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April 4, 2012

SOEP Brown Bag Seminar

SOEP Brown Bag Seminar: Integrating Inequality in Multidimensional Poverty Indices: The Correlation Sensitive Poverty Index
Integrating Inequality in Multidimensional Poverty Indices: The Correlation Sensitive Poverty Index


April 4, 2012
12:30 - 13:30


DIW Berlin
Room 2.3.001
Mohrenstraße 58
10117 Berlin


Nicole Rippin (Deutsches Institut für Entwicklungspolitik)
The study deals with the inclusion of inter-personal inequality in multidimensional poverty indices. Inter-personal inequality is usually equated with association among poverty dimensions, i.e. whether a substitute, complement, or independent relationship exists among the poverty dimensions in question. The equation produced a situation where the existence of simultaneous deprivations serves as the main justification for poverty measures to go beyond simple averages, yet is usually neglected in the actual calculations. This is also the case for the popular Multidimensional Poverty Index (MPI) utilised by UNDP in their Human Development Reports. The study questions the appropriateness of the equation and suggests to take a more holistic approach by defining inter-personal inequality as the association-sensitive spread of simultaneous deprivations across the population. The suggested definition is introduced in the form of a new axiom and it is demonstrated how this proceeding leads to a new identification method and eventually to a new class of correlation sensitive poverty indices. This new class is unique in the sense that it is the first class of additive poverty indices that i) is able to account for the fact that households may suffer from simultaneous deprivations, and ii) is association-sensitive. An example from India illustrates the empirical relevance of the new methodological approach. In particular, evidence is provided that reveals how the additional information provided by the new indices when compared to the MPI has the potential to improve the targeting of poverty reduction policies.