COMMENTS THE MULTIDIMENSIONAL POVERTY INDEX: ACHIEVEMENTS, CONCEPTUAL AND EMPIRICAL ISSUES CAROLINE DOTTER -STEPHAN KLASEN George Gray Molina Eduardo Ortiz-Juarez UNDP, Regional Bureau for Latin America and the Caribbean International Conference on Measuring Human Development March 4-5, 2013. New York City Overview • Index of acute multidimensional poverty, a counterpart to the $1,25 dollar a day indicator. • Of great policy interest. • Decomposability –what’s leading progress –education or access to water? • Disaggregation –all the way down to the hh, all the way up to the nation-state. • Dynamics – moves much faster than HDI Conceptual and empirical issues • Union, intermediate, or intersection cutoffs? (intersection) • Inequality in the spread of deprivations (pending) • Reporting the multidimensional incidence instead of the MPI (both) • Choice of dimensional cutoffs (pending) • Use of the World Health Survey • Problematic use • Dynamics in the MPI • Further work on understanding the dynamics of changes • Simplification of the MPI • Reduce the number of standard of living indicators • Modify schooling, mortality, and nutritional indicators A higher threshold MPI • Not to celebrate progress in middle income • Why not focus empirical firepower on creating an MPI 2.0, equivalent to the 4 dollar/day indicator? • “Similar to the international income poverty line which is less and less relevant for an increasing number of countries whose national poverty lines are substantially above the $1.25 line, one might consider whether one should similarly construct a (weakly) relative MPI cut-off that rises with average well-being in a country”. countries, nor highlight their middle classes, but for three other reasons: - The focus on poverty will tend to disappear w/out indicators, Currently 37 million under 1.25/day line in LAC, but close to 200 million under/near 4/day poverty line. - Inequalities need to be highlighted. The focus on a higher threshold indicator will illustrate a moving gradient. Will also allow a debate on how to transition from highly targeted interventions to universal floors of social protection. - Decompositions on income inequality show (predictably) that “labor income” explains improvements. Need something similar for nonincome based well-being. Will likely highlight the role of social policy and the state. Could add new dimensions, new indicators Could tinker with thresholds for first-cutoff Could tinker with second-cutoff or estimate “weaklyrelative” cutoffs that rise with income (Chen and Ravallion 2012) An (imperfect) example of higher thresholds relative to LAC Dimension Indicator Material well-being Education Dwelling Brazil Dimensional cut-offs Asset index Having a car Child in school All children between 7 and 15 attending school Education of the head At least five years of education Running water Having tap water in the dwelling Sanitation Having flush toilet in the dwelling Quality of living space House with non-precarious materials Nicaragua Uruguay 70.0 Meaningful for policy purposes (LAC-specific) 60.0 50.0 40.0 What about Asia, Africa, and the Middle East? 30.0 20.0 10.0 0.0 Incidence Breadth MPI Original MPI (cut-off = 1/3) Incidence Breadth MPI Region-specific MPI (cut-off = 1/3) Source: HDR 2011, and own calculations. All three indicators are expressed in %. The poverty line gradient (left) Where are the multidimensional poor? (right) $4 a day $5 a day Central and Eastern Europe and the CIS 12 millions 0.7% Sub-Saharan Africa 458 millions 27.6% Latin America and Caribbean 51 millions (3.1%) East Asia and the Pacific 255 millions 15.4% Arab States 39 millions 2.3% $1.25 a day $2.5 a day Source: Chen & Ravallion 2012 South Asia 844 millions 50.9% Source: Alkire & Santos 2010 What dimensions/indicators are relevant in each region? To conclude… • The MPI: – Has been successful in comparing acute deprivations across countries. It can be seen as the counterpart of the $1.25 poverty line. – Very policy relevant: cases of Colombia, Mexico, and subnational governments in Brazil and El Salvador. – Basic MPI might need some twitches, but the most important issue is the use, not the exquisite statistical series. Again, the biggest complaint on MPI is the slow periodicity, not empirical or conceptual flaws. • To do: – “Higher-threshold” MPIs as counterparts to the $2.5, $4, or $5 dollars a day poverty lines are needed. Thought experiment: Why not describe how trajectories diverge/converge between the $1.25/MPI 1.0 and $4/MPI 2.0 over time, say back from 2000? The dynamics should be different, should yield different insight about how poverty evolves. Why not analyze the drivers of MPI progress more carefully? Will likely move pendulum from market-based “labor income story” to social policy “human assets” story.