Quantitative Approaches to Multidimensional Poverty Measurement

Evaluation of household or individual well-being is now widely accepted as a multi-attribute exercise. Far less agreement exists on such matters as which attributes to include, how such attributes are related and/or contribute to overall well-being, and what criteria to employ for complete (that is, index-based) ranking of well-being situations. Some degree of robustness may be sought through weak uniform rankings of states, as by stochastic dominance and related criteria. A useful starting point, both for the believers and non-believers in the multidimensional approach, is to see the traditional univariate assessments in the multiattribute setting: it is as though a weight of one is attached to a single attribute, typically income or consumption, and zero weights given to all other real and potential factors! Univariate approaches do not avoid, they rather impose very strong a priori values.

Most of the methods designed for the analysis of poverty share two main limitations: (i) they are unidimensional, i.e. refer to only one proxy of poverty such as low income or consumption expenditure; (ii) they need to dichotomize the population into the poor and the non-poor by means of the so-called poverty line.

The topic of the multidimensionality of poverty is currently at the heart of many theoretical, empirical and institutional debates in the European Union (Atkinson, Cantillon, Marlier, Nolan, 2002). Despite this increasing interest, there seems to be no consensus on how to define and measure multidimensional poverty. Key aspects of this debate are the questions of the dimensionality of the poverty concept and the nature of the relationship between the items measuring each dimension. In this chapter we apply the Rasch model in order to illustrate its contribution to analysing these questions.

The basic notion that poverty should be measured on the basis of as large a number of components (attributes) as relevant and feasible has enjoyed increasing support in the literature. Since the seminal work of Townsend (1979), it has been recognized that other aspects of life not necessarily related to income can impair human development, such as the access to public goods, health, or education. Many authors have come up with new approaches to provide poverty measures which account for its multidimensionality while maintaining desirable properties (Bourguignon and Chakravarty, 1999, 2003; Atkinson, 2003). One main conceptual issue is how to count multidimensional poverty. In other words, is multidimensional poverty the accumulation of deprivation in various components of what is considered ‘normal life’ (the intersection approach) or should it be defined as the failure to access to at least one of the dimensions (the union approach)?

This chapter aims to offer a succinct presentation of the use of a particular factorial technique, Multiple Correspondence Analysis (MCA), in the area of multidimensional poverty measurement. We will not discuss conceptual issues concerning the choice of poverty indicators, and will not review other approaches found in the literature.² Neither will we present the statistical foundations of the basic factorial techniques, found in many textbooks. We will rather highlight in section 5.2 some characteristics of MCA which render it particularly attractive for measuring multidimensional poverty and making poverty comparisons across space, time and socioeconomic groups.

The catalogue of definitions of poverty appears to be very large and there is little consensus about the appropriate indicator of resources to be adopted (Atkinson, 1989). Clearly, the choice of definition is the starting point of any poverty-related study, and should not be left as a side issue. Furthermore, the definition of resources greatly influences the set of families identified as being in poverty and there is little overlap between the sets of poor obtained from alternative definitions (Anand and Harris, 1990; Glewwe and Van der Gaag, 1990; Chaudhuri and Ravallion, 1994).

Development is a multidimensional concept incorporating diverse social, economic, cultural and political dimensions and economic growth, though necessary, is not sufficient in itself to bring about development in this broad sense. According to Nobel Prize Laureate Amartya Sen (for example, Sen, 1985, 1999), the basic purpose of development is to enlarge people’s choices so that they can lead the life they want to. In this approach, the choices are termed ‘capabilities’ and the actual levels of achievement attained in the various dimensions are called ‘functionings’. Thus human development is the enhancement of the set of choices or capabilities of individuals whereas functionings are a set of ‘beings’ and ‘doings’ which are the results of a given choice. The concept of human development proposed by Mahbub ul Haq, in the first Human Development Report in 1990 (see UNDP, 1990), largely inspired by Sen’s various works, represents a major step ahead in the concretization of this extended meaning of development and in the effort to bring people’s lives to the centre of thinking and analysis. Since then, human development and human deprivation have been the object of extensive theoretical and empirical research. They have been studied from various angles: conceptual, methodological, operational and policy making. As it is not possible to directly observe and measure human development in its broad sense or the lack of it, they are generally constructed as composite indices based on several variables (indicators).

The concept of poverty is elusive. On the one hand, poverty is a politically and psychologically loaded concept. It has been the subject of novels and also of many scientific studies. On the other hand, there is no straightforward definition of the concept and no generally accepted method of measurement. This makes it difficult to use the concept of poverty in the political debate on poverty reduction, which after all requires quantitative data.

At least nominally, if not in fact, poverty reduction has been the espoused policy target of nations and global institutions in recent years, putting demands upon ‘Chiffrefilic’ economists to quantify it and measure its progress. Like many things in life, it is hard to define, but you know it when you see it and typically, the more instruments available to describe it, the better it is described! Indeed Sen’s arguments (see Sen, 1995) — that welfare and inequality, when measured in terms of functionings and capabilities, is intrinsically a many dimensioned thing — are equally pertinent for poverty measurement. When confined to the single variable paradigm the measurement and testing of poverty states has prompted many questions: ‘What variable should be employed (income or consumption)?’, ‘What should the poverty cut-off point be?’, ‘How should the variable be transformed (incidence, depth or intensity formulations)?’, ‘Should we use permanent or transitory concepts?’. These issues are both diminished and compounded in magnitude when we move to a multidimensional paradigm: to some extent, variable choice becomes less of a problem (if in doubt include as much as possible), but how the combination of the factors in defining what would be a poverty boundary and the extent of poverty it delimits presents a whole new set of questions.

The elimination of poverty has been and continues to be one of the primary aims of economic policy in a large number of countries. Therefore, the targeting of poverty alleviation is still a very important issue in many countries. It is thus necessary to know the dimension of poverty and the process through which it seems to be aggravated. One natural question that arises in this context is: how do we quantify the extent of poverty?

This chapter tries to address a question that is to a certain extent a puzzle: Can we explain the self-reported improvement in well-being of Colombians between 1997 and 2003 by using multidimensional poverty indexes? And it is puzzling because during this period Colombians experienced the worst economic recession of the twentieth century (1998), erasing a decade of progress in poverty reduction and reversing the levels of poverty to 1988 levels.

It is a common assertion that poverty is a multidimensional phenomenon, yet most empirical work on poverty uses a one-dimensional yardstick, usually household expenditures or income per capita or per adult equivalent, to judge a person’s well-being. When studies use more than one indicator of well-being, poverty comparisons are either made for each indicator independently of the others,³ or are performed using an arbitrarily defined aggregation of the multiple indicators into a single index .⁴ In either case, aggregation across multiple welfare indicators, and across the welfare statuses of individuals or households, requires specific aggregation rules that are necessarily arbitrary.⁵ Multidimensional poverty comparisons also require estimation of multidimensional poverty lines, a procedure that is problematic even in a unidimensional setting.