Chapter 2: Income Standards, Inequality, and Poverty
that, despite having a lower headcount ratio, a massive number of poor people reside in Tbilisi. The share of subgroup poverty in overall poverty also has an intuitive interpretation that can be relevant for geographic targeting. Using the same notations as in the previous paragraph, we can express the poverty gap measure as q
[∑i = 1(z − xi)]/Nz, q
where [∑i = 1(z − xi)] is the total sum of financial assistance required to bring all poor people just to the poverty line to eradicate poverty. If the distribution x is divided into M subgroups as earlier, then the poverty gap measure of subgroup m is q
[∑ i m= 1(z − xi)]/Nmz, q
where [∑ i m= 1(z − xi)] is the total amount of financial assistance required to eradicate poverty in subgroup m. The contribution of subgroup m’s poverty gap measure to the overall poverty gap ratio is q
q
q
q
[Nm∑ i m= 1(z − xi)]/Nmz]/N[∑i = 1(z − xi)]/Nz = ∑ i m= 1(z − xi)/∑i = 1(z − xi). (2.53) Therefore, a subgroup’s contribution is nothing but the share of total financial assistance that should be received by that subgroup to eradicate poverty. Thus, the contribution in terms of the poverty gap measure may be used to understand the requirement for fund allocation across geographic regions. The subgroup contribution of other additively decomposable poverty measures that are sensitive to inequality, such as the squared gap or the Watts index, may not have such an intuitive implication for targeting. However, their additively decomposable property enables us to understand the subgroup’s contribution to overall poverty and monitor the targeting exercise. Although for these examples we have considered only the population subgroups in terms of subnational regions, the population may well be grouped alternatively by gender, occupation, or household head characteristics, as depicted in chapter 3. Poverty, Inequality, and Welfare Poverty measures that satisfy the transfer principle are called distributionsensitive poverty measures. The distribution-sensitive poverty measures
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