CH2 Flashcards
What are local poverty assessments?
Researchers trying to survey poverty in developing countries sometimes ask the people in villages who among them is poor.
What is calorie counting?
Determining the minimal cost of 2,000 calories worth of food per day, the average daily number of calories humans need to estimate poverty in the community
What is the poverty line?
The income required to purchase 2,000 calories of food, taking into account food habits and preferences. Those families or individuals with income below the poverty line are considered poor, whereas those with income above that line are not.
What is a poverty headcount?
The number of people in a given population who are below the poverty line
What is the equation for the Poverty Headcount Ratio?
H = Q/N
What is the poverty gap?
The poverty gap assesses people below the poverty line according to their distance from the line.
What is the equation of the Poverty Gap?
PG = Q(z - yq)/z
What is the equation of Absolute Poverty Gap?
APG = (Q/N)(z - yq)/z = H(z - yq)/z
How can we measure poverty across countries using exchange rates?
One method that compares poverty across countries takes a particular country’s poverty line and converts it into other countries’ currencies.
What are non-tradeable goods?
All goods that are not exported and imported
Why are non-tradeable goods important in exchange rate calculations for poverty?
Non-tradeable goods are very important for the poor because in developing countries, the poor are unable to buy expensive imported goods. As a result, currency conversions of poverty lines based on exchange rates may give a misleading comparison of living standards across countries.
What are Purchasing power parity exchange rates?
Exchange rates which are calculated so that a typical basket of goods in two countries, including non-tradables, would have the same value when using the PPP exchange rate.
What are the international challenges of surveys?
International comparisons are still an issue because surveys to determine the poverty line are done differently in different countries. In some countries, people are asked about their incomes, while in others, they are asked to report their expenditures.
What is one dollar a day?
In an early study, Martin Ravallion from the World Bank and two co-authors noticed that national poverty lines in developing countries tended to be clustered around 1 dollar a day. The 1-dollar-a-day methodology that the World Bank has pioneered and used defines an international poverty line.
What does Chen and Ravallion’s data show?
The latest estimates from the Chen and Ravallion team are from 2008.8 They use a poverty line of $1.25 a day based on 2005 PPP exchange rates. The data were constructed using 675 household surveys across 116 developing countries spanning the period 1981–2005.
What are quantile measures?
Used for measuring income inequality. To divide the population of a country into income categories, researchers use quantile measures. Particular examples of quantiles are quartiles (4 groups), quintiles (5 groups), and deciles (10 groups)
What is the quantile ratio?
A ratio of the average income in the highest quantile over the average income in the lowest quantile.
What is the Lorenz Curve?
Plots the cumulative income share of different quantiles for the whole range of income distribution. The Lorenz curve indicates the cumula- tive share of income held by the cumulative share of the population.
What is the Gini coefficient?
It is defined as twice the area between the diagonal and the Lorenz curve.
What is the formula for G?
G = 1 - 2S
What are some of the Economic Determinants of Inequality
- Education and Income Inequality
- Land Ownership and Income Inequality
How is education a determinant of inequality?
Some countries have broad access to edu- cation while others do not. The idea of a link between education and income inequality is fairly straightforward: people with limited access to education will acquire less skills and consequently will earn lower wages than those with broader access.
How is land ownership a determinant of inequality?
The distribution of land ownership is very important in the context of develop- ing countries in which agricultural production still plays an important role in their economies. Inequality of wealth leads to inequality of income. Those owning relatively large amounts of land will have a very high income while those owning little or no land will have a very low income.
What is Kuznet’s Hypothesis?
Income inequality at first increases with economic development but later decreases as countries become wealthy.
Explanation: The reason why income inequality increases first is that only part of society grows out of poverty at initial stages of economic development. As some people become richer and others remain poor, income inequality must inevitably increase. Eventually, however, the effects of economic growth “trickle down” to the poor, whose living standards also increase, and inequality declines as a result.
