27/01/16
Lesson 1: Poverty and indicators
Learning Objective: I can define, explain, give examples of, and illustrate the poverty cycles.
Poverty trap/poverty cycles
Relative poverty: The condition in which people lack the minimum amount of income needed in order to maintain the average standard of living in the society in which they live.
- Cannot keep up with the standard of living as determined by the country.
- Four person fam; two adults, two kids = $23,283
Absolute poverty: Measured in terms of basic necessities for survival. Amount a person needs to have in order to live.
- Level of income that is sufficient to buy items such as clothing, food and shelter.
- Purchasing power parity (PPP) is used to determine this figure.
- World Bank uses an absolute poverty line of $1.25 per day. Below is considered to be extreme poverty.
Below we can see an illustration of a poverty trap. A poverty trap is an linked combination of barriers to growth and development that forms a circle, thus self-perpetuating unless the circle can be broken.
Which MDG do you believe is most influential in breaking this cycle and why?
Single indicators: Solitary measures that may be used to assess development; financial, health, education and institutional measures.
Financial
1. GDP and GNI
- Foreign direct investment (FDI); GDP figures will be significantly higher than its GNI.
Developing countries also have one other important inflow of earnings, worker remittances. Normally less than one percent of GDP, the following countries are an exception:
2. GDP per capita at purchasing power parity (PPP) exchange rate
- Financial comparisons between countries can be inaccurate because cost of goods/services are different by country.
- To avoid this problem the PPP exchange rate is used. Calculated by comparing prices of identical goods/services in different countries.
- Big Mac index. http://www.economist.com/content/big-mac-index
Health Measures
1. Life expectancy at birth
2. Infant mortality rate
Education Measures
1. Adult literacy rate
2. Net enrollment ratio in primary education
- Number of children of primary school age, to the total number of children who are of age.
Composite indicators: Combine a number of single indicators, ie, HDI (1990). GDI is also used as a composite. It's basically HDI which takes into consideration inequalities for men/women.
- Human Development Index (HDI) = Measures life expectancy, education, income per capita.
- Gender Inequalities Index (GDI) = Measures gender gaps in human development achievements by accounting for disparities between women and men; long/health life, knowledge and standard of living.
- Gender Empowerment Measure (GEM) = Number/percentage of women in leadership, managerial and parliamentary positions and in technical and professional jobs. Index values range from 0-1. What if GEM < GDI?
- Human Poverty Index (HPI) = % of people who do not reach the age of 40, % of adults who are illiterate, % of population without access to safe water, % of children who are underweight for their age.
Assessment: