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Poverty and Undernutrition

Reference: Debraj Ray Ch 8; Todaro Ch 5

Outline of this chapter

• There is no more visible characteristic of economic

underdevelopment than poverty.
• It is also the most shocking characteristic—the outgrowth of layer
upon layer of inequality.
• We will discuss
• The concept of poverty
• How to measure poverty
• Correlates of poverty: characteristics that are widely shared by poor
individuals
• Functional impact of poverty
• Policies for poverty alleviation

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The Experience of Poverty: Voices of the Poor

• “Don’t ask me what poverty is because you have met it outside my

house. Look at the house and count the number of holes. Look at
the utensils and the clothes I am wearing. Look at everything and
write what you see. What you see is poverty.”
— A poor man in Kenya
• For a poor person, everything is terrible—illness, humiliation,
shame. We are cripples; we are afraid of everything; we depend on
everyone. No one needs us. We are like garbage that everyone
wants to get rid of.
—A blind woman from Tiraspol, Moldova

The Experience of Poverty: Voices of the Poor

• “Life in the area is so precarious that the youth and every able
person have to migrate to the towns or join the army at the
war front to escape the hazards of hunger escalating over
here.
— Participant in a discussion group in rural Ethiopia
• “We have to line up for hours before it is our turn todraw
water”.
—Participant in a discussion group from Mbwadzulu
Village (Mangochi), Malawi

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The Experience of Poverty: Voices of the Poor

• “When one is poor, she has no say in public, she feels inferior. She
has no food, so there is famine in her house; no clothing, and no
progress in her family.”
— A poor woman from Uganda
• “When food was in abundance, relatives used to share it. These
days of hunger, however, not even relatives would help you by
giving you some food.
— Young man in Nichimishi, Zambia
• “[Poverty is] low salaries and lack of jobs. And it’s also not having
medicine, food, and clothes”.
—Participant in a discussion group in Brazil

Poverty as Multidimensional

• Deepa Narayan et al.’s (2000:4–5) study is based on numerous

World Bank surveys and reports of a representative sample of
60,000 poor people from sixty developing countries during the
1990s.
• The World Bank and the authors ask two major questions:
• How do poor people view poverty and well-being?
• What are their problems and priorities?
• The poor see Poverty as multidimensional. . . . Six dimensions
feature prominently in poor people’s definition of poverty.

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Poverty as Multidimensional (cont.)

• First, poverty consists of many interlocked dimensions Although

poverty is rarely about the lack of only one thing, the bottom line is
always hunger – the lack of food.
• Second, poverty has important psychological dimensions, such as
powerlessness, voicelessness, dependency, shame, and
humiliation.
• The maintenance of cultural identity and social norms of solidarity helps
poor people to continue to believe in their own humanity, despite inhumane
conditions.
• Third, poor people lack access to basic infrastructure – roads
(particularly in rural areas), transportation, and clean water.

Poverty as Multidimensional (cont.)

• Fourth, while there is a widespread thirst for literacy, schooling

receives little mention or mixed reviews.
• Poor people realize that education offers an escape from poverty, but only if
the economic environment in the society at large and the quality of
education improve.
• Fifth, poor health and illness are dreaded almost everywhere as a
source of destitution. This is related to the costs of health care as
well as to income lost due to illness.
• Finally, the poor rarely speak of income but focus instead on
managing assets – physical, human, social, and environmental –
as a way to cope with their vulnerability. In many areas, this
vulnerability has a gender dimension.

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Absolute vs. Relative poverty

• Absolute Poverty (Basic Needs Approach) : Poverty is a condition
where a person cannot meet the minimum requirements or basic
needs of life to sustain a healthy life, such as food, shelter,
clothing, water, healthcare and education.
• Household income is below a certain level that makes it impossible for a
person or family to meet the basic needs.
• Relative poverty compares the income of a household with the
average income for their country.
• If income of a HH is 50% or less than the average, the HH is said to be in
relative poverty.
• HH has income but only to meet basic needs
• HH members are not able to enjoy the same standard and quality of life as
the rest of the population with income above 50% of the average.

