1. Multidimensional Poverty Measurement
Poverty and Equity GP
2017 Summer Course
Maria Ana Lugo
Minh Cong Nguyen

2. Outline Why multidimensional poverty? Early applications Steps WB-MPI
Dimensions, indicators and thresholds
The aggregation question
Weights
WB-MPI
PANEL (Moritz Meyer ECA, Federica Marzo AFR)
STATA EXAMPLES (Minh)

3. Why add non-monetary poverty?
2. EARLY APP
3. STEPS
4. WB-MPI
Why add non-monetary poverty?
(1) Conceptual: Human well-being is intrinsically multidimensional, and income or consumption do not capture fully this multidimensionality
1. Living standards perspective: incomplete coverage through consumption/income because of, for instance, publicly provided services (instrumental and intrinsic) thus prices cannot be used
2. Capabilities: people have different ability to convert resources into capabilities
3. Human Rights: intrinsically multidimensional, no possible trade-off

4. Why add non-monetary poverty? (cont.)
2. EARLY APP
3. STEPS
4. WB-MPI
Why add non-monetary poverty? (cont.)
(2) Empirical: correlation between monetary and non-monetary is not perfect.

5. Why add non-monetary poverty? (cont.)
2. EARLY APP
3. STEPS
4. WB-MPI
Why add non-monetary poverty? (cont.)
(3) Consensual: Increasing interest from governments and international institutions (UNDP, EU, OECD).
SGD Goal 1.2. halving poverty “… in all its dimensions …”
Plurality of views about well-being
2/3 of countries using or going to

6. A bit of history (of counting approach)
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
A bit of history (of counting approach)
Social Inclusion in Europe: beyond elimination of poverty to the focus on the mechanisms that exclude individuals
Townsend 1979, Mack and Lansley 1985, …, Nolan and Whelan 2011
Socially perceived necessities, by force not choice
Poverty cut-off (dual): number of deprivations to be considered poor.
Many combined income (relative) and “material deprivation”
Basic Needs Approach in LAC: direct method to measure poverty, intrinsically important, and also associated to income poverty
Chile 1975, INDEC-CEPAL 1984 (Argentina): applications to Censuses as UBN maps, extended to many other LAC and MENA countries.
Indicators: overcrowding, housing, toilet, school attendance, dependency ratio (economic capacity)
Union approach: at least one UBN, but also with at least 2, at least 3, …
Integrated approach: income-UBN. See Beccaria, Altimir, Boltvinik

7. Critical steps in multidimensional approach
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Critical steps in multidimensional approach
Selection of variables (dimensions, indicators, thresholds)
If more than one:
2. Aggregation (or not)  Identification
If aggregation
3. Choice of weights

8. Step 1: Selection of dimensions, indicators
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 1: Selection of dimensions, indicators
Normatively
Capabilities (Nussbaum), primary goods (Rawls), basic rights / constitution (Mexico), ancestors’ philosophy (Bolivia – Vivir Bien)
Preference based: focus groups (El Salvador / Armenia)
Pragmatically
As instrument for policy coordination (e.g. Colombia)
Empirically
Based on subjective well-being data (UN WHR)
Statistically, based on available data

9. Step 1. Indicators in country-based MDP in LAC
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 1. Indicators in country-based MDP in LAC
back
Paises: Chile, Colombia, Costa Rica, Ecuador, El Salvador, Mexico, Paraguay

10. Step 1. Indicators in Global MDP
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 1. Indicators in Global MDP
UNDP-MPI
EU Social Indicators (selected)
Monetary poverty
Below 60% of median national equalized income
Education
Years of schooling
Children enrolled
Early school-leavers (18-24)
Health
Child mortality
Life expectancy
Infant mortality
Self-reported unmet need for health care
Nutrition
BMI for adults and height for age for children
Access to services
Electricity
Water
Sanitation
Assets
Cooking fuel
Floor
Assets (radio, tel., TV, bike, motorbike, car, fridge)
Washing machine, color tv, telephone, car
Employment
Jobless households
Employment of older workers

