A Unified Approach to Measuring Poverty and Inequality
order 0.5 for urban Georgia is 9.1 percent lower than Georgia’s mean per capita expenditure in 2003. The next two cells to the right report A(0) and A(–1) for urban Georgia, where A(0) = 17.7 [1,B] and A(–1) = 34.3 [1,C]. Therefore, A(0) is 17.7 percent lower than the mean per capita expenditure and A(–1) is 34.3 percent lower than the mean per capita expenditure. Columns D, E, and F report three generalized entropy measures for a = 0, 1, and 2, denoted by GE(0), GE(1), and GE(2), respectively. Row 2 reports the three Atkinson measures and three generalized entropy measures for rural Georgia. Each of these six measures shows that rural Georgia is more unequal than urban Georgia. For example, the A(1/2) for the rural area is 10.1 [2,A], compared with 9.1 in the urban area [1,A], and A(0) for the rural area is 19.8 [2,B], compared with 17.7 for the urban area [1,B]. However, the difference is much larger when the two regions are compared with respect to A(–1): 38.9 for the rural area [2,C] and 34.3 for the urban area [1,C]. Next, we consider the results across regions. The level of inequality of Ajara according to A(1/2) is 9.4 [8,A], which is higher than that of Samtskhe-Javakheti at 9.0 [7,A]. This means that Ajara has larger income inequality than Samtskhe-Javakheti. Even according to A(0), A(–1), GE(0), and GE(–1), Ajara has higher income inequality than SamtskheJavakheti. However, in terms of GE(2), which gives more weight to larger incomes across the population, Samtskhe-Javakheti [7,F] has higher income inequality than Ajara [8,F]. Lessons for Policy Makers A region’s income standards reflect that region’s welfare level. However, higher welfare does not necessarily mean more equal distribution. A high level of inequality may be detrimental to a region’s welfare. We already reported the Gini coefficient for that purpose. However, given that the Gini coefficient has certain limitations, we report three Atkinson inequality measures and three generalized entropy measures to check the inequality ranking for regions. These six inequality measures are commonly used separately from the Gini coefficient. Also unlike the Gini coefficient, Atkinson and generalized entropy class inequality measures are normative measures, in which we may choose varying degrees of inequality aversion. If these six measures agree with the Gini coefficient, then a conclusion based on the Gini coefficient can be
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