Poverty Measurement and Analysis

This chapter offers a primer on poverty, inequality, and vulnerability analysis and a guide to resources on this topic. It is written for decisionmakers who want to define the type of information they need to monitor poverty reduction and make appropriate policy decisions and for the technical experts in charge of the analysis. The chapter takes a broad look at tools for analysis and provides a brief introduction to each topic. It also outlines why certain information is essential in policymaking and how this information can be generated.

The measurement and analysis of poverty, inequality, and vulnerability are crucial for cognitive purposes (to know what the situation is), for analytical purposes (to understand the factors determining this situation), for policymaking purposes (to design interventions best adapted to the issues), and for monitoring and evaluation purposes (to assess the effectiveness of current policies and to determine whether the situation is changing).

Various definitions and concepts exist for well-being, and this chapter focuses on three of its aspects. First, it addresses what is typically referred to as poverty, that is, whether households or individuals possess enough resources or abilities to meet their current needs. This definition is based on a comparison of individuals’ income, consumption, education, or other attributes with some defined threshold below which individuals are considered as being poor in that particular attribute. Second, the chapter focuses on inequality in the distribution of income, consumption, or other attributes across the population. This is based on the premise that the relative position of individuals or households in society is an important aspect of their welfare. In addition, the overall level of inequality in a country, region, or population group, in terms of monetary and non-monetary dimensions, is in itself also an important summary indicator of the level of welfare in that group. (A detailed analysis of inequality is given in chapter 2, “Inequality and Social Welfare.”) Finally, the chapter considers the vulnerability dimension of well-being, defined here as the probability or risk today of being in poverty—or falling deeper into poverty—at some point in the future. Vulnerability is a key dimension of well-being, since it affects individuals’ behavior (in terms of investment, production patterns, coping strategies) and their perception of their own situation.

Although the concepts, measures, and analytical tools can be applied to numerous dimensions of well-being, such as income, consumption, health, education, and assets ownership, the chapter focuses mainly on income and consumption and refers only casually to the other dimensions. (See technical note A.12 in the appendix at the end of volume 1 for a brief discussion of the multidimensional aspects of extreme poverty and social exclusion.) Other chapters in this book focus on the dimensions of well-being excluded here. It should also be noted that this chapter outlines general principles that should be valid in many settings, but the methods used for analyzing well-being must always be adapted to country circumstances and the availability of data.

The chapter is arranged into several sections so that readers can easily find the information of greatest interest to them. The chapter begins with the essentials of poverty measurement and analysis (section 1.2) before turning to inequality (section 1.3) and vulnerability (section 1.4). In each of these sections, the chapter first defines some of the concepts, indicators, and measures that can be used, and then discusses the various analytical tools available. Section 1.5 presents an overview of different sources and types of data that can be used for the analysis. The section includes a reference table linking the analytical methods described in this chapter with the data sources necessary for their application. Finally, a reference list contains resources and web sites for further study, and the technical notes explore specific issues in greater depth.

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