Multi-dimensional approaches to measuring poverty: Strengths and Challenges

Vadivelu, Vijayalakshmi (2016). 'Multi-dimensional approaches to measuring poverty: Strengths and Challenges' Paper presented at the annual conference of the HDCA, Tokyo 2016.

The capability approach, as a framework, has over the years provided a multi-dimensional lens for poverty measurement and analysis.  It has been long recognized that using income as the primary indicator of welfare is seriously limited—it needs to be supplemented with other welfare attributes (e.g. health and education). The basic needs approach, in the 1970s, expanded the definition of development beyond increases of income alone, but rather as progress in different areas of human needs. This departure from the single-minded focus on income received further thrust from Amartya Sen in the 1980s, through his capability approach. Going beyond the instrumental importance of income, capability approach argued for the need to take into consideration people’s capabilities as ends, the challenges that constrain people’s lives and well-being. Sen’s capability approach has been adopted with a considerable degree of internal pluralism and has influenced the thinking and policy approaches in developed as well as developing countries. It has offered an intuitively appealing framework for developing methodologies to address poverty and inequality issues. As its policy relevance has been increasingly recognized, empirical work on the applicability of the approach has multiplied. A large body of conceptual work has also been devoted to clarifying, augmenting and criticizing Sen’s original approach.
For a quarter century, the capability approach has informed the Human Development Reports, and the indices at the global and national level, which are part of these reports. The Human Development Report made an effort to bring a capability perspective to the themes it dealt with, deconstructing capability approach for policy application.  Probably one of the applications that had the resonance at the national level policy making is the multidimensional poverty index (MPI). Indices such as MPI pushed the boundaries of public policy that relied on income, health and education data that often by themselves had limitations in providing an assessment of multi-dimensionality of poverty.
Drawing from an in-depth analysis of 30 countries, carried out as part of the evaluation of the contribution of global HDRs to the public policy process, this paper discusses issues pertaining to the application of capability approach and framework to poverty measurement. The paper examines how the capability concept has been applied to measuring poverty and inequality, and how the framework has informed policy processes. First, the paper provides a brief review of the use of capability concept in poverty measurement and public policy, its distinctness from other approaches that has long dominated development discourse, as well as the complementary areas.  Second, the paper analyses empirical applications of the concept, at global and national levels, particularly in poverty measurements. Third, makes a critical assessment of the multidimensional poverty measurements (MPI), their strengths and limitations. The paper concludes by providing insights and lessons for poverty measurements; and the importance of contextual specificities that make the indices more relevant for policy making.
Across the countries assessed there still continues to be a fixation with income based measurements as a proxy to capture social inequality and poverty. In many countries, there is   greater recognition that income based poverty measurement has limitations in addressing complex challenges of poverty reduction and social inequality.  However, the acceptability of multidimensional poverty measurement, such as MPI, computation and actual use is still evolving.  There is often a clutter of national level poverty metrics, and the uniformity international agreements such as MDGs pushed for (by define the global poverty line at $1.25 per day), which has come to be widely accepted as the key benchmark for progress on poverty reduction.  The multidimensional poverty measurements are seen, as too broad for policy application. For capability approach to inform multidimensional poverty measurements, and through it public policy, requires minimizing the conflation of poverty with broader and less tangible notions of inequality.   Although multidimensional poverty measurements capture elements of inequality and poverty better than income based methods, the paper argues for the need to bridge the gap between the two, while at the same time not losing the focus on the multidimensionality.
The paper argues that indices such as MPI are more suited for computation at the national level, with appropriate adjustments to suite the particular situation of the country. For the same reason the utility of the nationally computed MPI are comparatively higher than the global MPI.  The other challenge in the case of global index is the outdated data, and reducing the robustness of the index for comparability. These challenges are significantly less when computing the MPI at the national level.  
Inequality, and understanding its various dimensions is critical for poverty reduction, and both need to be addressed simultaneously. There are multiple interpretations of inequality, its understanding, and articulation. Capturing inequality in poverty measurements coherently, i.e., the coherence of conceptualization of poverty and inequality, and eliminating the contextual arbitrariness,   is key to any multidimensional poverty metric to inform public policy.  

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