 2005 Page 2 of 218 Table of Contents CHAPTER 1. WHAT IS POVERTY AND WHY MEASURE IT? ..8 The concept of well-being and POVERTY ..9 Why measure POVERTY ? ..10 Thinking Systematically: POVERTY Reduction Strategy Papers (PRSP) ..13 CHAPTER 2. MEASURING Steps in measuring POVERTY ..15 Household surveys ..15 Key survey Common survey problems ..16 Survey design ..16 Goods coverage and valuation ..20 Variability and the time period of measurement ..21 Comparisons across households at similar consumption levels ..21 Key features of Living Standards Measurement (LSMS) surveys.

Poverty Manual, All, JH Revision of August 8, 2005 Page 6 of 218 Introduction This manual presents an introductory course on poverty analysis.

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Transcription of INTRODUCTION TO POVERTY ANALYSIS - World Bank

1 INTRODUCTION TO POVERTY ANALYSIS World bank Institute August 2005 POVERTY Manual, All, JH Revision of August 8, 2005 Page 2 of 218 Table of Contents CHAPTER 1. WHAT IS POVERTY AND WHY MEASURE IT? ..8 The concept of well-being and POVERTY ..9 Why measure POVERTY ? ..10 Thinking Systematically: POVERTY Reduction Strategy Papers (PRSP) ..13 CHAPTER 2. MEASURING Steps in measuring POVERTY ..15 Household surveys ..15 Key survey Common survey problems ..16 Survey design ..16 Goods coverage and valuation ..20 Variability and the time period of measurement ..21 Comparisons across households at similar consumption levels ..21 Key features of Living Standards Measurement (LSMS) surveys.

2 22 Multi-topic questionnaires ..23 Quality Measuring POVERTY : choose an indicator of welfare ..24 Candidate 1: Income ..26 Candidate 2: Consumption expenditure ..28 Measuring durable Measure the value of housing services ..31 Weddings and Accounting for household composition Candidate 3. Other measures of household welfare ..37 CHAPTER 3. POVERTY How to define a POVERTY line ..43 Relative POVERTY ..46 Absolute POVERTY ..48 Issues in choosing an absolute POVERTY Decide the standard of living ..49 Decide uz and g(.)..51 Solution A: objective POVERTY lines..53 The Cost-of-Basic-Needs method: ..53 Box. The US POVERTY line ..54 Food Energy Intake method.

3 58 The urban-rural The relative price problem ..63 POVERTY Manual, All, JH Revision of August 8, 2005 Page 3 of 218 CHAPTER 4. MEASURES OF Headcount POVERTY gap Squared POVERTY gap ( POVERTY severity ) index ..73 Sen The Sen-Shorrocks-Thon The Watts Index ..79 Time taken to Other Measures ..81 CHAPTER 5. POVERTY INDICES: CHECKING FOR INTRODUCTION ..84 Sampling Error ..84 Measurement error ..85 Equivalence Choice of POVERTY Line and POVERTY A single measure of standard of Robustness: More than One Dimension [Advanced] ..93 CHAPTER 6. INEQUALITY Definition of inequality ..96 Commonly used summary measures of inequality.

4 97 Gini coefficient of inequality ..97 Generalized Entropy Atkinson's inequality measures ..100 Decile dispersion ratio ..101 Inequality Decomposition of income CHAPTER 7. DESCRIBING POVERTY : POVERTY What is a country POVERTY profile? ..107 Additive POVERTY measures ..110 Profile Presentation ..111 POVERTY Comparisons over time ..112 Excerpts from POVERTY profiles for Indonesia and Indonesia ..114 Cambodia ..116 POVERTY mapping ..120 CHAPTER 8. UNDERSTANDING THE DETERMINANTS OF What causes POVERTY ? ..125 Regional level Community level characteristics ..126 Household and individual level characteristics ..127 Demographic characteristics.

