An analysis on poverty gap

   AN ANALYSIS ON EVOLUTION OF POVERTY GAP

ABSTRACT

Almost three years after the the introduction of Millenium development goals (2015),the entire world is in mindful about the reduction of the poverty rate. For developed nations, there concern is about reducing the poverty rate by 50%. the purpose of this paper is to intoduce new way of comparing poverty level inspired from the world Bank methodology taking into account the development level of each nation in the world.  in accodance to the newly introduced method the poverty level of developing regions is 31 percent instead of 23.4 percent in USD 1 per day. This paper also highlights the progressive understanding of the definition of poverty prom leading in market-purchased goods to other dimensions in life such as literacy and health, and also raised concerns on vulnarability and lack of voice. this wider definition leads to expanding on the set of policies that are of great help in the reduction of poverty levels.

INTRODUCTION

The poor command a special attention from the society even though development seeks to benefit all members of the society. Reduction or total eradication of poverty lies in the heart of development economies. Poverty simply implies that a reasonable or significant number of people are living in hardship circumstances where starvation is a constant threat,sickness  and opression. Poverty can thus be difided in terms of monetary values required to attain a particular level of welfare. household with suficient financial resources can concievebly piurchase better health care  and educate their children. In Alfred Marshall's words, "The study of the causes of poverty is the study of the causes of degradation of a large part of mankind."1 Improving the lives of the poor must be at the top of our agenda.

The focus of the topic requires some selectivity. They will mainly answer two questions. How to measure and define poverty? And the policies that should be put into place to to reduce the poverty gap. In this phis paper explores the issues regarding to poverty taking advantage of the increased broadness on the discusion of poverty oveer the last a quartee a century. This also lead to increased and development of new relevant policies. According to the comparison conducted by the world bank and UN in practisind specialised literature dealing with global poverty;a poverty line can be held over time across countries

Logically, the food poverty line is the main  anchor for money-metric poverty

measurements.in regard the 'basic needs approach'; food poverty lines in developing countries are set as the cost a normative 'basic needs' bundle of goods which is typically chosen to reach a predetermined caloric requirement with a composition that is consistent with the consumption behavior of the poor. This goods  are evaluated using prices prevailing in each of the country's regions and at each date. Food poverty line is obtain ed from the goods purchaawed for the purpose of food. . In accordance Engel's law, the non-food allowance can be determined in two  main ways ; (i)comparison of the food share against total expenditures and identifying the non-food share in the expenditure distribution of households whose expenditure on food is equivalent to the food poverty line; or (ii) by identifying the share of non-food expenditure for households whose total expenditure is equal to the food

poverty line.It can be seen from this paper of poverty gap that poverty level has a wide range of definitions and measurement methods.

Poverty is a complex phomena, a special approach is required to to develop poverty strategies and programmes to deal with the various dimension of poverty especially, especially with the limited resourses in developing nation.If the Millenium development goals are to be achieved If the Millennium Development Goals are to be achieved, progress in all major areas

related to the well-being of the people is essential, including poverty reduction and improvements in education, health, gender equality and the environment, with the

eradication of extreme poverty and hunger at the forefront. The world is not at a state of achieving Millenium Development  goals in most regions and counties (UNDP 2003).This raises questions on the policies and strategies adopted to succeed on poverty reduction. This slow process raises important questions about the concept ond understanding of poverty. The has been significant evolution on poverty perspective with widespread acceptance of its multi-dimensional nature and of consideration its depth. Progress in recognizing andresponding to the persistence of much poverty over time has been slow (Clark and Hulme 2005).Of the world's 6 billion people, 2.8 billion, almost half, live on less than $2 a day; and 1.2 billion, one fifth, live on less than $1 per day (UNDP 2006)

Different approaches to poverty measurement

All approaches identify the same people as being poor as any of this approaches can be used to meaasure poverty. Ruggeru-Laderchi et al.2003 mainly four approaches on poverty.

The four approaches are as follow:

the monetary approach

the capability approach 

the social exclusion approach,and 

the participatory approach

The monetary approach is the one mostly used to define and measure poverty.Here poverty line is explained in terms of the monetary income sufficient for attaining a mimimal standard of living.Any person falling below the poverty line is said to be poor. As per the World Bankthe poverty line for households was set to be more  than $2 per person  a day.

The capability approach brought foward by Amartya Sen emphasized that incomes becomes valuable if it increases individual's capability in functioning in the society. In accordance to the capability approach,poverty is pronounced as a deprivation in well being. The poor lacks shelter,adequate food,education  and health,essentials that keep them lead them to a life that no one values.ThIs also increases their vulnarability. This are all dimensions of poverty making many to believe that the escape from poverty is almost impossible due to the experience on multiple depriviations.All these forms of deprivation severely restrict what Sen (1976) calls the "capabilities that a person has, that is, the substantive freedoms he or she enjoys to lead the kind of life he or she values".According to this approach someone is regarded poor if his or her capabilities of functioning falls below a minimum acceptable stadard.

