The poverty gap reflects the intensity of poverty in a nation, showing the average shortfall of the total population from the poverty line. The poverty gap is an indicator produced by the World Bank, which measures poverty by looking at per capita income and consumption in households.
Full Answer
How to calculate poverty gap?
Poverty Gap
- Understanding the Poverty Gap. The poverty gap indicator is produced by the World Bank Development Research Group. ...
- U.S. Poverty Gap. ...
- Special Considerations. The commonly used poverty headcount ratio provides a simple count of all the people below a poverty line in a given population, considering them equally poor.
What is meant by poverty gap?
extreme poverty would mean the command over a much smaller section of goods and services and the prevalence of a longer duration of poverty. If a group of people remain poor for generations, they can be described as suffering from chronic poverty and can ...
Why is there a poverty gap?
- Population The first and the foremost reason is Asia’s huge population. ...
- Food Security According to a report by the Asian Development Bank, 67 percent of the world’s hungry lives in Asia. ...
- Education Lack of proper education also causes poverty. ...
- Health Malnutrition in women and children is also another factor. ...
What is the definition of poverty gap?
The poverty gap is the ratio by which the mean income of the poor falls below the poverty line. The poverty line is defined as half the median household income of the total population. The poverty gap helps refine the poverty rate by providing an indication of the poverty level in a country.
What does the poverty gap represent?
The poverty gap is the ratio by which the mean income of the poor falls below the poverty line. The poverty line is defined as half the median household income of the total population. The poverty gap helps refine the poverty rate by providing an indication of the poverty level in a country.
What does a high poverty gap mean?
This measure reflects the depth of poverty as well as its incidence. Long definition. Poverty gap at $5.50 a day (2011 PPP) is the mean shortfall in income or consumption from the poverty line $5.50 a day (counting the nonpoor as having zero shortfall), expressed as a percentage of the poverty line.
Why is it important to monitor the poverty gap?
By measuring poverty, we learn which poverty reduction strategies work and which do not. Poverty measurement also helps developing countries gauge program effectiveness and guide their development strategy in a rapidly changing economic environment.
How do you interpret the square poverty gap?
Squared poverty gap index, also known poverty severity index or P2, is related to poverty gap index. It is calculated by averaging the square of the poverty gap ratio. By squaring each poverty gap data, the measure puts more weight the further a poor person's observed income falls below the poverty line.
What is poverty gap in India?
India - Poverty Gap At National Poverty Line Poverty gap at national poverty lines is the mean shortfall from the poverty lines (counting the nonpoor as having zero shortfall) as a percentage of the poverty lines. This measure reflects the depth of poverty as well as its incidence.
What is poverty gap Upsc?
IAS Exam Latest Updates The Poverty Gap is a ratio that depicts the average population's shortfall from the poverty line, the minimum level of income required to meet basic survival needs. In other words, it represents the intensity of a country's poverty.
How do we measure poverty?
The official poverty line is the expenditure incurred to obtain the goods in a “poverty line basket” (PLB). Poverty can be measured in terms of the number of people living below this line (with the incidence of poverty expressed as the head count ratio).
Is poverty gap a percentage?
The poverty gap index is defined as the mean shortfall in income (or consumption) from the poverty line, expressed as a percentage of the poverty line.
What is the current poverty gap ratio in our country?
Based on 2019's PPPs International Comparison Program, According to the United Nations Millennium Development Goals (MDG) programme, 80 million people out of 1.2 billion Indians, roughly equal to 6.7% of India's population, lived below the poverty line of $1.25 in 2018–19.
How is poverty measured?
Poverty measurement involves choosing a welfare indicator, establishing a threshold level (poverty line) of this indicator, and aggregating the individual information on the poor into a summary measure of poverty. In applied work, the usual approach is to use current income (or expenditure) as a unidimensional measure summarizing a person’s welfare. A person is deemed poor if the person’s income is below a predetermined poverty line. The information on the poor is then combined into an aggregate measure. Numerous aggregate poverty measures have been suggested in the literature, but what has gained popularity in applied work is the so-called Foster–Greer–Thorbecke (FGT) class of poverty measures, of which the headcount is the most recognizable, owing to its simplicity. The headcount, also referred to as poverty incidence, is defined simply as the proportion of the population deemed poor.
What are the key indicators of poverty?