11. Step 2. The aggregation question
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 2. The aggregation question
Two polar alternatives and an intermediate position
1. Dashboard approach
Present each dimension separately but simultaneously
e.g. Atkinson et al (2002), MDGs, WDR 2006, Ravallion (2011)
2. Multidimensional index approach
Aggregation into a single index across individuals and across dimensions
e.g. HDI, MPI, GNH
3. Middle ground
Dashboard + dependency structure
e.g. Venn diagrams

12. Step 2. Middle ground 1. WHY ? 2. EARLY APP 3. STEPS 4. WB-MPI
Alternative forms of representing the dependency structure
Based on counting overlaps:
Tabulation
Venn Diagram
Average deprivation
for a given k (1, …, D)
k=1 union
K=D intersection
Source: Reprinted from Atkinson, A. B., E. Marlier, F. Monatigne, and A. Reinstadler (2010) `Income poverty and income inequality’, in Income and Living Conditions in Europe, Atkinson and Marlier (eds), Eurostat, page 127.
See also Ferreira and Lugo (2013)

13. Step 2. Comparing approaches
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 2. Comparing approaches
Dashboard Approach
MD Measures
Overlap Approach
No complete conclusion when dimensions disagree
# dimensions deprived are not important (joint distribution ignored)
Use of best possible data for each dimension
No need to choose relative weights
Complete ranking
Intensity of well-being or deprivations matters
All information should come from a single source
Need to choose relative weights
No complete conclusion when dimensions disagree
Intensity of well-being or deprivations matters
No need to agree on weights?
One source for all dimensions ?

14. Step 2. Global MPI (UNDP) 1. WHY ? 2. EARLY APP 3. STEPS 4. WB-MPI
Key characteristics of MPI:
[1] DUAL CUT-OFF
By deprivation (z_d)
Number of deprivations to be MD poor (k) = 33%
[2] INTENSITY
MPI = Headcount * Average deprivation
among the MD poor
1 Argentina, 2005 Encuesta Nacional de Nutrición y Salud (ENNys);
2 Brazil, 2013 and 2012 Pesquisa Nacional por Amostra de Domicílios (PNAD);
3 China, 2012 China Family Panel Studies;
4 Ecuador, 2014 and 2006 Encuesta de Condiciones de Vida (ECV);
5 Jamaica, 2010 Jamaica Survey of Living Conditions (JSLC);
6 Libya, 2007 Pan Arab Population and Family Health Survey (PAPFAM);
7 Mexico, 2012 and 2006 Encuesta Nacional de Salud y Nutricion (ENSANUT);
8 Morocco, 2011 Pan Arab Population and Family Health Survey (PAPFAM);
9 State of Palestine, 2006/2007 Pan Arab Population and Family Health Survey (PAPFAM);
10 Syrian Arab Republic, 2009 Pan Arab Population and Family Health Survey (PAPFAM), and
11 South Africa, 2012 and 2008 National Income Dynamics Study (NIDS). T
ables 6 and 7 of the Human Development Report Statistical Annex indicate for each country if data come from the DHS, MICS or from a national survey.
Available for 101 countries (and 61 more than once)
Sources: DHS, MICS, and some national equivalent surveys

15. Step 2. MD Measures: Selected examples
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 2. MD Measures: Selected examples
Bourguignon-Chakravarty (2003)
Correlation across dimensions matters (sign depending on parameters)
Weighted average of individual deprivations with CES-type function
Pure counting approach: the Alkire-Foster (2011) … e.g. MPI
Dual cut-off: identification and aggregation clearly distinguished
Decomposable (two-way) : Completely linear
A “cross-dimensionally” convex approach (Datt, 2016)
Every deprivation counts (union approach)
Compounding effect of overlapping dimensions

16. Step 2. MD Measures: Selected examples
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 2. MD Measures: Selected examples
Bourguignon-Chakravarty (2003)
Pure counting approach: the Alkire-Foster (2011) … e.g. MPI
A “cross-dimensionally” convex approach (Datt, 2016)

17. Step 3. Selecting weights
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Step 3. Selecting weights
Weights determine the trade-offs between dimensions. They convey a specific view of how “a good life” should look.
Approaches to set weights
Data-driven
(what ‘is’)
Hybrid
Normative
(what ‘ought to’)
Frequency
Self-stated
Equal or arbitrary
Statistical
Hedonic
Expert opinion
Most-favorable
Price-based
Source: Decancq and Lugo (2013)

18. The Atkinson Commission on Global Poverty
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
The Atkinson Commission on Global Poverty
The 24-member commission led by Prof. Anthony Atkinson tasked with providing advice to the World Bank’s Chief Economist on various poverty measurement issues including:
What choices should the World Bank make regarding complementary poverty measures to be tracked and made available to policy-makers?
The final report was published in October 2016, and contains 21 recommendations, grouped in three parts.