The social exclusion approach emphasizes relation among individuals. When individuals or groups are unable to participate fully in the society it is termed as social exclusion.The income capabilities or other characteristics of the poor becomes distant unacceptably from the norms of the comunity as a result of this exclusion.

the participtory approach takes into concideration the viewas of poor people themselves.They determine the magnitude of poverty and also explain what it means to be poor by themselves. Van Praag (1978) introduced this approach to measure poverty level based on sample surveys about the perception of poverty  and its magnitude of the people interviewed for the study.

 

INCOME AND CONSUMPTION

CONVENTIONAL MEASURES

According to normal definition or usage poverty is "The state of one who lacks a usual or socially acceptable amount of money or material possessions."The definition of poverty first will be different at different times and diffeent societies. secondly the focus on money or material possesion. This two ideas will be widely used in an attempt to explain poverty.

 

Benjamin Seebohm Rowntree, an well known  measurer of poverty, arrived at a "socially acceptable" amount of money by estimating the budget required "to obtain the minimum necessaries for the maintenance of merely physical efficiency"for specific circumstances in the City of New York at that time. Based on nutrition view and the local prices,Rowntree concluded that 15 shillings is enough to feed a family of six for a period  of one week.In addition to an allowance for shelter, clothing, fuel, and other essentials , he arrived at a poverty line of twenty-six shillings for a family of six that implied a poverty rate of almost 10 percent in  NewYork. This approach has been widely used in other parts of the world but the resulting mean poverty lines is sensitive to local circumstances.  

A known  poverty line for monitoring progress in decreasing poverty worldwide is

the dollar-a-day measure which was introduced  in the 1990 World Development Report.With basis on the poverty lines actually used in several low-income countries, this poverty line is expressed in1985 PPP dollars and refering to household expenditure per person. This measure has several well�known deficiencies – it does not allow for cost-of-living differentials within countries (Ravallionand van de Walle, 1991), it does not distinguish betweentransient and chronic poverty (WorldBank, 1990), it only values goods and services delivered through the market (van de Walle andNead, 1994), it does not consider intra-household allocation of expenditure (Haddad and Kanbur,1990), it deals in only a rudimentary fashion with differences in household size and composition(Lanjouw and Ravallion, 1995), and so on. It is reassuring that the use of more than one line generally gives the same overall picture regarding the worldwide distribution of poverty and how it is changing.over.time.

Table1 below illustrates this point of poverty lines – one identifying the poor and the other the extreme poor as defined in the 1990 World Development Report. Whichever poverty line one uses, the incidence of poverty is highest in South Asia and sub-Saharan Africa and lowest in the Middle East and North Africa and East Asia. Similarly, whichever poverty line one uses, between 1985 and 1990 the incidence of poverty fell in South Asia, but increased in Latin America and sub�Saharan Africa. The survey data underlying these numbers cover 80 percent of the population in developing countries. Extrapolating to the total population, the higher of the two poverty lines,the widely used dollar-a-day poverty line for one individual at 1985 U.S. prices, indicates that about 1.3 billion people, or one in three, were living in poverty in the developing world in 1990.

Table 1: The incidence of poverty

Poverty line (1985PPP$/person/month

$21.00

$30.42

Year

1985

1990

1985

1990

Region(% of population)

South Asia 

36.76

33.31

60.84

58.60

Sub-Saharan africa

31.65

33.44

51.40

52.89

Latin america

13.23

17.21

23.07

27.77

East asia

4.89

4.86

15.72

14.71

Middle east and north america

1.33

0.54

4.49

2.52

Total

18.25

17.26

33.88

33.52

Source:Chen.Dart and Ravallion,1994

Findings

It is surprising that Benjamin Seebohm approach of poverty used be him almost 100 years ago is very much a feature of how we measure poverty today.Secondly,the take that life expectancy,literacy and food are the main aspects that human well bing and that the poor in the world suffer in this dimensions.There was also relation of poverty to health in the society.

Seebohn third reaction in the notion of giving a voice to the poor is nuanced.When the key focus was confined to income,the intention was between growth in the mean and changes in equality.The definition expanded on including health ,literacy status and so on,the key interaction became that between effort and increased income to reduce risks and vulnarabity among individuals

References

Ahluwalia, M.S. 1976. "Inequality, Poverty, and Development." Journal of Development Economics, 3, September, 307-342.

Ahluwalia, M.S., N.G. Carter and H.B. Chenery. 1979. "Growth and Poverty in Developing Countries." Journal of Development Economics, 6, 299-341.

Alderman, H., et al. 1995. "Unitary Versus Collective Models of the Household: Is it Time to Shift the Burden of Proof?" World Bank Research Observer 10: 1-19.

Alderman, H., J. Behrman, V. Lavy, and R. Menon. 1997. "Child Nutrition, Child Health, and School Enrollment: a Longitudinal Analysis." Policy Research Working Paper No. 1700.