Following on the seminal works of Förster, Greer, and Thorbecke (FGT) in the 1980s, three measures (the head count index [HCI], the poverty gap, and poverty severity ), generally in common use, are generally called the FGT class of poverty indicators. The three poverty indicators are computed in relation to the “poverty line” and are the most commonly used. The simple HCI can tell us the proportion of population with incomes or consumption levels falling below the poverty line. Expressed as a percentage, this gives us an idea of what share of the population lives in poverty and can be monitored over time to give an idea of the progress made in reducing poverty. Based on the poverty line, it is also possible to calculate the poverty gap ratio, which gives an idea of the depth of poverty or how far the poor are below the poverty line. Households with incomes or consumption above the poverty line are considered as being nonpoor. The third FGT indicator is the poverty severity index, which gives us an idea of inequality among the poor. This is calculated as the average squared income or consumption shortfall of the poor households (as a percentage of the poverty line). This measure assigns more weight to households with incomes far below the poverty line and is often seen as being a response to Amartya Sen's view that income transfers from a poor household (already below the poverty line) to an even poorer one should be reflected in an improvement of how we measure income poverty. In general, a higher index reflects a high number of very poor households among those living in income or consumption poverty.
How is poverty measured in multidimensional?
Multidimensional poverty measurement follows generally the same track: choosing the indicators representing dimensions of deprivation, defining the deprivation thresholds (cutoffs) associated with these dimensions, and aggregating the information on individual deprivations for the population into a summary measure of poverty. While the various dimensions of poverty have long been well-articulated in the development literature, the conceptual and empirical issues in aggregating the information on multidimensional deprivations have been a fairly recent interest in poverty assessment. The past decade, in particular, has seen an explosion of the literature on approaches to multidimensional poverty assessment. 1 This study builds on this literature.
What is the unidimensional measure of welfare?
In applied work, the usual approach is to use current income (or expenditure) as a unidimensional measure summarizing a person’s welfare. A person is deemed poor if the person’s income is below a predetermined poverty line. The information on the poor is then combined into an aggregate measure.
What is poverty in economics?
Poverty from this starting point has two core elements: It is about inability to participate, and this inability to participate is attributable to inadequate resources. Most economic research then employs income to distinguish the poor, with a great deal of research and debate on how best to establish an income cutoff for that purpose. There are also substantial theoretical and empirical literatures on concepts such as social exclusion ( Kronauer, 1998) and on the “capabilities” approach pioneered by Sen (1980, 1993), which have implications for how one thinks about and measures poverty. Indeed, a concern with “poverty” per se may predominantly be seen as an Anglo-Saxon concern, with concepts such as deprivation and social exclusion more often the focus in countries such as France or Germany and with the “level of living” approach to living standards and well-being of central importance in the Nordic countries (and having much in common with Sen's capabilities approach in general orientation, on which see for example Erikson, 1993 ).
What is poverty threshold?
When poverty is defined in income terms, the poverty threshold is often used to measure the magnitude and depth of poverty.
What is poverty in Europe?
The definition of poverty underpinning most recent research in Europe relates to exclusion from the ordinary life of the society due to lack of resources, as spelled out, for example, in the particularly influential formulation by Townsend (1979). This has also been very influential from a policy-making perspective as evidenced by the definition adopted by the European economic communities in the mid-1980s:
What is the poverty gap?
In statistics, the poverty gap is the average amount of money those below the poverty line lack compared to those at or above the line. The definition of the poverty line can vary based on the country, but it is usually a ballpark measurement of the absolute least a person could make to cover necessities like shelter and adequate food.
What is the poverty guidelines?
Poverty guidelines are set by the United States Department of Health and Human Services (HHS). Designed to oversee the health of the citizens of the United States, HHS handles Medicare and Medicaid and assists with medical services for those who cannot afford them. The HHS department uses its poverty guidelines to determine a citizen's eligibility for its services. As of 2010, the HHS poverty guideline was set at $18,310 US Dollars (USD) for three-person families living in the contiguous 48 states.
What is the poverty threshold?
The poverty threshold is a poverty measurement set by the United States Census Bureau, a department created to survey the people of the United States to collect information about its populace. This department uses its poverty thresholds to calculate statistics about levels of poverty in the United States. As of 2008, the Census Bureau set its poverty threshold at $17,163 USD for a three-person family. As of 2004, the United States had an overall poverty gap of 12.7 percent. In this case, the poverty gap denotes the percentage of people who are not making enough to meet basic needs for adequate human survival.
Why are young women more likely to have unplanned pregnancy?
Young women living in poverty are more likely to experience an unplanned pregnancy as they don't have access to proper health care.
What is Poverty Gap?
Definition: The poverty gap is a ratio showing the average shortfall of the total population from the poverty line—the minimum level of income required to secure the basic necessities for survival. In other words, it reflects the intensity of poverty in a nation.
Example - How to use
Poverty Gap is an example of a term used in the field of economics (Economics - Macroeconomics). The Termbase team is compiling practical examples in using Poverty Gap.
Qu'est-ce que la Poverty Gap?
