A Unified Approach to Measuring Poverty and Inequality
other employment sector, all else being equal, then the probability of being in poverty fell. Hence, this analysis provides a tool to better understand the source of poverty and what type of policy would be more efficient in terms of eradicating poverty. Growth and Redistribution Decomposition of Poverty Changes Table 3.30 decomposes the change in poverty into a change in the mean per capita consumption expenditure and a change in distribution of consumption expenditure around the mean, following Huppi and Ravallion (1991). Table rows denote three regions—urban, rural, and all of Georgia—for two different poverty lines. The per capita consumption expenditure is measured in lari per month. Poverty lines are set at GEL 75.4 (poor) and GEL 45.2 (extremely poor) for each household and household member. For simplicity in this table, we present the decomposition for headcount ratio only, but the technique is equally applicable to other poverty measures in the FGT class. Columns A and B report the headcount ratio of the three regions for years 2003 and 2006, respectively, and column C reports the changes over time. Columns D, E, and F decompose the change in the headcount ratio between 2003 and 2006 into three different terms. Column D reports the effect of growth on poverty, referred to as the growth effect. Column E reports the effect of redistribution on poverty and is called the redistribution effect. Column F reports the interaction term and is referred to as the interaction effect, following Huppi and Ravallion (1991). Table 3.30: Growth and Redistribution Decomposition of Poverty Changes, Headcount Ratio percent 2003 2006 Actual change Growth Redistribution Interaction Region
A
B
C
D
E
F
Poverty line = GEL 75.4 1 Urban 2 Rural 3 Total
28.1 31.6 29.9
30.8 31.1 31.0
2.7 −0.5 1.0
0.6 −0.7 0.0
1.9 −0.1 1.0
0.1 0.3 0.0
Poverty line = GEL 45.2 4 Urban 5 Rural 6 Total
8.9 11.4 10.2
9.3 12.1 10.7
0.4 0.7 0.5
0.3 −0.2 0.0
0.0 1.0 0.5
0.1 0.0 0.0
Source: Based on ADePT Poverty and Inequality modules using Integrated Household Survey of Georgia 2003 and 2006.
222