Absolute poverty and poverty line

• The extent of absolute poverty is the number of people who are
unable to command sufficient resources to satisfy basic needs.
• They are counted as the total number living below a – a poverty line.
• A poverty line is a critical threshold of income, consumption, or,
more generally, access to goods and services below which
individuals are declared to be poor.
• The international poverty line was first introduced in 1990 ($1 a
day).
• The international poverty line is periodically updated to reflect
changes in prices across the world.

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Absolute or extreme poverty

Source: The World Bank

International poverty line

• In June 2025, the international poverty line, which is used to
measure extreme poverty in low-income economies, is set at $3.00
per person per day.
• According to the latest data, around one in ten people globally are
estimated to be living in extreme poverty, a significant share of
whom are in Sub-Saharan Africa or fragile and conflict-affected
situations.
• The rise in the international poverty line reflects an increase in the
costs of basic food, clothing, and shelter needs in low-income
countries between 2017 and 2022, relative to the rest of the world.
In other words, the real value of $3.00 in 2022 prices is the same
as $2.15 was in 2017 prices.

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Measuring Absolute (income) Poverty

• Absolute poverty is measured by the number, or “headcount,” H, of
those whose incomes fall below the absolute poverty line, Yp.
• When the headcount is taken as a fraction of the total population,
N, we define the headcount ratio.
• 𝐻𝐶𝑅 =
• Thus, HCR is the proportion of a country’s population living below
the poverty line.
• However, simply counting the number of people below an agreed-
upon poverty line has serious limitations.
• For example, if the poverty line is set at US $450 per person, it
makes a big difference whether most of the absolute poor earn $400
or $300 per year.

Measuring Absolute (income) Poverty

• Total Poverty Gap (TPG): measures the total amount of income
necessary to raise everyone who is below the poverty line up to
that line.
• TPG is the sum of the difference between the poverty line and
actual income levels of all people living below that line (see next
slide).
• .

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Measuring Total Poverty Gap

Even though in both country A and country B, 50% of the population falls
below the same poverty line, the TPG in country A is greater than in country
B. Therefore, it will take more of an effort to eliminate absolute poverty in
country A.
5-15

Measuring Absolute (income) Poverty

• The TPG, the extent to which the incomes of the poor lie below the
poverty line, is found by adding up the amounts by which each
poor person’s income, Yi, falls below the absolute poverty line, Yp.

• On a per capita basis, the average poverty gap (APG) is found by

dividing the TPG by the total population.

• The Foster-Greer-Thorbecke Index considers the degree of income

inequality among the poor

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Amartya Sen on Poverty

• According to Sen, Poverty is not just about income, but about lacking
the real freedom to make choices and live with dignity.
• Poverty is the inability to achieve minimally adequate levels of basic
capabilities defined as the real freedoms or opportunities people have to
lead the kind of life they value, such as being healthy, educated, or
participating in community life.
• Thus, Sen’s approach points to the multidimensional nature of poverty
and shifts poverty alleviation from just income transfers to expanding
access to education and healthcare, promoting social inclusion, and
empowering people to make choices.

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What is Multidimensional Poverty?

• Conceptually, poverty has traditionally been understood as a lack of

money with statistics on consumption or expenditure acting as a proxy
for a household's quality of life.
• However, in recent decades, a consensus has gradually built that
focusing on monetary poverty alone, or on any single indicator for that
matter, is not enough to capture the lived reality of poverty and that
measurement can do more.
• Multidimensional poverty conceives of poverty as an experience of
overlapping deprivations.

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What is Multidimensional Poverty?

• A person who is poor can suffer from multiple disadvantages at the

same time. For example,
– They may have poor health or be malnourished,
– They may also lack clean water or electricity,
– They may have had little schooling,
– or be unemployed or precariously employed.
• Multidimensional poverty measures identify whether or not people are
living in poverty based on whether they experience a critical mass of
possible deprivations.

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What is Multidimensional Poverty?

