World Bank Reprint Series: Number Seventy-seven

T. N. Srinivasan

Poverty:Some Measurement Problems

Reprinted from conference proceedings of the 41st Sessionof the International Statistical Institute, December 1977, New Delhi, India

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9R49

POVERTY: SOME MEASUREMENT PROBLEMS*

T. N. SRINIVASAN

Development Researck Center, World Bankc, U.S.A.and

Indian St abtis,i,l Iinstiltle, In dia

1. Introduction

Tlhe. r(ecogition1 that a,i impo)Ortanlt. if niot the oveririding, olbjective of

ecOno0lic de(Ne,lopmelnt ill ss (ldoeolop)e(l (omintrlieS is to provide at least a

miinimuim level of liviaicy for their entire poptiil;ttmiOI, is not new. As far hacka. 1 '62. thle then chief of the Perspective Planining Divisioni of the Planiglu

Cominkision in India, thie late Pitambar Palit, prodtie-eed a pajjir oxplori-in tlih

impli(a,tionls for piailnin for proi(ling a minmimim level of living to thio Tl(linldi

no1mlatlion by the exnd of Fifteeni, year time lhor izoln (Pant, 1974). Ani opera-

tion'al definiti'i. of p)Oerty\- wa's Sed ill this paple: a hollOselll(l was dlefilledas poor if it caniinot afford to buy;s (at the goingr mark;ft. p)iiees) a normatively

set blunidle of basic goods, partie.uarl;y food'. At 1 9(60-61 priees, this bmnlle

cost Rs. 20 per eapita. per- monitlh. Tlhe )ioj1ee(im- ap(rtl oach of thlis paper wa

niot rcflv.(mtc(d in the Tuldiani Pltlas 1un1til a Min,imum,,,,, Ne(eds pr,ogrmme wasl

proposed ini thle Approach p),per of the hTi(lid ii Fifth Five-Year Plani (1972).

The Plurp?ose, of the present paper is niot to go inito the reasons for the failuire

of Indialn Planmin-r to l)pirslme tleir ea ilier pe1rop)t.iohs or to those thlat led

some0 of the TImter.ationm ml rW .niztiLti0h{, u Is ad i(l (1011 0uS to (IMI)raCOc what'has voln to be 1n11own 1as the S B i1-mlb al. c N (lds n.p)pr(n(m'h to (development,

as if it is a fmindiment-allyv niew discovery. Nor will somlne of theo policy i..slsnes

be (dis(mIsseid ( ex(cept)t i1n so far as they .raeV some problems of nearemII t

(8rinivasai.S 1 977). ThIe aim of this pqtn,r Is to ].'Jse so-nme (0o1eoj)tcp ,tl anid

mlep.txsi mnemt. pioblemults rl:stin t,>o pov-erty with alln aim towilars rorlall.tionof policios- for- poverty a,jle.iti\nj.tj;)l2

Before entering inito anyv isemissoi, of 11(';LS1III(lVi' of pioNe1ity, it is

imlp)ortn.nt to d1raw al.ttermt.ioll to a ProCblemil wILiell as moth political as well a.s

* tio vio-m oxpiosi,od aio prsao dtilal (to l(ot necessarily refleet thoso of tleO 1 oritl Bankil;8. 11( 1 ILriJllL S;tatistica fl .f IittitVte.

1 This bundle (lid not. inclodo odlue4ionl and(l lwaitli caro ani(d serices tiioit wore smigltl to 15)

providedtltlrotili t.ho ptl)lic budgl-t.

2 ()illy tliA so-Call(l o sizo (1ist-iihi'it 0' () 0il('010) 01M' C"--LWI.tip i11LII"'lhI!_ )OrSO18s or hOIubo-

hold,s ,vill ho considorod in this papor. Fituetilonal (i.e. as botwoenvei agvs ae(i assot incomeo),regional and otliol such dlistiibLuti ils of total income will inot 'be discussed.

OR4S-1

2 T. N. SRINIVASAX

philosophic-l diinienisioils. Tt can be argued that olne s'hol(ul bho coniecr1le(nnot with the observed iniequa,flities iin the inco,me or w%eidtlth flistfril)itolis 'bitwhether the hiUst,jtittiOIwI. stt, Lict I I 1 ) provides eqjiiality of o1 )j)opprtititui 11 il:,broad sense. Tn- otlhae worcds wvh.at on"l should be. lb oilnle1ned wl.ith is o(yidllityof "access', be it to edu('.tQ.ioi .l fi(ilit-id., ili(litedil fa.ilit.ivs, job l) opp 0l11iiiti('5iand nlot JW eessa'rih' with equality of "sues'!s.', i.e., whatu differlellt 11ndividualslma.ke of tht' oppoi't-itiities as lonig as t,he svst.,it is C"fi rFhis is not tosay, that those who falil in a "faith system sholuild not 1)e ;;idedd tltu1uoigh t1.iltisferosfrom those who succeed. o-Tovever, t;his wrould niot caill for itist.i1tiHOnllcliit.n,e. If this viaw is acted.onel wold wvai t.L to Illeas;ltre tbt degre(t towhiheli cqual,ity'v of 'xtes5' all(i filijrte',s of thel 0p1)eri,joil of the svstlnn isobservod rather th,a-n the, extent of iile(qialditV in time en(d rv('Silll,s. Tlhotilrhthis prolleili arises in the eontqxt of almost all iss5uo- to heo Dliselss(d ifl t1lefollowillng, nIo fuzrtllbi' refelrece to it will be miiade for tlhe -.a.ke of hrevity.

