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POVERTY MEASUREMENT Bosnia and Herzegovina Poverty Analysis Workshop September 17-21, 2007 Giovanni Vecchi Universita’ di Roma “Tor Vergata” giovanni.vecchi@uniroma2.it PLAN OF THE LECTURE 1) Review the most popular poverty measures: Incidence, depth and severity of poverty Sen’s poverty index Watts index 2) Estimation Issues (time permitting) 3) Summary and Recommendations
  POVERTY MEASUREMENT Bosnia and Herzegovina Poverty Analysis WorkshopSeptember 17-21, 2007 Giovanni VecchiUniversita’di Roma “Tor Vergata”giovanni.vecchi@uniroma2.it  Giovanni Vecchi -Sep 20072 PLAN OF THE LECTURE 1)Review the most popular poverty measures:  Incidence, depth and severity of poverty  Sen’spoverty index  Watts index 2)Estimation Issues (time permitting)  3)Summary and Recommendations  Giovanni Vecchi -Sep 20073 POVERTY MEASURES Basic ideas oPoverty measures aggregate information.oA poverty measure is a function of individual incomes x  = (x  1 , …, x  n   )  and the poverty line z  : P: R n → R + oThe literature on poverty measures is huge and technical in nature. It deals with the choice of the functional form of a suitable poverty index.oIn practice three indices have taken centre stage:1)the headcount ratio 2)the poverty gap index 3)the poverty gap squared index  Giovanni Vecchi -Sep 20074 THE HEADCOUNT RATIO Definition  The headcount ratio is the proportion of the population that is classified as poor.  Let q  denote the number of poor households, and N the total population.  The headcount ratio H  is defined as: ( ) 1 1  N hh q H I x z N N  = = = ≤ ∑ I(·) is an indicator function that is 1 if its argument is true, 0 otherwise.
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