• The study of multidimensional poverty has its roots in participatory

studies in which people in poverty were asked about their lives.
• In these studies, people described their experience as one of multiple
deprivations, and part of its burden was that so many disadvantages
struck them simultaneously.
• The main idea of multidimensional poverty is that apart from income is
imperfectly measured, even more important, the advantages provided
by a given amount of income greatly differ, depending on
circumstances.
– To capture this idea, the United Nations Development Programme (UNDP) used
its Human Poverty Index from 1997 to 2009.
– This was later replaced by Multidimensional Poverty Index

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Human Poverty Index

• Human Poverty Index is measured in terms of

deprivation of

– Life: years of life expectancy

– Basic education: adult illiteracy

– Basic needs: lack of access to health services, access to safe

drinking water, and number of malnourished children

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Multidimensional Poverty Index (MPI)

• The global Multidimensional Poverty Index (MPI) is an international

measure of acute multidimensional poverty covering over 100
developing countries.
• It complements traditional monetary poverty measures by
simultaneously capturing the acute deprivations in health, education,
and living standards that a person faces.
• The MPI assesses poverty at the individual level.
– If a person is deprived in a third or more of ten (weighted) indicators, the global
MPI identifies them as ‘MPI poor’.
– The extent – or intensity – of their poverty is also measured through the
percentage of deprivations they are experiencing.

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Multidimensional Poverty Index (MPI)

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Multidimensional Poverty Index (MPI)

• The global MPI shows who is poor and how they are poor and can be used to
create a comprehensive picture of people living in poverty.
• It permits comparisons both across countries and world regions, and within
countries by ethnic group, urban/rural area, subnational region, and age group,
as well as other key household and community characteristics.
• For each group and for countries as a whole, the composition of MPI by each
of the ten indicators shows how people are poor.

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MPI Dimensions, indicators and their definitions

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Multidimensional Poverty Index (MPI)

5-26

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Chronic and Ultra-poverty

• Chronic poverty: Research suggests that approximately one-third of all

people who are income poor at any one time are chronically (always)
poor.
• The other two-thirds are made up of families that are vulnerable to
poverty and become extremely poor occasionally.
– families, usually poor but occasionally receiving enough income to cross
the poverty line, and
– families, usually nonpoor but occasionally experiencing a shock that
knocks them temporarily below the poverty line.
• Chronic poverty is concentrated in India, where the largest
numbers are found, and in Africa, where the severity of poverty
among the chronically poor is greatest.
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Chronic and Ultra-poverty

• Ultra poor or “the poorest of the poor”: Ultra-poverty differs from

conventional poverty in terms of
– depth (degree of deprivation),
– length (duration of time), and
– breadth (the number of dimensions, such as illiteracy and malnutrition).
• The mutual reinforcement among the different dimensions of poverty
can potentially result in multiple mutually reinforcing poverty traps.
– This makes ultra-poverty a more difficult problem to address than
conventional poverty (which can more often be redressed with simpler
solutions such as microfinance plus business training).
• The chronic nature and severity of ultrapoverty also make short-term
policies more problematic.
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Chronic and Ultra-poverty (cont.)

• The International Food Policy Research (IFPRI) study found that the
incidence of poverty just below the poverty line has been falling faster
than poverty at one-half of the poverty line (ultra-poor).
• “it has been easier to reach those living closer to the dollar-a-day line rather than
those living well below it”.
• “The slow progress of poverty reduction for the world’s most deprived indicates
the presence of poverty traps, or conditions from which the poorest individuals or
groups cannot emerge without outside assistance”.
• Some NGOs have responded to this problem, such as BRAC’s “Targeting the
Ultrapoor Programme” (TUP, now called the Graduation Programme), and
Grameen’s Beggars Programme.
• The prospect for ending poverty depends critically on two factors: first, the rate
of economic growth—provided it is undertaken in a shared and sustainable
way—and second, the level of resources devoted to poverty programmes and
the quality of those programmes. 5-29

Economic Characteristics of High Poverty

Group

• The magnitude of absolute poverty results from a combination of low per

capita incomes and highly unequal distributions of that income.
• Clearly, for any given distribution of income, the higher the level of per capita
income, the lower the number of the absolutely.
• But higher levels of per capita income are no guarantee of lower levels of
poverty.
• To formulate effective policies and programmes to attack poverty at its source,
we need some specific knowledge of these high-poverty groups and their
economic characteristics.