At the outset, it is wil'rthhidl to dist,iiiiLuish iuxeiwvn. r 1l',1bti and rdalai/I'ealsIure,s of poverty. The, mo.if widely u5ted ad)solute m ue of the (Xi.(ltof poverty r (at poinlt of time. in sole n1ti,;0lll st,at, or r :ioti) is the propeuoi ai.of tlhe relev ;an1t populatiolil whoso level of living, falls below suoie pov(dg 7y ie.Oftcnl. the level of livinig is idendtifiedI wvithll thel Per citaoluttiipluf.e)tj Xp)tlldi-turo (mon thly or1 annual) of 'tihe h iou.selhold which a persl, is a1 1iol 1[hlTrt. Id thep)(e k'l'tXv line0 is the co St at eeva lt) pricers of a ii itollnubtiv y defined hJwim sl;i of(coll.tiilsmpt.ioll. Perllaps s freqait.lV, the levA Of liViiu2 and-1 pvtyt linesare clefined in terrmi;s of per bapit' r oino of a l ui-liold rather the.n1l. its coll-1111ipfioii. Les-,s fro,uil.mt,ly, the le've of liVill'f ol ' buiscUl,l0l is i(di'uT.if '(d

with its per capita calorieo iti;i,ke( (tiIM1.hly+ or 0ti i 1iald) an11d thle )0veC'ty.v lineis thlie calorie. 1i0(iit''m11111ifi; b 1ASe ou t tit iutrif l (lsil'rat.b ute;.

The faiiaii1i, tasurs, namely, the0 Gilli (e0fficien.ti Of t.l. dis(PiihMiUtiotof persoi]s (or lholishld](s) aeiordiuu'22 to income. or (owr)iiiip timil (expoitdlitiui-(per (.apitat or total) is ?a rel;tifve mi ti t). i h th( s(nSe it reflets. tin' fvlivdiyupisitinll" o1? Of f'ctilil. 11er.sonls 0o' lioiist1l.()1ds, (Pybtt1. 1 977). nx ax1 (4iitiwt;, I ii'S 1la;)sel oil SI ll a (li iti)blitiobll, Such as tihe coo flio avitt of i '.d1i;0 ioivWluailleo of l1ganitji tin of illeo ilt or COitsit piot.i,O. the11 share- ill total in'cOlii'or (on si t pilt i. i i itm. to thloe fio(t.holll mm .id tl (dIlc:4e('S (qlitil orl oilier1)(itD0 i'titil, of the jut T1 buti l i rp, > i'ltt III(';ISIIIItS tir 1'(, I uei i.('l (14t lcdi'il' hd :.s~tiii iiialv' iicin.ite SO(f thl( jii('(liililV rjitl' htllor .as povr1 )O\ t ty i:1'1e;5o(. 1I'luiSm 1)b icv il.u a glito lihiranti' oll n teit (imloilivi of iof iieqiwli1lv% ;in is. m.;\\vblilu':r mm tI ir:ii'.r iOl quality lic;s111', ' cuit (.bI) i sl.d as a s01ocial w1 ivl' illdicdo ta

till soe well-ds thf;id- teric l O(F ltf e-ivoilltll, ils tm aei-as-t-ilmt-im, t (diotrdildt(X..o0111( we'fl-detfillodli''., \lfi( lXll(l isth 8;1( ;,l( 11va fl;ltb ;)lJII((( )v\

PtOVERTY: SOMIIEn M.T,EAS1I'IE'MIENT. PrRo.LEMrS 3

the inequiality iieianur-, as w1e,ll as thie sti,t.isti(% stilatioll pr-oblem1s (Son,1073 and Ka,tkiwani, 1977). Wh1il]3 thili teatur3 is illicpresivo anld lusefuil, thielik lietwoeenl the p)o:.itvi a ,speets slc als m'euscicec at (more app'u itcl v,deCipi)V;lll) arid ti w -1iOi;Iit,iv( ets ot snoeial and cOIoilii( p)olieh towa;rlsd

rvePtVI. nbat. cil:vu, h"s niot Jveiv(eil as much -ri Gtntidoll avs it- ,cscrv' s. This

is nellt to Orevt that. effectS of sme0 poli ies, suIch as, foTr i0.stau2, of thlepolpor'f,l for ,, reri-tiv( inco)t1me tax at the lowver eniids of the ino me profilein ndl(Mit.0o' to thle 1usail s spets of it aIr1 lol (noldsc ussed( exten,-sivelv. Buti it is fairt t-o soly thivt tli- dise4 is not ulsuially inl tflhe 0ontextcf pov-ty abl)teielul; an(-l cio)llrlife (leweloip llf of a ls,s dovvl.oped ;olilntry.

Tlhe paper is or,a.uiized as folloiws : Tin ievtion 2, the pvrolblemi of initer-pretilng tbhe (data (cross-s-eet;iois as well tas timie. serie.s) oni illOl. e i 5 dist' ibutionis rTieed. In Section 3, the probleims associated wvith defning ant absoluteInorm called povewrty linie. as wIell as estililmtinir' the proportion-l of tan populatiollhav'inr a stan,lidard of living(y lower tlan the i eltv Iine' 'aroe dis w(riscl. InlSetionll. 4, pOb)l)ls ssoiated -with e'st-ltilmla,t the inI)I(:J. of spnific polic(yIlieasilers, sulchl as iI Iv4t,ivirt il clii (;t.i(-)on. health care, etc. are clsiiisw(lSection 5, offers Ksomleli rel eiji £l remarks.

