Poverty and Equity: Measurement, Policy and Estimation with DAD

398 Pages·2006·33.815 MB·English

by  Jean-Yves Duclos, Abdelkrim Araar (auth.)

POVERTY AND EQUITY:
MEASUREMENT, POLICY AND
ESTIMATION WITH DAD
ECONOMIC STUDIES IN INEQUALITY, SOCIAL EXCLUSION AND WELL-BEING
Editor:
Jacques Silber, Bar Ilan University
Editorial Advisory Board:
John Bishop, East Carolina University, USA.
Satya Chakravarty, Indian Statistical Institute, India,
Conchita D'Ambrosio, University of Milano-Bicocca, Italy.
David Gordon, University of Bristol, The United Kingdom.
Jaya Krishnakumar, University of Geneva, Switzerland.
This series will publish volumes that go beyond the traditional concepts of consumption, income or wealth
and will offer a broad, inclusive view of inequality and well-being. Specific areas of interest will include
Capabilities and Inequalities, Discrimination and Segregation in the Labor Market, Equality of
Opportunities, Globalization and Inequality, Human Development and the Quality of Life, Income and
Social Mobility, Inequality and Development, Inequality and Happiness, Inequality and Malnutrition,
Income and Social Mobility, Inequality in Consumption and Time Use, Inequalities in Health and
Education, Multidimensional Inequality and Poverty Measurement, Polarization among Children and
Elderly People, Social Policy and the Welfare State, and Wealth Distribution.
Volume 1
de Janvry, Alain and Kanbur, Ravi
Poverty, Inequality and Development: Essays in Honor of Erik Thorbecke
Volume 2
Duclos, Jean-Yves and Araar, Abdelkrim
Poverty and Equity: Measurement, Policy and Estimation with DAD
POVERTY AND EQUITY:
MEASUREMENT, POLICY AND
ESTIMATION WITH DAD
By
JEAN-YVES DUCLOS
Interuniversity Centre on Risk, Economic Poiicies and Employment (CIRPEE)
Universite Laval, Quebec, Canada
ABDELKRIM ARAAR
CIRPEE and Poverty and Economic Policy (PEP) network,
Universite Laval, Quebec, Canada
Springer
International Development Research Centre
Ottawa • Cairo • Dakar • Montevideo • Nairobi • New Delhi • Singapore
Jointly published by
Springer
233 Spring Street
NewYork, NY 10013
and the
International Development Research Centre
PO Box 8500, Ottawa, ON, Canada KIG 3H9
[email protected] / www.idrc.ca
Library of Congress Control Number: 2006923024
ISBN:10: 0-387-25893-0 (HE) e-ISBN-10: 0-387-33318-5
ISBN-13: 978-0387-25893-5 (HB) e-ISBN-13: 978-0387-33318-2
© 2006 Springer Science+Business Media, LLC
All rights reserved. This work may not be translated or copied in whole or in part without the
written permission of the publisher except for brief excerpts in connection with reviews or
scholarly analysis. Use in connection with any form of information storage and retrieval,
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The use in this publication of trade names, trademarks, service marks and similar terms, even
if they are not identified as such, is not to be taken as an expression of opinion as to whether
or not they are subject to proprietary rights.
Printed in the United States of America.
9 8 7 6 5 4 3 21
springer.com
To Marie-Chantal,
Etienne, Clemence and
Antoine. Without their
love, I could not be
such a happy Dad.
Yves
To Syham, Abdou and
Aymen.
To my mother and my
father
Araar Abdelkrim
Contents
Dedication v
List of Figures xv
List of Tables xviii
Preface xix
Part I Conceptual and methodological issues
1. WELL-BEING AND POVERTY 3
1.1 The welfarist approach 3
1.2 Non-welfarist approaches 5
1.2.1 Basic needs and functionings 5
1.2.2 Capabilities 7
1.3 A graphical illustration 8
1.3.1 Exercises 11
1.4 Practical measurement difficulties for the non-welfarist
approaches 12
1.5 Poverty measurement and public policy 15
1.5.1 Poverty measurement matters 15
1.5.2 Welfarist and non-welfarist policy implications 16
2. THE EMPIRICAL MEASUREMENT OF
WELL-BEING 19
2.1 Survey issues 19
2.2 Income versus consumption 21