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Economic Characteristics of High Poverty

Group

• Children and poverty: In most countries, the level of poverty is greater

among children than among adults.
– The 2018 MPI was applied specifically to disaggregate the extent of child
poverty, finding that half of all those in MPI poverty are children.
– This means that more than a third of all children globally are living in
multidimensional poverty.
– UNICEF has found that extreme poverty disproportionately affects
children.
• In a 2016 report, UNICEF estimated that close to 385 million children were
living in extremely poor households in 2013, so that they represented about
half of the extreme poor, even though children represented only a third of the
population

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Economic Characteristics of High Poverty

Group

• Women and Poverty: Women make up a substantial majority of the

world’s poor.
– Virtually everywhere, women and children experience the harshest deprivation.
– They are more likely to be poor and malnourished and less likely to receive
medical services, clean water, sanitation, and other benefits.
– The prevalence of female-headed households, the lower earning capacity of
women, and their limited control over their spouses’ income all contribute to this
disturbing phenomenon. In addition, women have less access to education,
formal-sector employment, social security, and government employment
programmes. These facts combine to ensure that poor women’s financial
resources are meagre and unstable relative to men’s.
• A highly disproportionate number of the ultrapoor live in households
headed by women, in which there are generally no male wage earners.

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Economic Characteristics of High Poverty

Group

• Ethnic Minorities, Indigenous Populations, and Poverty:

– A final generalisation about the incidence of poverty in the developing
world is that it falls especially heavily on minority ethnic groups and
indigenous populations.
– domestic conflicts and even civil wars, sometimes involving harsh
government-sponsored repression and even genocide to crush indigenous
rights movements,

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Indigenous Poverty in Latin America

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Economic Characteristics of High Poverty

Group (cont.)

• Rural Poverty: Well over two-thirds of the poor are located in rural
areas, primarily engaged in agricultural and other natural
resource-based livelihoods, largely as small farmers or as low-
paid farmworkers.
– Also, urban poverty is often the mirror image of rural poverty

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Poverty: Rural vs. Urban

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Rural and Urban Poverty in Bangladesh

Locality Upper Poverty Line Lower Poverty Line

2022 2016 2010 2022 2016 2010

National 18.7 24.3 31.5 5.6 12.9 17.6

Rural 20.5 26.4 35.2 6.5 14.9 21.1

Urban 14.7 18.9 21.3 3.8 7.6 7.7

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Poverty-Growth Nexus - Does poverty affect growth?

• Poverty can negatively impact economic growth by

– Reducing human capital:
• Health, education, and child poverty with long-lasting effects
– limiting investment, and hindering innovation and productivity.
• Limited savings and investment
• Reduced demand
• Brain drain

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Poverty-Growth Nexus - Does poverty affect growth?

• Poverty can create social and political instability, further impeding

economic progress.
• Market imperfections
– Imperfect credit market: The market for credit naturally fails for the poor.
The poor are unable to obtain loans that can be used to better their lives
by allowing them to invest in a productive activity (lack of collateral)
– Lack of insurance
• Impact of poverty on government spending
– Resource constraints
– Debt and borrowing

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Poverty-Growth Nexus - Does growth affect poverty?

• Is economic growth good for the poor?

• Poverty reduction = growth + distributional change
– First, both economic growth and redistribution can be used to reduce poverty, and
should therefore be considered as policy alternatives at the outset.
– Second, economic growth will reduce income poverty, unless it is accompanied
by a significant worsening of the income distribution. Neutral growth (no
distributional changes), or growth which only worsens the income distribution
slightly, will increase the income of the poor and thereby reduce headcount
poverty.
• When growth occurs, in absolute terms, the rich are getting richer, but
poverty is falling ( Graph next slide).
– Thus, ‘a rising tide lifts all the boats’.

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Poverty-Growth Nexus - Does growth affect poverty?

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Poverty-Growth Nexus - Does growth affect poverty?

• Trickle-Down Hypothesis: Traditional neoclassical theory holds that

economic growth benefits all layers of society, including the poor,
through job creation, wage increases, and increased public revenues.
This "trickle-down" effect assumes that growth leads to broad-based
improvements in well-being.
• The question "Is growth good for the poor?" has been widely debated in
the fields of development and poverty economics.
• While economic growth is traditionally seen as a driver of poverty
reduction, empirical studies disagree in their conclusions depending on
country context, inequality levels, and the nature of the growth process.

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Poverty-Growth Nexus - Does growth affect poverty?

• Why disagree? Disagrees on the following points.