2. Income distribution trends and patterns

Kiluznets (1963) in his hisiorieal1 study of thle (lovelopllolrit. of somle of

thleA ricll co'011trites of Wvestorn Eurmpea)(' and North Aiirit'la piut foirwadl theypothesis thlat

4 T. N. SRINIVASAN

Thorfe are a nulmiber of well-l-lnown difficulties ritl iittore parameters of a w..oss-se..t.iolnal rela-tionship uised for t( )r.l projectioiis are stable ovar tiin(. Tin somle situa-tions wlhore the data base is richer ini that a timo sories of cross scetions areavaiiLiMe, Var'iolus statist.icall t.(:liVliq1I(- i1ii itrilld r that of variuil(; ace c in rsl+.models, the raildomll o.0effmcieits regression iiod(dels, Kalman Filte(r mo1r-l5q.etc.. catn be ivved to recover efficielitlv tlhe inlform'Antio-il conltalilledI in tlhe data%(Abiddala, 1971: Swamy, 1970 anid Cool)per 1973), TI)c well-known anid oft-repeated issues relating to whether (orT is an app)rvoriato illdic;ltor of thelevel of developmenit or tlhe less stressedl, buit l)elliiils more im l)otawit problem.lameilllyV, that GNP estima1.ltes for different countriies (or for differentt timne

points for the same couintrv) are stubject to differinig cnwelptual aid measuroe-ment errors need nlot detain uis. Given the poliev emplaisis of the twoesoitpaper, two isslues are particiila-ly relevant. Tf the cross-sectial relatio.n-ship is aceeptecl as a va(lid tool of project ioll oNer tire, is thllere an imilplicitdenial in sueh a.ecept;loce of am- role of oolmiollic poilicy iln (cllaili!x ilicomodist,Lributio ? A literali- iiitnrpretation of the slatistiCadl a,ssutuptionlC under-lying thle model, namely, that the residula.ls (i.e. thle dlepalhrtur of aln olsera-tion for a country front thle expectetd value over countries wiith theo sa;m,em(ONP) are random and have thie same probability dist-ribution aRs GN-P VfieiS,wvouldl suw-est. this to be the case. Tf. however, one a1sslliumes thlat thie. residualrepresents both random fiat.ois as well ams any policyl (lifferences l)e.tw(ellcountries wirithi the samlle (T\P. the statistical iLSSINptiiS oil the distril)mitiollof residuals han-ve to be 4treitllclthed to( stf(e that residuahl; iu(ilurie ointleffects'" that rTe' uL1l(uOrl`l.-t 'd( withl other ex)planatory variable.'s sulchl as (.NJ,of the country. In thie former eaose onie wo ild be int-.rt,i1-0 the cross-section rel

POVERTY: SOMTE MEASUREMENT PROBLMAS 5

re-presoenlts only the re.lationship b)etwv eenl income and age, of poersoii. in thesense, that e(,very iindividual in this econioiim will have t,he sameone-lie polieover hiis life time with lowv incom-ties -NN-lrii youngy and old, an( higher incomesduring tlhe middle years. For contrast, let, us al-ssimmue thlat.l in the. sevolndeonomny, there is no mobility of indiv ;dua.ls across illcolle oprofiles ill the sellsn

that a person born poor (riell) stays poor (riclh) and(1 lies poor (riech). Tt isobvious that the olbserve d incomne iniequality. in. the firs;t econi.omiiy, is irrlov alnt,from a poliy yanleo, sinice the life-time iiiomne profile of all ])er.sols are idellicalwhere?as the same Ievel of inequialitv in tho seconl econony is far more seriousfrom a policy poinlt of view. There lleiv eell some attemip)ti to app)ly aMarkloviami miiodel witlh a tri.nit ioii prol)abilit v nma,trix des(cribing theprohabilites of a.n indlividnial Nelolugillnc to olle. incolile groulp) illn onel peliiodstaving ill thie samtze or m1o vilng to ainothier- income grouip ini tlhe. next jer iod.Oni a vesioni of thi appmrioaclh, see Chali-np)ernownvile (1973).

The above. illustr ationi. while extreme, in itself, raises a inuiiI)er of measuire-ment issues. it has been sii ggestded t.hAt the 1 `ilfe cycle- aspect of the ill?nomeprofile over tim) of an imivi(lvual is bettor reflilcted. if in)stea(l of conlila)alillmuthe distributioin of actuia;l income, oiie eom)a.lie the dist iilmit.i0ii of "perma-nent" incoomes. The trouible is thatt there is nio completely satisfT t.ory proxyfor the iuoblserved and punbservable peranen-i income stud iihil- tlhe dis-tribuitioni of imiaterial and finianeiadl assets is niot adequate for this purp)ose.Those wvho believe the, permanente income hypothesis of Miltoni Frieduan(1957) to be an adequate dles;eriptioni of 1wb X-oeln wvi o llrdili gsugest tlhait thle. (lis-tril)lltioll of conlsumliiptioln is the relva.1n.t (listlilmftion to stl(ltJ y woen thle aimnis to examnlille t!he listribution of levels of liviing. Trlh latter is not alffecteedi.much by tuallsitorly phlenomena, in. the senso that the variance. of the transi-tory coonll)(melits of consm-lij)t.ioiL ar,e eonsiderably less thanl that of inicome.There is ")lso the arlditiollal a-dvanltage th-at collnsum11Ptioll is less subclict tocOMmc 101)Wtl a.ul miieasuremenet error than incomiie. The fact that in mostlmolslhOl(l surve ils i whlichl dtil o )oth illncom)e :111(1 collm,isuuptioni eX1 )eI(litImleAwere (ellefted Show nega.-tive Savivl, by holioli.( (ddsl itl, lowpelr (cIpita. illcolme is,consistent with the l)p'ImnLmmemit ineome lmhwpothiesk. At aiiy rte, it, is fulillclear that the iniequality of obselv "e(l inco)m(es overstates the imlmq(mlmalify ill te(levels of livimn¢ lplromiattl dcfilled.

Tt may be ortilhwhile to })oilt ouit liere. tat data on colsillipl)tioll arcvoftenl collected tilrourh hliseoheld s1ie -v s in, whlicl1 the llousehold's s conlsllimlp-tioni ill thle pr-evioulls veek;s or mointh (cace,lleld tlhe e(fornei(% perioid) is rec,orded.The dlesign-i of the survey usuallv is such thaIt^ thle cfilcuiry is sllitably spreaIdthlri,oughout the year aind the sale size is set al)ppropriateloy so that tlhe

6 T. N. SRINIVASAN

ail]lalz (Vir(fprI(' per capita (' ollS', Illptio(ll is e-4til'ted lWh WtiWV littlO 5Iit iV'i bias.'il a .atIipliltl' orT1'Or not vxcnod.l(il!2 fb a isiirui V,11i, Bitt ill S( far :as ailly

iC(jtiqa] ibt 1 ( .,.-;1 u is all a ICII; aV;i i u lElcrot iOI , ,i he vriai ice(- of the (lidsh p)l ti m;l itrit are -viilvlde : aIttribIlte to each if ils]ividural Who is a, nIcullem r oftlhe lioulStioilrdl (or, ., a rpdeuidrt of an O.1rlear or ass!,st-,'e), tl- total onlisuimption(or enlmliLus or irleooin) respootuvely o-f thell' i useid (oaruiver and :ssesir )oil ;iltc.ri 1alt i-eil onel can ;r I t riljito to (:' l u indiv inial. the pr (Cpjita inolliW o(euil f.il,gs or e usui rpnu).o Tt is iruprut.;r.iit to irote that the tm;o ;llteul tivo(in" )irIpt irn- of the -; 4li) (Idatal Itl v viel(I (diffilrclut policy i*afsei'o:s agalinto take a'i extreinIr iIIr':wIr;.i'm, the di ributioll of vrr.S-oil.-s io( iidiii t(, totall

lo)II.('llo(li t!l;;ii'r ti(io Irll0y jt.,5t rflO.c tlh dIfferele'os ill limrriselde(1 .izCso 1-1olw; nl() )11in1.k1 what, the lmiiisehol siZ( iiuippjieiis to 1be , its 1(1 catl)t conll-Sumllprtfion is the s-tu rli. Ad lliitt,odly thiis is extreme. Oil the. ot.lis h1wtld,ftm rseit)oi SiO(' j n(O so .may niot be rever linlo}. For iIist.;ril('(, it ho s fft;il i'oi.olbson-ei that Si,;im l(u lileiril 1cr bo10,so;lIolols fall ill 1)both1 1.il of tile 0 -firilrulii iillri(lli, SIinilo aiul lih" (Vii2irlO at tlle i I)pjr tail andi(I the p) ol d 1(1 alil 1iiiieiuilnpy-able at this' lower tatil.

The a,bovoe disruis irirsiOi S tIL"'('ivs that it 00o1(1 be Il isle;lAilicg to malke politriufrvi l ooces withr il t. crIluP11I v coiiL ago-se (OilmpOsitionl of the hollse-h1(lds. thL(e (411iltinrial aitttailllrlut. of it-, nilmler,s, its luLseql 1iiJr asset. oldin(r.et(c. A,'uiin to illustrate: if it so lpl;imeils that tlAt Irorslolirnils; thla;t.1 faill in. thlelower' tail of thele relevant, ilistri.itiont.ioi are cllauactotrized by tileirhigli. riepeiudonc

1T)V1VRTY : SOME 11l'ASUlREMENT PROBLEMS

rati os and po ssiblv being heasded by female!s; wvithl depoadenit clildreon01' (l0Isist' of the el(lerly or thle. (1is;'bllrXtd, the 1BolL Iit poliv !' (option1 Would Is01on Of the in.come' tranfer to t Oiil. On fliv ott.1C hal,)d if thle poor holuse-holds are cthiau ttiizedi! b their poor asset lioldiuii (sa v. land) 1iml'o' lmb tfliilimnemiber i5jim.r illiterite 01' l)oroorly (idLlLati.(dl. itiw I)oli(v iifievi-vftioiil vmIld-also ii u-i irl(( asset i eeist'cil.i LI.i( I. l)ct.tc aI l 1( i.ti'i I'('l 15 to (d1I I()tit)i 1, ot(c.Indeed thJfe-se coisider;iatioris havel led th(e Nl tioP a Sa;upulo Smi ivey ill fI (li;l to)collect data oni the. "Nwake' soctiolls ; tlhe S i(td niplo tit ad lnl-'111 ployiriniit, asset and li; ubilieivs of rural l )nushl(ods, ete. . L'Me (latat liavi'not ct' beenll. fullly ".1uii,lyzed t.fiddimn ilnto a siimit possilfle iiiteel jOlis a liiOh1et.licti Avriatbles 3 . Trbe a)nIlysis has to 'Lio Ievolnl lii). tImtt' . to fl('((.jlp 11.for iuista.i.ce.. a', c sell ili slulOe of illS{imlalitY int,o (ciLtI ,l)lm i siml5 of v ilull>s"factorst' anllid their illatOrlalctioiiS, alilmost by aiadoti(,v wN-ithi alalysis of va.lia.ivco.1l'l ile the analpsis of vall coiIi(e hvas lbellial it Ib stat.4.istitiiLl In0i0], the (d10 111-p)oSjitiolls of ineasi 105 of il(el alitiy ofteu Liive n.o 1 xpl jlajia t. arV Imiode 1 or theorybellind theiii so that they aIMr 110m l)o bef thal i f X } 14Sf p( 1 -A.i iL As Sui(ch,not much ca;tn be lIa'Ilit aibout thoe poles-.s of., 12(mev4lfiii of ijlL(1jlUialifies.> (Buno.19(69: Pyz,att. 1976) andl M-lmitaIs. I 9),.,).