Définir: L'écart de pauvreté est un ratio indiquant le déficit moyen de la population totale du seuil de pauvreté - le niveau minimum de revenu requis pour assurer les nécessités de base de la survie. En d'autres termes, cela reflète l'intensité de la pauvreté dans une nation.
Was ist Poverty Gap?
Definition: Die Armutslücke ist ein Verhältnis, das den durchschnittlichen Mangel der Gesamtbevölkerung aus der Armutslinie zeigt - das Mindestniveau des Einkommens, das erforderlich ist, um die Grundbedürfnisse für das Überleben zu sichern. Mit anderen Worten, es spiegelt die Intensität der Armut in einer Nation wider.
Que es Poverty Gap?
Definición: La brecha de pobreza es una proporción que muestra el déficit promedio de la población total de la línea de pobreza, el nivel mínimo de ingresos requerido para asegurar las necesidades básicas de supervivencia. En otras palabras, refleja la intensidad de la pobreza en una nación.
O que é Poverty Gap?
Definição: A lacuna da pobreza é uma proporção que mostra o déficit médio da população total da linha da pobreza - o nível mínimo de renda necessária para garantir as necessidades básicas para a sobrevivência. Em outras palavras, reflete a intensidade da pobreza em uma nação.
Why is poverty gap index used?
The poverty gap index is often used in policy discussions because it has an intuitive unit (per cent mean shortfall) that allows for meaningful comparisons regarding the relative intensity of poverty.
What data do the authors use for the poverty gap?
The authors use PovcalNet data, and project forward to 2015. They note: “We first use the poverty gap to calculate a cost of filling the gap in 2011 PPP dollars, then we use PPP exchange rate ratios and the U.S. CPI to convert to market dollars. We also merge in 2015’s estimated cost & yearly foreign aid values.”
Why is Povcal global total smaller than global total?
This is because some countries in the Middle East and North African region do not have data, but are included in the global total. Povcal explains this as follows: “As a compromise between precision and coverage, the regional poverty totals and headcount ratios are not reported for the Middle East and North Africa, but an estimate of the number of the poor is included in the global total (based on regression-based PPPs and 2011 PPPs, depending on the country).”
How to measure poverty?
Ending extreme poverty is very much within our reach. The most straightforward way to measure poverty is to set a poverty line and to count the number of people living with incomes or consumption levels below that poverty line. This is the so-called poverty headcount ratio.
How much money do we need to close the poverty gap?
The short answer is that we’d need around 160 billion ‘international dollars’ per year to close the global poverty gap, according to 2013 figures (the latest year for which we have good data). To give you a rough idea of the order of magnitude of this number, the equivalent figure in market dollars is about 90 billion – much less than, for example, the yearly military expenditure of the US ($600 billion as I show below).
Which countries have similar poverty rates?
For example, India and Bolivia have relatively similar poverty gaps (mean shortfall is close to 4% of the poverty line), but they have very different poverty rates (the share of population in poverty in India is 21%, while in Bolivia it is 7.7%).
Is the correlation between poverty and poverty gap perfect?
Interestingly, the correlation is very strong, but is far from perfect. For example, India and Bolivia have relatively similar poverty gaps (mean shortfall is close to 4% of the poverty line), but they have very different poverty rates (the share of population in poverty in India is 21%, while in Bolivia it is 7.7%). This can be appreciated in a scatter plot of poverty headcount rates vs. poverty gap indices. The fact that the correlation is not perfect justifies the discussion below. The intensity of poverty contains information that is not captured by the poverty headcount rate.
Why is the poverty line important?
The poverty line is also the most important way that America measures how well it is treating its most disadvantaged members. A large and growing percentage of people below the poverty line indicates that we are not doing enough.
Why is poverty unable to account for this important correlate of poverty?
Poverty lines are unable to account for this important correlate of poverty, which is problematic because health interventions can play an important role in reducing poverty. Last, knowing that a family is below the poverty line does not tell us the extent to which they are otherwise integrated into society.
What was the purpose of the Panel on Poverty and Family Assistance?
The Panel on Poverty and Family Assistance designed a better way to measure poverty. 2 The group’s detailed recommendations were published in Measuring Poverty: A New Approach and sought to compensate for the shortcomings of Orshansky’s threshold by accounting for the full consumption needs of families, a more accurate measure of household income, and regional variation in cost of living.
How do you measure poverty?
In addition to the absolute and relative measures of poverty, some suggest using a subjective approach to the poverty measure. The absolute and relative poverty measures depend on an external agency determining the threshold for being poor. The best judge of whether someone is poor or not, however, may be the poor person himself. Subjective poverty measures rely on a person’s own reporting of whether or not he has an income that is adequate to meet his needs. 9 Although a useful gauge of aggregate perceived well-being, subjective measures of poverty are often impractical when it comes to providing government support for the poor. If a person is able to determine for himself whether he is poor and deserves government help, there is an obvious incentive for misreporting.
