Inequality, Polarization and Poverty

Advances in Distributional Analysis

verfasst von: Satya R. Chakravarty

Verlag: Springer New York

Buchreihe : Economic Studies in Inequality, Social Exclusion and Well-Being

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book provides a synthesis of some recent issues and an up-to-date treatment of some of the major important issues in distributional analysis that I have covered in my previous book Ethical Social Index Numbers, which was widely accepted by students, teachers, researchers and practitioners in the area. Wide coverage of on-going and advanced topics and their analytical, articulate and authoritative p- sentation make the book theoretically and methodologically quite contemporary and inclusive, and highly responsive to the practical problems of recent concern. Since many countries of the world are still characterized by high levels of income inequality, Chap. 1 analyzes the problems of income inequality measurement in detail. Poverty alleviation is an overriding goal of development and social policy. To formulate antipoverty policies, research on poverty has mostly focused on inco- based indices. In view of this, a substantive analysis of income-based poverty has been presented in Chap. 2. The subject of Chap. 3 is people’s perception about income inequality in terms of deprivation. Since polarization is of current concern to analysts and social decisi- makers, a discussion on polarization is presented in Chap. 4.

Inhaltsverzeichnis

Frontmatter

Chapter 1. The Measurement of Income Inequality

Abstract

Given the population size and the distribution of income, the two questions that arise in a person's mind are: what is the mean income and how unequally is the total income distributed among the individuals in the society? Loosely speaking, income inequality represents interpersonal income differences within a given population. Income inequality has become a growing concern for the policymakers because it has important effects on development, poverty, social outcomes, and public finance. In terms of social outcomes, inequality has impacts on several issues, including, health, education, incidence of crime, and violence (Deaton, 2001). The levels and heterogeneity of local inequality may affect tax collection and influence the decentralization of provision of public goods (Bardhan and Mookerjee, 2006). For a given mean income, high inequality generally implies high poverty. Development studies and public finance often employ indicators of inequality to evaluate a distribution of income or the distributional effects of a particular economic policy. Some of the standard questions that arise in this context are: (1) Is inequality in the country lower now than it was in the past? (2) Does region I of the country have more inequality than region II? (3) How much of total inequality arises because of variations of the mean incomes in different regions of the country?

Chapter 2. Inequality and Income Poverty

Abstract

Poverty elimination is still one of the major economic policies in many countries of the world. In order to evaluate the efficacy of an antipoverty policy, it is necessary to know how much of poverty is there and observe the changes in the level of poverty over time. Poverty elimination programs also require identification of the causal factors of poverty, for example, the subgroups of population that are most afflicted by poverty. Quantification of the extent of poverty becomes necessary to address these problems. More precisely, we need an indicator of poverty that will enable us to analyze these issues. According to Sen (1976a), poverty measurement problem involves two distinct but not unrelated exercises: (i) identification of the poor, that is, to isolate the set of poor persons from the set of nonpoor persons and (ii) to aggregate the information available on the poor into an overall indicator of poverty. That is, we need to know who are poor and how poor are the poor? While identification can be referred to as perception of poverty, the aggregation of characteristics of the poor is known as “measurement of poverty.” When income is regarded as the only attribute of well-being, identification problem is solved by specifying a “poverty line,” an exogenously given level of income required to maintain a subsistence standard of living. A person is identified as poor if his income does not exceed the poverty line. Thus, the poverty line is a line of demarcation that separates the set of poor persons from the set of nonpoor persons. The aggregation exercise, loosely speaking, consists of aggregating the income shortfalls of the poor from the poverty line into an overall indicator of poverty.

Chapter 3. Measuring Income Deprivation

Abstract

A person's feeling of deprivation with respect to an attribute of well-being arises from the comparison of his situation in the society with those of the persons that are better-off in the attribute. Evidently, high deprivation may generate tensions in the society which ultimately may lead to conflicts. A natural objective of the society should, therefore, be to make deprivation as low as possible. In this chapter, for simplicity, we will study only income deprivation. The concept of deprivation was introduced into the income distribution literature by Sen (1973, 1976a). According to Sen (1973), in any pairwise comparison, the person with lower income may have a feeling of depression on finding that his income is lower. Assuming that the extent of depression suffered by an individual is proportional to the difference between the two incomes concerned, the average of all such depressions in all pairwise comparisons becomes the Gini index. A more formal treatment of this result was provided by Hey and Lambert (1980). Kakwani (1980a) interpreted the coefficient of variation from a similar perspective under the assumption that an individual's extent of depression is proportional to the square of the income difference. Tsui and Wang (2000) characterized a transformation of the Donaldson and Weymark (1980, 1983) S-Gini indices as a deprivation index using the concept of “net marginal deprivation.” Net marginal deprivation demands that a rank-preserving increase in a person's income will generate two effects: (1) the feeling of deprivation among those poorer than him will increase and (2) his deprivation with respect to those richer than him will decrease. This approach bears some similarity with the Berrebi and Silber (1981) formulation.