It is alsVo w-orthl Iiieiti0llill that. evell tloillgll the lholt okli.olil Iil rvo\soften. (ill pr)ovide dlata Oil as-et (1LI';1I1 Sii ll nllmaterial) lolIh(li,gs, the in-forluiatLOnl the '"quality' or "nrodic tivit-yv of these assets is usitally not coII(ttedlo1r ima;y eveln be imlossulale to collect. A.-;aiii, as an illistratioln, the Iii(liaii.datatshow thliat smll,I farmers tml(l to have .a birper proportion, of their 1,xladiiriua.ted . Biit th,e conc()t of iri'riittll IlSi(l ill I ldlia1 dlata, is to (il;lssifV

lailid thli.t 1-reivedl at least o lm', iI'riltiiuL (1111ilm, the Cioji s;AS(PI). how-'e i La.de( qianih it J-riight; have been, aS irri-a,tel . (Ckearly' fromi-a pro)diu(ctivity

point of uieaw irrii-a.tiuui quality (inite(nit.y) aLs well asquantity is iiport.;alit.Thle `qitality"' of skills aind edlteati(jn (i.e. hnlul c(apitill) is ov(' l m1ore d11 ffi(Ollltto assess. There is a. flrlrtier plobleml that an ideittiei ssetl may \iedl(l differvtiitrietiurns to d iffw'a'fi.1; iii(ldials. bcaullse tile :(:(e.iss to a lld/01' flc tertii iLS atwh.ichl) otli. el ar(- :nc:lii-o -for l6wr usoiS o f the asset. miLLYoliffe,r Ietwccii.uill(iii(tLials.

If the, cost of frtilizer or1 irri-ation wal.e. or .r('lit are I1t) tfli SnI lic f(orltIW() fairsi.iiie IioIlii'- ],I)dl of' ideliliL idLerent. I; it.ilitV- buit ill (liff-0l'e1nt,i LLi0illlIlLf,(as is oftenll the a .- ht h l tu l{ fanert.j-1 &t ts inputs at a lowe' cost) th1el the

"'ho Ineome 1)i.ti Dil'iijOIL DiVisi,m )R' t1au 1) i I or P. ', -01Llala (' Linh' at th.- WorldBAddLk iS L'INVILtI' 01a,ag:ILgaI ill zlaaal tZil[r V 11M',a0liadd S244t1'V(Iy dat faaoa 1, 1111111 ( 1 1T OJaual AsiUlnanri(L Ibiin AItYiiiricall miultariots ill a rsesarlih plrojvvt inl eollalbloation withi EL(AP) andel ECLA.'i'-" Wox'rld EmiAailouilat Progrumnioa of tho ILO hlas also gnenrato(d a iuniber of atudios.

8 r. 1•. S1RINSUVASAN

size (lifferlential ill tllhi l1Ol(ljill-,s will 1ll(lCsorstii.;t(, their ilcToillo dlirfell'iitiid.Obxuiollsl , if Ot,.]ll' V0lLt.uli,et,iMl ;,MjRX'ts of ((lUtdLtiOll. sllhli as thle fromlls oftolueaiwc or sli Clre(.ppill1rp a-re also bliouglif ill, the pictilre bicmOiil's (,N ,oVl lir(tlooinpilie ;at,ed Moec {r(sil('.lll'7, ii idl(ltlst.iiun. thlie prOxilniato e talisrs of

p)ovelrtv, oni(e will iivf|oss;llily llI^e to pwove n.1.to the nature of thi arketosor other iistitRilioll.l byi ;]aiie iwits y wvhi(cl resol i.es uot allocaterd and(I thlesirreturnls (let lhinlie1(d1

3. Definition and measurement of a "Poverty Line"In (defininig tlie 'poor", (o11i ('Ol 4(l )0opl, jit;her ii Pr (Jllt' (Oiuc.j), s.11(41h

as thla1t aylv 0oil. is (c(wilw:Cl to be) po? .if Otvt, iAperson is a miennber of al uIseIoldohlthat 1 luLJ)ppils to fall ini the1 Nott oli 4(i ,, of thes nflelvalt ilt. l ne 1'e or eXI)e-ditrlleo distiiltuItioli ol. all r 1ibs.s11 col'c(n)t t;that t pelrson. iY; poo' if tllhe inlcome01' 1I,llSillUlp)t.ioll of thli Ot ishlhol(l is below at diiriivc1 filelrI.d po?.rr'tlilne. While it is clear tlw't in 11.d(t$poveirty. the absolilto nole.("ptiS 1ltoit ti.sofil. its ils(fiilillwsC5 is 1 ilt iflhll- (ollCl0O(te(ld wiihl thloe lefiilitioit(adll lliewisimicite- lil) of the p)o\ver tyf linl(e.

As statet(l Cii li r, tlieiv lmxe lwoi t;wo hIN6ili appl.oi.clhts ill the litoraturein defillifilt'i a1 poveI't lile at ta, p1))i;t il tm: tho irSt is tf i fst ii it' as ti' itstof a L)uii(il of' f l) gi tods a,t the rel(oxii iii 1p)rices (AMi wiii rl uei, 1I 74)41 althe seo(1oiiil iS to (lefillt it, .is 1a ili-itijtjflilo iln1. s1wh i1c ll(. `.li-oqiIuij(d- ilit;l)k(,

of calories -and prot4tilns.

