Chapter 1: Introduction
2. Identify the poor. This step involves selecting a poverty line that indicates the minimum acceptable level of income or consumption. 3. Aggregate the data into an overall poverty measure. Headcount ratio is the most basic measure. It simply calculates the share of the population that is poor. But following the work of Amartya Sen, other aggregation methods designed to evaluate the depth and severity of poverty have become part of the poverty analyst’s standard toolkit.1 Applying and interpreting poverty measures require understanding the methods used to assess two other aspects of income distribution: its spread (as evaluated by an inequality measure like the Gini coefficient) and its size (as gauged by an “income standard” like the mean or median income). There are several links between income inequality, poverty, and income standards. For instance, inequality and poverty often move together— particularly when growth in the distribution is small and its size is relatively unchanged. Other links exist for individual poverty measures. To gauge the depth of poverty, a poverty measure can assess the size of the income distribution among the poor—or a poor income standard. Other measures incorporate a special concern for the poorest of the poor and are sensitive to the income distribution among the poor. This sensitivity takes the form of including a measure of inequality among the poor within the measure of poverty. Thus, to measure and to understand the many dimensions of income poverty, one must have a clear understanding of income standards and inequality measures. This chapter is a conceptual introduction to poverty measurement and the related distributional analysis tools. It begins with a brief discussion of the variable and data to be used in poverty assessment. It then discusses the various income standards commonly used in distributional analysis. Inequality measures are then introduced, and their meanings in income standards are presented. The final part of this introduction combines those elements to obtain the main tools for evaluating poverty. The second chapter complements this introduction by providing a detailed outline and more formal analysis of the concepts introduced here, and follows the composition of this chapter closely. The third chapter and
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