19. Atkinson’s report: recommendation on multidimensionality
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Atkinson’s report: recommendation on multidimensionality
Recommendation 11
“The Bank should publish, alongside the global poverty headcount, a portfolio of Complementary Indicators”, including a dashboard of multi-dimensional indicators
(small number for prominence, based on explicit set of principles, external consultations)
Recommendation 19:
Complementary Indicators: a multidimensional poverty indicator based on the counting approach
WB response and next steps
The recommendation is taken on board
POV-DEC working group to decide on dimensions, indicators, and aggregator in consultation with global experts and stakeholders
Income/consumption will be one of the indicators to be included

20. Core guiding principles
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
How should we select non-monetary indicators? (in addition to income/consumption)
Core guiding principles
(1) Complement of monetary poverty: use prices when appropriate and choose other dimensions when lacking natural weights (relative prices) for incorporation into consumption aggregate
(2) Relevance: Essential for well-being
(3) Parsimony: Small number to give prominence (3 to 5 dimensions) – importance of overlap within unit of observation
(4) Data availability: Ideally indicators with global coverage, and taken from same data sources to enable joint distribution
Rule of thumb: at least 60% of population coverage in each of the WB’s regions

21. How should we select non-monetary indicators? (cont.)
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
How should we select non-monetary indicators? (cont.)
Proposed approach – three parallel tracks
The “wide” group of indicators: dimensions and indicators are now (or soon to be) available for a large number of countries
The ideal indicators: given selected dimensions, to serve as guide posts (SDGs as driving force)
The “intermediate” group of indicators: currently available with limited coverage, can supplement the “wide” group for a smaller number of countries
Closer to the ideal than the “wide” group, trading off coverage for more or better indicators
The wide approach: after an assessment of what we can deliver by the next PSP report, would the wide approach be worth pursuing (i.e. if we only have two non-monetary dimensions)?
The ideal approach: which dimensions should we aspire to include (i.e. should we work towards a security dimension)?
The “intermediate” approach: should we only consider indicators available within the same data source, or consider a hybrid that combines data sources that enables joint distribution at an aggregate level (i.e. district or geo-spatial grid)?
Aggregation: which aggregation approaches should we adopt, and which summary measures should be presented in the country tables (i.e. an overlap measure, Venn diagram, etc.)?

22. Currently proposed dimensions
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Currently proposed dimensions
Wide
Monetary poverty
Consumption/Income per capita ($1.9 per day)
Education
Children's enrollment
Completed level of education (adults)
Health
Nutrition
Access to services
Piped water in dwelling or plot
Sanitation
Electricity (any)
Security

23. Currently proposed dimensions
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Currently proposed dimensions
Wide
Ideal
Monetary poverty
Consumption/Income per capita ($1.9 per day)
Education
Children's enrollment
Age appropriate cognitive skills
Completed level of education (adults)
Health
Quality adjusted access to health (preventative and curative)
Individual level health outcome measures (e.g. hypertension, diabetes, CV)
Nutrition
Individual nutrition measures (normed and age-adjusted), e.g. BMI, stunting, anemia
Access to services
Piped water in dwelling or plot
Safely managed drinking water (safe and available)
Sanitation
Safely managed sanitation service (not shared and safe disposal)
Electricity (any)
Non-interrupted supply of electricity of sufficient voltage
Security
incidence of violence at the community level