A 11.11 ibli. of ni;wisi (iCI( II t proMo1w:S t.*liS(C ill 1lSi?ll£ eit ti1(1 de l ni tiol).. 'PluconIposi-ion1 of the oiinle of "I;,Si(- is not indpI( di)(1fll of the sowi;-(:ihtlilrl r1clwuract lrist.ic of thle( pp(1)1) Ition an(l the sti-iicftio re of th1(e (('Or11b1N,,or evoill the clhimate of the coll-t i\. E n if we (ls151111c iflili basic (goodsare defil nd .li-iowl- to ill cli ide cl .S11111ptiOil of ood)(1, ciothiniv. -sbr It-te, aiid(lsei'w ices. s1uoh1 us e(lIdcatimi i(ai he.alth,. thie, fact tl,at somle of tllis (oUSliniiulptiollis provi(ded to llolisell')lWs iLl.liglI tile h piublic bdet. becomes relevanit. T'hlefilnlianll lnormll of pov\erkt mlcll iolcwl d enIi(,ir speciifical,l, (w\huelded pliblicl,ypI')oi(1c'(d S(:l'(5 d (111l (d( tilO( tihe povertv huw as the iiiniuilhi. 1)('r capita1oll0 sehiold cx p el (itilr tilat w e.Xfi(;t(Sl to (( we the cost att base ;(twii(19(0-61) lpri(cs of a bnshl;. of li.sis go(eis ill tile iail. iImplickit, in this

4 (-lauiI in d (itting thei bundle, the sie tiln( ' so N 0t,1c t.h i t'. of thu Isul.t! lail, tobe fiakoat irito a(ectluitt IF we nuto olit oollnoMiiOs Of sca1e ill (MiSsiLtotl i1, 'tIen h,ly the I'atioof 1a ht)ttSOhlold's ivo'l( (or wpicill il lr') to the cost of it.Y hasie nv uns M'dlo is re]voaN?t thosoll'IL a i'tti() less flutll I Iwiw,i doiinmi as poovl Thier tr nu1be1 Of arties On the o.Mt01 p vM

vtv wVll( tsl flqoirivatl estimates Ofol(tllftl. tl ti tO t tales tit ajust fo i x co itijor olta holse-hldol.

POVERTY: SOME MEASUREMENT PROBLI.1M.S 9

is the belief that the excluded itoiems of coitnSimptioii will somehow bo providedto the required extenit to all. sectionis of tlho population. Whether, in fact,this has happenied is aiL issue oni which tlhe ovidience is fragmnenitary-theleare few studics on the distributioni of beviefits [iorm piublic expenl.dittiros onhealth1, o(eicat-ion, w-ater supply and salutatio.ii, ( Btc. 3e that as it may, therei.s a fuirtlher problem that the l i'ico.S for the ;aillne sot of e(,lodit(;ics varydopodling on1 thio location of tlho traniisaction (rural, uri'ban1, motbiopolitaii, eti.),timo of year, anId, imiore imlpolrtanltly, on tlle ocolOnloic statils of the buyer.Thus, it is often the case th(at tlho poor pay m!iore and(l get an iniforior varietyor brand of tlho siame commiii-todity that tlho richl get cheaper. These isstiosubecome extremely importzanit if onle wvire to nlmake coitiparisolls (over time andor space) of the proportion of tlhe poor in a pol)ttliont(irini(atsatni andRBardhan,1974). Frequently, however, they are iluonored anid iniferenceos as to trendsin poverby are drawnt oni the basis of as few as two obsieirv-atioisl widelyseparated iln timie (Grifll. a(ld Khliai. 1976). There is some m-idenceo, at leastfor India, that tlhe fliiet,iimatimims o-er tiime in thlle ipr)ortioil of ruiral popula-tion below the poverty linx e Ii arO sibtat alfl; wlhilo tllro 1s ( .Y() time l rerid inthle proportioni, th;. ffiuthiatiojims aeLr)j)er to be iassoeiat-e with thoso ill agri-cultural otutptit per head (AlLliwalia. 1977 andi(. Senl., 19)74). It turnis oit thatAlilu ali.'s ]e.ullts tire inot affi ded if the so-c;'lled Sen ilulex of poverty isuseed rather tha,n the pmroportioll of poor in the popnl;l.tio)l for oolmlparisolnsover time.

A inuitr-itionaetl requeiiem t based p1oerty linie is r,.uiight. with (woil moreprohleiis of a conlceCptulaLl nattuire. This is p;artieularly thoe case wheni thepoor are defined as persons wh}o are members of houiseholds whose per capitacalorie intakle. falls bolow somne avoi,aco norm sct for tho popuilation as a whole.Even if oneo were to igniore tleo izitra.-lc)ilsehold variations (in actual itaakes)so that tho per oat)ital intake reprosenits tho actual intake of each .memnberof a housel old, the fact that thie cablorie normns vary from person. to porsonl(and, in fact, from day to d:x.y for the samne poerSoll) Ocan re'sult ill orlron0eculse-stilmatos of tlto pop)ilLtionl. of tle l)oor. To tako two extreme oxaplleiosif every peorsoni, in. fact, coil.sumeo as muchlOll calorioe as his "ilnorm", by dlefinli-tion thhere are no p)oor pe(:rs(onls in this society; yvot, by idenltifyilng the proporl-tion. of perlsons whose intake is less t1lhani tlhe avoraog, ?zorm for theQ polaiii.tionias the pov1erty propopltionlj, wo G-btain ani oere etimato of tlhte exteit. of p)ovorty,At another extrome, if everyone ecosu lmed the sallme nllimbor of calories buit

6 B )4j(Ie) the question of incidence of pillbliC 0xPIAl it -tu IL lt hso if oms as well as tho meansto finance it, thoro is also the quiostion wliethor tho level of oxi)wLditulro is "uLptimnil" ill so0nowoll-dofinold se1se.