5 128 Economic Social Analyzing the determinants of POVERTY : Regression POVERTY Manual, All, JH Revision of August 8, 2005 Page 4 of 218 CHAPTER 9. POVERTY REDUCTION Is growth good for the poor? ..138 Pro-poor growth ..142 Opportunity ..143 Policies to Enhance Empowerment ..145 Policies to enhance Income security ..148 Policies to enhance security and reduce Practice and good examples ..149 India ..150 CHAPTER 10. INTERNATIONAL POVERTY INTRODUCTION ..154 Overview of POVERTY International POVERTY comparisons ..155 Further methodological considerations ..158 Illustrating the importance of exchange rate adjustments ..160 Survey data and national accounts.

6 161 Why HBS and national accounts total differ ..163 The Debate: Is World POVERTY falling? If so, how fast? ..164 APPENDIX I: DATA File Data APPENDIX II: STATA Starting STATA ..170 Opening a Dataset ..171 Saving a Data Exiting STATA ..173 STATA Help ..173 Notes on STATA Listing the variables ..175 Listing data ..176 Summarizing Frequency distributions (tabulations) ..178 Distributions of descriptive statistics (table command)..178 Missing Values in STATA ..180 Counting observations ..180 Generating new variables ..180 Keeping and Dropping Variables and Observations ..183 Producing Graphs ..184 Combining Data sets.

7 184 Follow-up POVERTY Manual, All, JH Revision of August 8, 2005 Page 5 of 218 APPENDIX 3: INTRODUCTION ..190 Exercise 1 (Chapter Two) ..190 Household Individual Characteristics ..191 Expenditure ..192 Household Weights ..195 The effects of clustering and stratification ..196 Exercise 2 (Chapter Three) ..198 Direct Caloric Intake ..198 Food-Energy Cost of Basic Needs ..200 Exercise 3 (Chapter Four):..201 A Simple Example ..201 POVERTY Measures for Rural Bangladesh 1999 ..201 Finding and Using .ado files ..203 Exercise 4 (Chapter Five): ..205 Sampling Measurement Error ..205 Sensitivity Stochastic Challenge: Bootstrapping standard error for SST index.

8 208 Exercise 5 (Chapter Six):..210 Lorenz Curve ..210 Inequality Measures for Rural Bangladesh ..210 Exercise 6 (Chapter Seven): ..212 Characteristics of the poor ..212 More POVERTY Comparison across subgroups ..212 Exercise 7 (Chapter Eight): ..213 POVERTY Manual, All, JH Revision of August 8, 2005 Page 6 of 218 INTRODUCTION This manual presents an introductory course on POVERTY ANALYSIS . It covers all the basic methods related to POVERTY measurement and diagnosis, and applies these methods using household survey data. The topics included in this manual are: the concept of well-being, why measure POVERTY , how measure POVERTY , setting POVERTY lines, POVERTY indices and their comparisons, inequality measures, POVERTY profiles, the determinants of POVERTY , whether POVERTY is falling worldwide, and how POVERTY ANALYSIS is linked to POVERTY reduction policies.

9 In order to make the material as clear as possible, the manual includes extensive illustrations from around the World . The manual was originally developed to be used in a full-time ten-day training course of morning lectures and afternoon practice exercises, geared towards participants with at least a university-level background in science or social science. The course was designed as part of a broader training program of the World bank Institute called the POVERTY ANALYSIS Initiative (PAI), whose objective is to improve the capacity of analysts, researchers and statisticians in less-developed countries to undertake POVERTY ANALYSIS , directly using data from household surveys.

10 Among other things, this should help support the policy work related to the PRSP ( POVERTY Reduction Strategy Paper) process involving POVERTY identification, measurement, monitoring, and evaluation. The World bank Institute has used a draft version of the manual in training workshops in the Philippines, Cambodia and Malawi, as well as in distance courses with substantial numbers of participants in several countries in Asia (in 2002) and Africa (in 2003). The feedback from these courses has been very useful in helping us create a manual that balances rigor with accessibility and practicality.


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