24. Currently proposed dimensions
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Currently proposed dimensions
Wide
Intermediate
Ideal
Monetary poverty
Consumption/Income per capita ($1.9 per day)
Education
Children's enrollment
Quality adjusted enrollment
Age appropriate cognitive skills
Completed level of education (adults)
Quality adjusted attainment
Health
Health access at community level for (a) careseeking for all morbidity, (b) skilled birth attendence
Quality adjusted access to health (preventative and curative)
Individual level health outcome measures (e.g. hypertension, diabetes, CV)
Nutrition
Stunting for children
Individual nutrition measures (normed and age-adjusted), e.g. BMI, stunting, anemia
BMI for adults
Access to services
Piped water in dwelling or plot
Quality adjusted basic drinking water source
Safely managed drinking water (safe and available)
Sanitation
Clean sanitation
Safely managed sanitation service (not shared and safe disposal)
Electricity (any)
Non-interrupted supply of electricity of sufficient voltage
Security
incidence of violence at the community level

25. Critical steps in multidimensional approach
1. WHY ?
2. EARLY APP
3. STEPS
4. WB-MPI
Critical steps in multidimensional approach
Selection of variables (dimensions, indicators, thresholds)
If more than one:
2. Aggregation (or not)   Identification
If aggregation
3. Choice of weights

26. Thanks!

27. WB country work on MDP
There are different types of supports that the WB currently provides
Accompanying the process, from formulation to data collection: provides training, close technical support, and survey instrument design and data collection (Armenia, ~Bolivia)
Working together/alongside with OPHI: financing OPHI’s TA (Senegal); providing technical inputs (Colombia, Dominican Republic, Honduras, Peru), peer- reviewers (Paraguay).
 Supporting data collection for multidimensional measurement: data collection to better capture the dimensions that are intended to be included in the measure (OECS, potentially in Costa Rica).

28. Initial proposal for complementary indicators
Global Summary (list of countries):
dashboard + M0 (k=1) M(𝛼=1,𝛽=2) overlap/intersection + M0 (k=2)
(3-6)
Individual Country:
dashboard + M0 (k=1) M(𝛼=1,𝛽=2) Venn

29. GMD Incidence of deprivations [as of today]
By Region
By Income Groups
Region
Less than primary completed
Less than $1.9/day
No electricity
EAP
2.1%
4.9%
1.9%
ECA
1.7%
0.6%
0.0%
LAC
3.7%
5.4%
3.4%
MENA
16.3%
2.0%
11.8%
SAS
17.9%
19.0%
23.3%
SSA
27.0%
46.7%
71.4%
Total
10.3%
14.2%
17.8%
Income group
Less than primary completed
Less than $1.9/day
No electricity
High income
1.2%
0.6%
0.0%
Low income
32.9%
49.4%
78.7%
Lower middle income
14.8%
19.0%
24.0%
Upper middle income
2.3%
3.9%
1.1%
Total
10.3%
14.2%
17.8%

30. Education SDG #4: “inclusive and equitable quality education”
Ideal: quality of education, reflected in learning capability.
Implementation: short module testing basic math and reading, such as citizen-led assessments (ASER, in India and Pakistan; UWEZO-Tanzania, Kenya, Uganda; Beekungo -Mali). This indicator could be appropriate for children, youth and adults.
Intermediate: quality adjusted enrolment levels: adjust enrolment rates by the country’s quality of the education, appropriate for children and youth.
Implementation: Unesco Institute for Statistics (UIS) harmonization exercise of international tests (PISA, SACMEQ-PASEC, TIMS, LLECE)
Alternatively, use DHS basic literacy test administered to adult women to adjust adults education (Pritchett and Sandefur, 2017).

31. Health
SGD #3 to ensure health lives and promote well-being for all at all ages
Ideal/intermediate: Two potentially complementary approaches
Population access to formal health care: consistent with the instrumental justification.
E.g. formal sector utilization rate conditional on health status at the community level
Direct individual assessment of specific health dimensions: consistent with capabilities.
E.g. anthropometric measures for both children and adults.
Others: anemia (blood hemoglobin, most relevant for children, pregnant women and the elderly), hypertension (blood pressure and pulse as well as total and HDL cholesterol, most relevant for prime age and older adults), type II diabetes (HbA1c, relevant for all ages), physical markers of all cause stress (CRP, cortisol, relevant for adults).