9R4S-2

10 t. N. SRINIVASANT

the individual requirements varied, the estinvLtod(l pi0oportionl of tbh poor (i.e.

thoso with a oalorie doficiency) in- tho population couild be eithlor 100% or 0%

depeniding oni whevtlher tho idoiltical cowuninpttioil is loss or -i-oator thaftnl thie

moan requiremenit, whlilo the true proport.ion, of course, wNill bo soninovwbero

in botween. SonmoQnies, the Sille1O uInllbor use(d to elhlabtn,v.lize tlho (lisCrib)l-

tion of calorie reqluiremeno11ts of . giveon pop)ulaLtioii may illd-.110o a SUh)st:LltitLI

s tifbty margini abovo the moin requiremont,s, thius aciding to thio possiibiity of

over-ok.t.iniitiuii of thn i)roportioIi of poor. Soein of these probleB ii,is aleo

disoussed by Sukhat.ino (1977), w0ho shoWs, that, if illnstCadf of uisiill ', J)p-evoty

line based simply On- averagen calorie reoquiimoeiits, allowaiice is, nimadle for

variations in inidividual rocuunemCnllt,s, tIlo eAstMiaLt iUCi(1C0C OfI o po rty' in

Inda is broughit dowl from about 50%/ to about 25'0/ in urba)tn areas, and

flroim bout 40% to about 15%/ in rural areias.6 Indeed, as he points out,

from a policy point of view, thie fact that these iporpoiliio.-9 are lnot as larfre

ts was once believed, raises the hiope that the probleoii of poverty a ioration

need not be intractable.

In someio studio1i, it has leen obsorveOd that (alurie inita1nke ba1sed ostilmlates

of thO proportion of malnourished cant bo 8ubstatntlially dliffereont froilm thle3

proport.ioil. obtained of when ialoiuiishm-fleint. is- dofin-cl in termnsh of body

weoighit iln relabtion to soline suiitable stan,dlard. All this suggprests, that luLps

the anost reliable method of (estiniatillog tIl extelnt of w1ialn1otirishillmlit is

anilt hroponietrio ic measurement anld On1ly 11 o'i OOnt1'Y this has coIllO tO be extoensivelJ"

a,dopted in poor coutintries. Evel. if t,he bost estiniateo of the ialnwiourishod

is available, there is still the iio'blomni of it,s utility foir policy purposes.

Firstly, the evidenice onl the (lelet{iious offiets of mnild 11'.lu11o1rishmnetolit is

scanlty since most studies conceIni.triatte onl the seerely mnalnouris hed. Secondly,

and more seriously, the problemin of malnutrition Illay have, othllr explanlaItionst

besides inadequato calorie ilitale, suIlh as disease anId uiisatis-4,thtoiy food

habits. Tliirdly, cortain sootionis of tho population, such as, eluidl(rel., parti-

oularly felmaoile hilddi-0n, expectalit and nilursin!g feomlen..s, otc., allrLy be pNrti-

ofulalrly suseopltiblo to mRalnlour] isIioh lit becau.mse they nlli;iy nlot frgt theili dLue

share of thoe lhousehold food co0S1111 mpUtio-tho oxpeienleo w itil di reot mlultlritioII

iltervoutfionI progrOalms (dirv'et(id towards thelso groupiS in TIn(dia' lhas niot booee

3Athi rli.qe-it of rF AO, tho ) tional :;niplu Suev'oy in India hag tabulatocd tlho calorie

anw peinehn Corltont (pqr Consimor tnit por day) of thl fooee onsunmod areord ing to por ca)ita

tot. i COfl sumfltiof r.xpilrit.eier of the lheu.'ho1. 'Liu sn ldata weoro erleto(l as part of a nation-wido survoy (Ittring July 1971-Juno 1972. .S1uldmi noilit'8s aeialy.xiS rolatos to oarlior data. It is

nob cloar wh4hor this olaborate tabuladtion by itsolf add-s vory mnuch to our un(lerstancling of

povorty or mahiourishment.

10oVErNTY J\OMEs joMleb 1RST T*NM'ETp TRn'rjREMS 1 1

spoeet.,elalrlv su3eesf'ul.7 Finally. to dispel malnutrition may reoqiire raisingincomes", a.linp

12 T. N. SR.INIVASAN

Nevertheless, t1ere areo iogns thalt many of the countries in which the omajority

of the world's poor live seem to have -l,sscci the peak in the crowYth rate of

their popul0tionl (AMeNainarn, 1977). The decline in britlh rates is more

proioiimwcd and prolcoptible in some countries, suclh as ,Si Lankakt and regionis

of India, suich as Iorala,,L whlere ponrst.ading uIlllCie policieo towrdls beot-ter

eduication (pai-rtililalrly of woion). initritioni anid health care seem to have

roiniforced each other ini biring-inig about tie doclinie (U.N., 1975). Thiis

interesting stiu(ly reachles some rather far reaclhilngr ceiit-iou iliat niot maniy

w ouldti driaw fri;rn the sani-c body of datai.

Tuirining 110NV SPOecifically to OdUCAed0ii1, tie ai ailTiblo dato,a do sigrgest

that poor household(ls have disproportionately higrer conieontration of aclults

and ohilchen with little or no fornmal education. It has also beein frequentily

said that poor countries invest in higher education (rather than in primnary

edulc-t.ionl, ad-ult and fullctional literacy prorrami-s) more than they sho.ld,

in some sense. Both the data on thoe poor and the alleged misidircetioni of

eduecational ex-penditure reflect the notionl(i that inivestmient in educa,tioni will

nerta,hily bring high privato Lettlinis to the ed(lto-ed while tleo returns t) the

society from explenitue Onl edullcation, at least some formas of it, ma,y not be

that high. An extreme voerision of this diffeir.nce betwoen pr,iva:1toe a lnd social

retuirns to education arises in the screniniig thlieory of educldtio, in which

education simply acts as a signal to the potential employers of the inherent

ability of the individtual who has cequired the educa,tioni, and, as such, edulca,-

tion hai no social producNtivit.y (Arrow, 1973). The inidividuiall has an-L incen-

tive in getting educated, theri:l)v revealing1, his suiperior inherent ability anid