• Level of aggregations:
– Group A: Macro figures
– Group B: local levels, not all benefits, public services
• Time horizon:
– Group A: 5 to 10 years
– Group B: Short term impact (Impact of SAP), long term impact – Environment
• Market structure and poverty (e.g. role of trade)
– Group A: Trade mutually beneficial
– Group B: Trade can be exploitative
• Definition:
– Group A: Increase in average income = economic growth
– Group B: Growth same as the growth-oriented policy (WB, IMF). 5-43

Poverty-Growth Nexus - Does growth affect poverty?

• Empirical evidence
• If there is no macro-level evidence for systematic changes in income
distribution during economic growth, we can expect growth to facilitate
poverty reduction.
• Fields (2001) concludes the following from his literature review:
– ‘It is overwhelmingly the case that growth reduces poverty and recession increases
it, though in about 10 percent of the cases, poverty did not appear to fall when growth
took place.’
• Likewise, Ravallion (1997) notes on his discussion of the Human
Development Reports, that ‘arguably the biggest problem facing the
world’s poor today is not “low quality growth” – but too little growth of even
quite normal quality!’
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Poverty-Growth Nexus - Does growth affect poverty?

• A comprehensive study by Dollar and Kraay (2001) is appropriately called

Growth is Good for the Poor.
– The authors studied a series of 236 cases of economic growth episodes (i.e. five year
periods) in 80 countries, and tested how the income of the poorest 20% change
during the economic growth process.
– They reached several conclusions:
• The elasticity of income to the poor with respect to average income is slightly above one,
that is, a 1 % increase in average income increases the income of the poorest quintile by
1.07 %. Thus, the poor’s “share of the cake” is lightly increasing during growth.
• About 80 % of the income level of the poor can be explained by the average income. In
other words, people are poor because they live in poor countries, rather than in countries
with a skewed income distribution.
• Looking at changes in the income, a smaller share – about 50 % – is explained by
changes in average income. Thus, changes in income distribution matters too for the
income of the poor.
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Poverty-Growth Nexus - Does growth affect poverty?

• Other studies have looked at the growth elasticity of poverty, i.e., the
reduction in headcount poverty due to economic growth.
– The average elasticity is in the range of minus 2-3, which is to say that a one percent
increase in average income reduces the headcount poverty by about 2-3 %
(Ravallion 2004).
– But such elasticities vary greatly, depending on the initial poverty incidence, the initial
income distribution and – partly correlated with that – the depth of poverty.
• Thus, any generalised statement that ‘economic growth does not generally
benefit the poor’ is wrong.

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Poverty-Growth Nexus - Does growth affect poverty?

• Pro-poor growth: Growth is good for the poor, but some types of growth
are better than others.
• ‘Pro-poor growth’ can either be defined as
– (1) growth which increase the income of the poor (and thereby reduce the incidence
of poverty), or
– (2) growth which increase the income of the poor by more than the growth rate
(Ravallion 2004).
• The prospect of achieving pro-poor growth depends on two sets of factors
– the preconditions that exist and
– the type of growth the country experiences.

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Poverty-Growth Nexus - Does growth affect poverty?

• Preconditions: There is strong evidence to suggest that an egalitarian

asset distribution – in particular of land and human capital – will enhance
the poverty reducing effect of growth.
– The combination of land reform, together with improved infrastructure, education and
labour intensive urban growth, was a key factor in the successful development of
South Korea and Taiwan in the post WWII period.
– In India, the variable degree of literacy among states is the prime factor explaining
different growth-poverty outcomes (Ravallion and Datt 2002.
• To investigate how the poverty-reducing effect of growth (‘growth elasticity
of poverty’) is conditioned by the income distribution, Ravallion (2004)
analyzed data from 62 countries.
– the reduction in poverty is determined by two factors: the economic growth rate and
the Gini index (the measure of inequality discussed earlier

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Poverty-Growth Nexus - Does growth affect poverty?

• Types of Growth: There is scope for governments to choose growth strategies

which are pro-poor.
• Generally speaking, it is beneficial for poverty reduction to have a growth
path emphasizing any combination of the following five factors:
– More education
– Labor intensive technologies
– Rural focus
– Technology for pro-poor consumption good
– Good governance

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