Incidence of Poverty in Pakistan: Methods and Measurement 1 Incidence of Poverty in Pakistan: Methods and Measurement Fowad Murtaza Department of Economics University of Essex IDEAs Workshop/Conference at Tsinghua University, Beijing, China, June 3-9, 2007

Incidence of Poverty in Pakistan: Methods and Measurement 2 Presentation Contents 1.Motivation 2.Methodology 3.Results and Future work

Incidence of Poverty in Pakistan: Methods and Measurement 3 1.Motivation In the absence of an official and widely acceptable poverty line in Pakistan, the motivation is to review different poverty measurement approaches and indicators; and respectively develop the indices of poverty and conduct poverty analyses in Pakistan.

Incidence of Poverty in Pakistan: Methods and Measurement 4 2.Methodology The methodology for the poverty analysis is divided into 6 steps: 1.data source 2.indicator of well being 3.unit of analysis 4.selection and calculation of poverty line 5.poverty indexes 6.checking the robustness

Incidence of Poverty in Pakistan: Methods and Measurement 5 2.1Data Source Household Integrated Economic Survey (HIES) data conducted by the Federal Bureau of Statistics, Government of Pakistan for year ( ) 2.2Indicator of Wellbeing Monetary indicator; i.e. consumption expenditure of households 5 sub consumption aggregates: 1.food items 2.fuel and utilities 3.housing 4.frequent non food expenses 5.other non food expenses

Incidence of Poverty in Pakistan: Methods and Measurement 6 2.3Unit of Analysis Individuals not households i.e consumption per capita 2.4Selection and calculation of Poverty Line Absolute Poverty Line Food Energy Intake (FEI)/Caloric Approach (a monetary expenditure necessary to reach the minimum calorie intake, and it also includes a minimum expenditure of non-food items)

Incidence of Poverty in Pakistan: Methods and Measurement (cont..) At least three steps required in adopting the calorie approach: minimum calorie intake per day (2350 calories per adult per day set by Government of Pakistan); transformation of the calorie intake in monetary terms (regression); inclusion of other non food minimum expenditure in relation to the minimum food expenditure.

Incidence of Poverty in Pakistan: Methods and Measurement 8 2.5Poverty Index Most common and preferred measure: Headcount Ratio (Incidence of Poverty) Head-count: Where z is the poverty line, w i is the per adult equivalent consumption expenditure of the individual i, and N is the total population

Incidence of Poverty in Pakistan: Methods and Measurement 9 Poverty Line = Rs per capita per month POVERTY INDICES FOR PAKISTAN ( ) Head Count (%) Poverty Gap (%) Severity of Poverty (%) PAKISTAN Urban Rural

Incidence of Poverty in Pakistan: Methods and Measurement 10 Relative Poverty Incidence: Incidence of Relative Poverty ( ) Head Count Index (%) poverty line=50% of per capita monthly consumption57.80 poverty line=60% of per capita monthly consumption67.76 poverty line=66% of per capita monthly consumption73.61

Incidence of Poverty in Pakistan: Methods and Measurement Checking the Robustness of Poverty Indices For robustness analysis for different poverty lines, I sketch cumulative distribution functions.

Incidence of Poverty in Pakistan: Methods and Measurement 12 Robustness Check of Estimated Poverty Line

Incidence of Poverty in Pakistan: Methods and Measurement 13 Food Deficient Population = 69.69% (i.e. population using less than 2350 calories daily)

Incidence of Poverty in Pakistan: Methods and Measurement 14 3.Further work... 1.Inclusion of more data sets 2.Develop poverty profiles and correlates 3.Analyze the determinants of poverty 4.Inequality and income distribution 5.Sectoral poverty decomposition 6.Growth and poverty reduction etc 7.Government policies and poverty alleviation (MDGs)

Incidence of Poverty in Pakistan: Methods and Measurement 15 Thank YOU!