receiving its reward; for the employer, it serves the useful. pluposeO of screenl-

ing oult those with low inheren.t abilty. But since the ind(lividuial's prodiic-

tivity depends in this extiemlie case only onL his or her inherent ability, and

not on the particular job assigned to hinm or ler, there is no

social belefit fiTom the indclivididal's acquiiring eduicationi. In sharp contrast,

t,he humanl.l,l capital viow of edruicaftion treats eoducaLtionial inivestmenmrt on1 par

with invesfi;imcin.t inL phy.,ical cap)it;al andil b)rth hnve social as wvell as, private

returnsI tholuogh they may differ, NeedfleSS to say that bothl tlho screoninigr

thelory anmd the humak'n cap eitall theory dlescribn somie vali(l faeots of education,

but neither pr-ovide the only and ec\oliusivo rationia-lo for al idlividuial's

-cquiringa educe-ation. fHoworer, it, is obvious tlh'al, if expansionl of edulcat-

tional opportuOnities is ono of the poverty ftaatnement policies, it would beusefill to measure the retuliils to edlcation.

There have been a unuber of studies in whlich returni- (social anid priv,atey

to cducationi hare been estimated by essentially com-iparini the oranlings of

POVERTY: SOME MEASUREMNTENT PROBLEMS 13

those with a slpecified level of ecdncation (more precisely -:'hoolin.o) to thosewTith the next lowver level of educ,ationi (Chamberlain and Griilliolh(s, 1 975B1 la,la qvard(l and A*oodllhatl, 1969). An in terostin mothodolog]ial problemof "seif-select.ieti' has only rol,cltlv su;;Irfaced(l in this COiiViOet,ioill : SlIJ)POSo,onlly those wh1o believe that tlhoy canii benefit frlom gettingp- c altloritedl go toschool and if their beliefs in fact come true, a

14 T. N. SRINIVASAN

4) ENren if arn adequ-te. (lofiilitioli of povorty is availatble., the inter-relationships botwoen policies to abate poverty axe not solidly ostab-lishletl. Dirc3t iulte. t.iotidst 1)olic;ies rai,se fulrthler p n.s, lot onlyre crardine their fesilbilit,x and eofficieLy, i)ltt; also fromii at mui11chi1)rnad(lr po;1t o-f Viow, that theay sonllot ;tinles illvaelo inll;o what Iare(eSSenltially privatte, (cleisions. such aL the allocation of food amongfaintlily 1u1ollulcrs, teo delcisionis oni family sizo, ont migration fromii ruralto urban areaws, otc. It can bo argued that tlho aim of policy slhouldbe to create tlhe (eision, environment through appropriate incolettives(and non-coorcive disincentivos) in whic1; ild(lividulals d0c:idle of tleirowni choice, to move in the direootion that tlh society wouldl wantthem to move,.

5) The lack of kaiowledge about interrelationships and conpIlcmieunotaritioesis inost ovid'eiit. in- tho as of fertility, health, nutrition anid c(licCRtionl.C;) fiven the .seerity of the m- lur,meiit-- probleolii. ony midinuim sisioiwl-dc scriptio'i of thie na-ture nd oextent of poverty shiolild be .I.vodecld.

6. Acknowledgments

I -wish to thank M. S. Ahluwo,litu. Johl D)uloy, liigielu. i\Iiuihas atnd(Gralhalma-1 Pya.tt for thoeil oem mer(^lits.

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16 T. N. SRINIVASAN

Abstract

The papor raisos somo conlcoptuat and measuremont problems relating to poverty with

an aim towards formulation of policios for povorty alleviation. Aftor drrawing a distinction

betwaon re7htive meoasures of the ineqvality associatod with an income distribution and abeolute

measures of poverty such as the proportioin of populationhaving a levol of living belowsN anorma-

tively definied povertty linle, tho papor cliscussos moasuromont probloms associatod with both.P.lra,1mN of intorpreting and using estimatod cross-soctional and timo series rolationships for

palicy formntulotion are (liscLssoed. Attention is drawnvi in particular to the coneoptual and

rieoasurument probloes associated with poveety linos based on nutritional norms. It is pointed

out that a seriou; gap oxists in tho literaturo from a policy point of viow. This gap is thle laok

of fiemi knowoedgoe aboluit initerrolationships and complimentarities in the areas of fortility, health,

nutrition antl poverty.

RWsum6

C'o document aiorde certains problemes conceptuels et do mesure pos6s par la pauvrat6,on vuo de la formalltion de politiquss susceptibles d'att6nuer co fl6au social. Apris avOir fait

al distinction ontre la m.sura relastivc de l'ind.falita associ6eo une certaino r6partition du rovenuot la enocuto ab)solue do la pa?ivretd, donn&o par oxemplo par le pourxentage de la population ayantin nivoantt do vio inf6riour a la norme d6finio commo sueuil de pauvretd, l'auteur examine los diffi-cUtt6s clde mosure qui apparaisSont dans les doux cas II 6t.1die notamnunorit les problemes quosoal6vent l'intorpr6tation et l'utilisatioin, aux fins de formulation (to 1politiques, des relationsostim6os sur la b%io do donn6es transversnlos et do s6rios clhronologiques; !'accont cst mis onparticulior sur loi probl6:nio-i coiicoptuol.i et do moeLure quo poso la d6ilniLion des souils d(e paeoeteI

A partir do normos nutritionnolles. Comme lo souligne cotto 6tuJo, la litt6ratuto sp6cialisMopr6osento nl 3ffect, dui point (lo vtlO de P6laboration dos politiquos, uno gravo lacune: l'incertitudedo.s coninaissancos actuellos touchant aux rolations dle reciprocit6 et de compl6montarit6 entre

f6condit6, sante, nutrition ot pauvrotM.