Tuesday, 7 December 1999

From "Poverty, Relative to the Ability to Eradicate It: An Index of Poverty Reduction Failure"

By Ravi Kanbur & Diganta Mukherjee.

This family of indices for the poverty reduction failure provides a useful template to discuss a number of interesting issues. If the poverty of any poor individual increases, so does PRF. If the income of any non-poor individual increases without a decrease in poverty, so does PRF. For a generally poor society, where those above the poverty line are not particularly well off, the PRF is low and the index registers this. Consider two societies where total population size and the income distribution below the poverty line are identical. Any standard measure of poverty will then be the same in the two societies. But if non-poor incomes in one society are much higher, then the PRF in this society will also be higher. A high PRF is also, in one sense, an indictment of wealthy societies that tolerate poverty.

Of course our measure of poverty reduction failure evokes inequality, since it penalizes increase in non-poor incomes without a corresponding increase in poor incomes. But it is not same as inequality. It is easy to show that a mean preserving spread in the income distribution can move the PRF index in any direction, and an increase in any standard inequality measure can coincide with an increase or a decrease on the PRF index.

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