How is poverty measured?
The so-called “poverty line” was determined in the mid-1960s by calculating the amount of money it costs to buy a basic basket of food and then multiplying that amount by three. Each year the line is updated to account for inflation. (The current poverty line is $10,830 for a single person and $22,050 for a family of four.) If a person lives in a household whose income is less than that amount, he is considered poor. If the household’s income is that amount or more (even by one dollar), he is not poor. The measure does not consider other living costs besides food, and the federal poverty line is the same whether a person lives in New York City or McAlester, Okla.
What is the problem with the American system of measuring poverty?
Some scholars, advocates, and policymakers argue that the main problem with the American system of measuring poverty is that a line is an absolute measure. 6. Absolute measures have clear shortcomings. It is difficult to establish an objective minimum level of goods necessary for an individual or a family.
Why are relative poverty measures useful?
Proponents of relative poverty measures argue that they are more useful because they account for changing levels of inequality within a society.
Detailed Solution
The correct answer is The difference between the poverty line and the actual income level of all those living below that line.
More Economy Questions
Q1. In which year Indian government has enacted the Consumer Protection Act?
When was the poverty line adjusted?
The poverty line was adjusted each year as food prices changed. Beginning in 1969 , the poverty line was adjusted annually by the average percentage price change for all consumer goods, not just changes in the price of food. There is little to be said for this methodology for defining poverty.
How many times is a family headed by a female more likely to live in poverty?
A family headed by a female is more than five times as likely to live in poverty as compared to a family with a husband present. This fact contributes to child poverty.
Why is noncash aid important?
Noncash assistance is the most important form of aid to the poor. The large share of noncash relative to cash assistance raises two issues. First, since the poor would be better off (that is, reach a higher level of satisfaction) with cash rather than noncash assistance, why is noncash aid such a large percentage of total aid to the poor? Second, the importance of noncash assistance raises an important issue concerning the methodology by which the poverty rate is measured in the United States. We examine these issues in turn.
How many money income thresholds are there?
The Census Bureau uses a set of 48 money income thresholds that vary by family size and composition to determine who is in poverty. The “Weighted Average Poverty Thresholds” in the accompanying table is a summary of the 48 thresholds used by the census bureau. It provides a general sense of the “poverty line” based on the relative number of families by size and composition.
How to determine if a family is poor?
Alternatively, you might examine the family’s income relative to the incomes of other families in the community or in the nation . If the family was on the low end of the income scale, you might classify it as poor.
What was the poverty rate in 2006?
Specifically, the poverty rate in 2006 for whites (non-Hispanic origin) was less than half that for Hispanics or of blacks. The poverty rate in central cities is higher than in other areas of residence. The incidence of poverty soars when several of these demographic factors associated with poverty are combined.
Why are the Smiths so poor?
According to the absolute income test, the Smiths are poor because their income of $20,500 falls below the 2006 poverty threshold of $20,614. According to the relative income test, they are not poor because their $20,500 income is above the upper limit of the lowest quintile, $20,035.
What Is Poverty Gap?
- The poverty gap indicator is produced by the World Bank Development Research Group. It measures poverty by looking at household per capitaincome and consumption. The World Bank seeks to measure all people against the same standard. As such, it sets an international poverty …
Example - How to Use
Qu'est-ce Que La Poverty Gap?
Was ist Poverty Gap?
- Definition: The poverty gap is a ratio showing the average shortfall of the total population from the poverty line—the minimum level of income required to secure the basic necessities for survival. In other words, it reflects the intensity of poverty in a nation.
Que Es Poverty Gap?
- Poverty Gap is an example of a term used in the field of economics (Economics - Macroeconomics). The Termbase team is compiling practical examples in using Poverty Gap.
O Que É Poverty Gap?
- Définir: L'écart de pauvreté est un ratio indiquant le déficit moyen de la population totale du seuil de pauvreté - le niveau minimum de revenu requis pour assurer les nécessités de base de la survie. En d'autres termes, cela reflète l'intensité de la pauvreté dans une nation.
Related Terms
- Definition: Die Armutslücke ist ein Verhältnis, das den durchschnittlichen Mangel der Gesamtbevölkerung aus der Armutslinie zeigt - das Mindestniveau des Einkommens, das erforderlich ist, um die Grundbedürfnisse für das Überleben zu sichern. Mit anderen Worten, es spiegelt die Intensität der Armut in einer Nation wider.