Chapter 4. The Measurement of Income Polarization

Abstract

Over the last 15 years or so, the study of polarization has become quite important for several reasons. Some of the major reasons are its role in analyzing the income distribution evolution, social conflict, and economic growth. Broadly speaking, polarization is concerned with appearance (or disappearance) of groups in a distribution. In politics, it is regarded as a process that leads to division of public opinion and movement of the divided opinion to the extremes. Likewise, one notion of income polarization, which we refer to as bipolarization, is concerned with the decline of the middle class. In this case, the relative frequency of observations associated with the central value of the distribution is low compared to those in the extremes. Polarization in this case is measured by the dispersion of the distribution from the central value toward the extreme points. The principal reason for looking at polarization this way is that a large and wealthy middle class contributes to economic growth in many ways and hence is important to every society. The middle class occupies the intermediate position between the poor and the rich. A person with low income may not be able to become highly rich but may have the expectation of achieving the position enjoyed by a middle-class person. Thus, such a person is likely to work hard to fulfill his expectation and unlikely to revolt against the society. Therefore, a society with thriving middle class contributes significantly to social and political stability as well. In contrast, a society with high degree of polarization may generate social conflicts, rebellions, and tensions (see Pressman, 2001). Therefore, in order to avoid or reduce such possible risks, it is necessary to monitor the situation in the society using indices that look at the spread of the distribution from its center. Bipolarization indices have been investigated in details by Foster and Wolfson (1992), Wolfson (1994, 1997), Wang and Tsui (2000), Chakravarty and Majumder (2001), Rodriguez and Salas (2003), Duclos and Echevin (2005), Amiel et al. (2007), Chakravarty et al. (2007), Silber et al. (2007), and others.

Chapter 5. The Measurement of Multidimensional Inequality

Abstract

In our treatment of the earlier chapters, income has been taken as the only indicator of well-being. But often this is inappropriate. Well-being of a population is a multidimensional phenomenon; income is just one of its many dimensions. It is certainly true that with high income a person may be able to improve the buying capacity of some of his nonincome dimensions of well-being. But for some dimensions, markets may not exist. An example is pollution control program in a community. This, therefore, shows inappropriateness of the use of prices as relative weights for the dimensions to arrive at a single measure of well-being or income. Further, the assumption of adequacy of prices for normative purposes is questionable (Tsui, 2002). In the basic-needs approach, an improvement in an array of certain fundamental needs, such as housing, food, clothing, education, health, various other social and political activities, and freedom is taken as an indication of development, not just growth of income alone (Streeten, 1981). Sen (1992) argued that the proper space for social evaluation is that of “functionings,” the different things, such as essential services, adequate nourishment, having self-respect, environmental factors, and communing with friends, etc., a person may value having, doing (or being). While the sets of realized functionings of different persons constitute an important part of social evaluation, more is required to get a complete picture of well-being. “Capability set” of an individual provides information on the set of functionings that he could achieve. The set of alternative functioning vectors from which a person has the freedom to choose, when the resource allocation is given, gives his capability set. Thus, capabilities represent real opportunities related to living conditions. The determination of living standard then relies on the opportunity set of the available basic capabilities of the person to function. Thus, the freedom to choose becomes an important component of the standard of living. This shows that well-being is intrinsically multidimensional from the capability-functioning perspective.

Chapter 6. The Measurement of Multidimensional Poverty

Abstract

In Chap. 2, we have presented a detailed and analytical discussion on the measurement of poverty using income as the only attribute of well-being. But as we have argued in Chap. 5, income is simply one of the many dimensions of well-being Therefore, poverty being a manifestation of insufficient well-being, should as well be regarded as a multidimensional phenomenon. In fact, there are many reasons for viewing poverty from a multidimensional perspective. The basic-needs approach regards poverty as lack of basic needs, and hence poverty is intrinsically multidimensional from this perspective. The importance of low income as a determinant of undernutrition is a debatable issue. (See Behrman and Deolikar, 1988; Dasgupta, 1993; Lipton and Ravallion, 1995; Ravallion, 1990, 1992.) In the capability-functioning approach, poverty is regarded as a problem of capability failure. As Sen (1999) argued, capability failure captures the notion of poverty that people experience in day-to-day living condition. This approach constitutes a very sensible way of conceptualizing poverty since capability failure is generated from inability of possession of a wide range of characteristics related to the living standard rather than simply from the lowness of income. (See also Lewis and Ulph, 1988; Sen, 1985a, 1992; Townsend, 1979.)

Backmatter

Titel: Inequality, Polarization and Poverty
verfasst von: Satya R. Chakravarty
Verlag: Springer New York
Electronic ISBN: 978-0-387-79253-8
Print ISBN: 978-0-387-79252-1
DOI: https://doi.org/10.1007/978-0-387-79253-8