32. Water and Sanitation
SDG #6 Clean Water and Sanitation. WHO/UNICEF Joint Monitoring Program for W&S
Ideal/Intermediate: access, quality, availability (Access Plus framework, WASH)
Water: “% of the population using safely managed drinking water sources”, defined as a basic drinking water source located on premises, available when needed, and compliant with fecal and priority chemical standards.
Sanitation: “% of the population using safely managed sanitation services” defined as a basic sanitation facility which is not shared, where excreta are safely disposed in situ or transported and treated off-site
Implementation: added module added to hh surveys, e.g. Ethiopia, Ecuador.

33. Security SDG #16 Peace, Justice, and Strong Institutions:
Significantly reduce all forms of violence and related
death rates everywhere
Ideal: Incidence of violent deaths at the community level (also as a proxy of threat of violence). Both homicide and conflict related deaths.
Implementation: added module (1/2 Qs) “do you know someone…”
Intermediate: combining other sources at low level of disaggregation
ACLED: georeferenced incidence of armed conflict from political violence (Africa, South Asia, Mena, 50 countries)
Geneva: small arms survey (homicides) + OSLO data (conflict)

34. Global MPI: Indicators and thresholds
Other applications
Indicator
Threshold
Health
• Nutrition:
BMI for adults and height-for-age under 5
At least one is malnourished: BMI for adults (women 15–49) and height-for-age z score for children under age 5 (WHO standards)
• Child mortality:
Child death in last 5 year
One or more children died within the five years prior to the survey.
Education
• School attainment:
Years completed
No one has completed at least six years of schooling.
• School attendance
Child-aged attendance
At least one school-age child (up to grade 8) is not attending school.
Standard of living
• Electricity:
Access to electricity
Not having access to electricity.
• Drinking water:
Source in dwelling and distance
Not having access to clean drinking water or if the source of clean drinking water is located more than 30 minutes away by walking.
• Sanitation:
Toilet
Not having access to improved sanitation or if improved, it is shared.
• Cooking fuel:
Cooking fuel material
Using ‘dirty’ cooking fuel (dung, wood or charcoal).
• Floor:
Floor material
Having a home with a dirt, sand or dung floor.
• Assets:
radio, TV, telephone; bike, motorbike, car, truck, animal cart, motorboat; refrigerator, arable land, livestock
Not having at least one asset related to access to information (radio, TV, telephone) and not having at least one asset related to mobility (bike, motorbike, car, truck, animal cart, motorboat) or at least one asset related to livelihood (refrigerator, arable land, livestock).

35. MPI – Alkire-Foster: main concepts
Original matrix
Censored matrix
k=2
dimensions y e h w
H of MD poor
Average deprivation 1 2
2/4 = .5 3 … N
¾ = .75
H = 2 / N
A = 1.25 / N
MPI = H x A y e h w 1 2 3 … N
individuals

36. Global MPI: Indicators and thresholds
Other applications
Indicator
Threshold
Health
• Nutrition:
BMI for adults and height-for-age under 5
At least one is malnourished: BMI for adults (women 15–49) and height-for-age z score for children under age 5 (WHO standards)
• Child mortality:
Child death in last 5 year
One or more children died within the five years prior to the survey.
Education
• School attainment:
Years completed
No one has completed at least six years of schooling.
• School attendance
Child-aged attendance
At least one school-age child (up to grade 8) is not attending school.
Standard of living
• Electricity:
Access to electricity
Not having access to electricity.
• Drinking water:
Source in dwelling and distance
Not having access to clean drinking water or if the source of clean drinking water is located more than 30 minutes away by walking.
• Sanitation:
Toilet
Not having access to improved sanitation or if improved, it is shared.
• Cooking fuel:
Cooking fuel material
Using ‘dirty’ cooking fuel (dung, wood or charcoal).
• Floor:
Floor material
Having a home with a dirt, sand or dung floor.
• Assets:
radio, TV, telephone; bike, motorbike, car, truck, animal cart, motorboat; refrigerator, arable land, livestock
Not having at least one asset related to access to information (radio, TV, telephone) and not having at least one asset related to mobility (bike, motorbike, car, truck, animal cart, motorboat) or at least one asset related to livelihood (refrigerator, arable land, livestock).