2.3 Price variability 22
2.3.1 Exercises 26
2.4 Household heterogeneity 27
viii POVERTY AND EQUITY
2.4.1 Estimating equivalence scales 28
2.4.2 Sensitivity analysis 29
2.4.3 Household decision-making and within-household
inequality 32
2.4.4 Counting units 33
2.5 References for Chapters 1 and 2 33
Part II Measuring poverty and equity
3. INTRODUCTION AND NOTATION 39
3.1 Continuous distributions 40
3.2 Discrete distributions 41
3.3 Poverty gaps 42
3.4 Cardinal versus ordinal comparisons 43
4. MEASURING INEQUALITY AND SOCIAL WELFARE 49
4.1 Lorenz curves 49
4.2 Gini indices 53
4.2.1 Linear inequality indices and S-Gini indices 53
4.2.2 Interpreting Gini indices 57
4.2.3 Gini indices and relative deprivation 59
4.3 Social welfare and inequality 60
4.4 Social welfare 63
4.4.1 Atkinson indices 63
4.4.2 S-Gini social welfare indices 65
4.4.3 Generalized Lorenz curves 65
4.5 Statistical and descriptive indices of inequality 66
4.6 Decomposing inequahty by population subgroups 67
4.6.1 Generalized entropy indices of inequality 67
4.6.2 A subgroup Shapley decomposition of inequality
indices 69
4.7 Appendix: the Shapley value 71
4.8 References 72
5. MEASURING POVERTY 81
5.1 Poverty indices 81
5.1.1 The EDE approach 81
5.1.2 The poverty gap approach 82
5.1.3 Interpreting FGT indices 83
Contents ix
5.1.4 Relative contributions to FGT indices 84
5.1.5 EDE poverty gaps for FGT indices 86
5.2 Group-decomposable poverty indices 87
5.3 Poverty and inequality 88
5.4 Poverty curves 89
5.5 S-Gini poverty indices 90
5.6 Normalizing poverty indices 91
5.7 Decomposing poverty 92
5.7.1 Growth-redistribution decompositions 92
5.7.2 Demographic and sectoral decomposition of differences
in FGT indices 95
5.7.3 The impact of demographic changes 96
5.7.4 Decomposing poverty by income components 97
5.8 References 98
6. ESTIMATING POVERTY LINES 103
6.1 Absolute and relative poverty lines 103
6.2 Social exclusion and relative deprivation 105
6.3 Estimating absolute poverty lines 106
6.3.1 Cost of basic needs 106
6.3.2 Cost of food needs 106
6.3.3 Non-food poverty lines 110
6.3.4 Food energy intake 113
6.3.5 Illustration for Cameroon 114
6.4 Estimating relative and subjective poverty lines 116
6.4.1 Relative poverty lines 116
6.4.2 Subjective poverty lines 119
6.4.3 Subjective poverty Unes with discrete information 120
6.5 References 121
7. MEASURING PRGGRESSIVITY
AND VERTICAL EQUITY 127
7.1 Taxes and transfers 127
7.2 Concentration curves 128
7.3 Concentration indices 130
7.4 Decomposition of inequality into income components 130
7.4.1 Using concentration curves and indices 130
7.4.2 Using the Shapley value 132
X POVERTY AND EQUITY
7.5 Progressivity comparisons 132
7.5.1 Deterministic tax and benefit systems 132
7.5.2 General tax and benefit systems 135
7.6 Tax and income redistribution 135
7.7 References 137
8. HORIZONTAL EQUITY, RERANKING
AND REDISTRIBUTION 141
8.1 Ethical and other foundations 141
8.2 Measuring reranking and redistribution 143
8.2.1 Reranking 144
8.2.2 S-Gini indices of equity and redistribution 144
8.2.3 Redistribution and vertical and horizontal equity 145
8.3 Measuring classical horizontal inequity and redistribution 147
8.3.1 Horizontally-equitable net incomes 147
8.3.2 Change-in-inequahty approach 149
8.3.3 Cost-of-inequality approach 149
8.3.4 Decomposition of classical horizontal inequity 151
8.4 References 151
Part HI Ordinal comparisons
9. DISTRIBUTIVE DOMINANCE 155
9.1 Ordering distributions 155
9.2 Sensitivity of poverty comparisons 155
9.3 Ordinal comparisons 156
9.4 Ethical judgements 158
9.4.1 Dominance tests 158
9.4.2 Paretian judgments 158
9.4.3 First-order judgments 159
9.4.4 Higher-order judgments 160
9.5 References 162
10. POVERTY DOMINANCE 165
10.1 Primal approach 167
10.1.1 Dominance tests 167
10.1.2 Nesting of dominance tests 171
10.2 Dual approach 173
10.2.1 First-order poverty dominance 173