A Unified Approach to Measuring Poverty and Inequality
Table 3.25: Sensitivity of Poverty Measures to the Choice of Poverty Line, 2003 Headcount Change from Poverty gap Change from Squared gap Change from ratio actual (%) measure actual (%) measure actual (%) A
B
C
1 2 3 4 5 6 7
Poverty line = GEL 75.4 Actual +5 percent +10 percent +20 percent −5 percent −10 percent −20 percent
29.9 32.6 35.3 40.5 26.9 24.2 19.4
0.0 9.0 18.0 35.2 −10.0 −19.1 −35.3
9.7 10.7 11.7 13.9 8.7 7.7 6.0
8 9 10 11 12 13 14
Poverty line = GEL 45.2 Actual +5 percent +10 percent +20 percent −5 percent −10 percent −20 percent
10.2 11.4 12.7 15.8 9.2 8.0 6.0
0.0 11.8 24.1 54.5 −9.9 −21.4 −40.9
3.0 3.4 3.8 4.7 2.7 2.4 1.8
D
E
F
0.0 10.7 21.7 44.3 −10.2 −19.9 −38.1
4.6 5.1 5.6 6.8 4.1 3.6 2.7
0.0 11.4 23.3 48.5 −10.8 −21.1 −40.0
0.0 12.2 25.2 53.8 −11.6 −22.4 −41.6
1.4 1.5 1.7 2.1 1.2 1.1 0.8
0.0 12.4 25.6 54.6 −11.6 −22.4 −41.4
Source: Based on ADePT Poverty and Inequality modules using Integrated Household Survey of Georgia 2003 and 2006.
in lari. In this table, we report the results only for 2003, but this analysis can be conducted for any year. Column A reports the headcount ratios for different poverty lines, and column B reports the change in the headcount ratios from the actual poverty line, which can be either GEL 75.4 per month or GEL 45.2 per month. Rows 2 and 9, corresponding to +5 percent, denote the increase in poverty line by 5 percent. Thus, when the poverty line is GEL 75.4, then a 5 percent increase means the poverty line becomes GEL 79.2 and the headcount ratio increases by 3.7 percentage points from 29.9 percent [1,A] to 32.6 percent [2,A], or the headcount ratio increases by 9.0 percent [2,B] from its actual level of 29.9 percent. Similarly, if the poverty line is decreased by 10 percent (–10 percent) from GEL 75.4, then the poverty headcount rate falls by 5.7 percentage points from 29.9 percent [1,A] to 24.2 percent [6,A], or the headcount ratio decreases by 19.1 percent from the actual level of 29.9 percent. The headcount ratio is more sensitive to the change in poverty line when the actual poverty line is GEL 45.2 than when the poverty line is GEL 75.4. In fact, the poverty gap measure and the squared gap measure are also more sensitive to change in poverty line when the actual poverty line is GEL 45.2 rather than GEL 75.4.
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