Questionable parentage

Gabriel Demombynes over at the World Bank blog has s0me more interesting things to say about the Multidimensional Poverty Index (MPI). There’s one claim he makes a claim which I find particularly interesting:

The MPI is a descendant of the earlier Human Development Index and is similar to the various Unsatisfied Basic Needs indices long used in many countries.

Several others, including Duncan Green, have also stated that the MPI is a natural follow-on from the Human Development Index (HDI), which I’m not sure is correct, as the two have a very different conceptual basis.

As its name implies, the MPI falls into a class of indices known as poverty measures. While they can get quite complex and opaque, the more basic of these have a similar approach: First we have to pick a welfare measure. This could really be anything that is measurable, but is most commonly income, consumption or asset wealth. Then comes the surprisingly contentious task of choosing a threshold, under which people will be classified as being poor if they do not meet it. These poverty lines can be absolute or relative, the latter indicating a greater concern for inequality than absolute deprivation. Counting the poor gives us a final tally of those living below the poverty line.

The MPI is an extension of this approach, instead using a range of indicators wrangled together a multidimensional poverty line. While single-dimension poverty lines make very precise statements about people along one dimension (Person i can only be not-poor if their income Xi exceeds the poverty threshold P (Xi >P), multidimensional lines can classify two households as being poor even when they face vastly different circumstances. For example: two people might be equally unhealthy, but one has enough asset wealth to be classified as “not-poor”. The MPI also tries to include information on the severity of poverty, for those that face many different deprivations all at once, a conceptually similar approach to the poverty gap and squared poverty gap indices.

The MPI, like the other poverty measures that came before it, focuses on a particular segment of the population, discarding all information about the non-poor. Because it is derived by counting individuals whole fall into a pre-specified condition, it is best thought of as a way to describe the state of this sub-population, rather than as a comprehensive indicator.

In contrast, the Human Development Index was intended to be used to make statements about the overall progress of a country’s development. While all of its components are aggregated from individual or household information, or from counting those in a certain condition (i.e. those that are literate, or who have died this year), they do not give the same type of insight. The education component is similar (we are just counting those who are in the state of literacy or who are enrolled in school), but with GNI and life expectancy, we aren’t really counting anything, we’re expressing moments and expectations from interesting country-wide distributions. We cannot say “X number of people have an HDI of Y.”

The HDI was initially introduced as an alternative to just relying on income as a measure of human welfare. This way of looking at the world, which became very popular following Sen’s work on the capabilities approach, also motivates the MPI as an alternative to only considering poverty in income. The weakness in both the indices is in their method with dealing with multidimensionality – by using ad hoc methods of averaging different dimensions together to come up with a single number.

So, when describing the MPI to someone new, one might refer to it as “an extension of traditional income-based poverty measures, taking into account the multidimensional nature of poverty, much as the Human Development Index considers the multidimensional nature of development. Both consider just measuring income, or consumption, to be insufficient,” rather than as a natural follow on from the HDI.

4 thoughts on “Questionable parentage

  1. Jiesheng

    August 9, 2010 at 12:10pm

    It’s the million dollar question again: What measurement reveals the real extent of poverty?

    The HDI model has had its flurry of criticisms despite its lure back in the 1990s. It’s nice to have another dig at the multidimensional aspect of poverty by having the MPI. But as Amartya Sen and others have objected, the focus should be on the larger topic of development, in this case Human Development which while not easily quantifiable, produces the range of topics that shows how poor or non-poor a person is.

  2. Gabriel

    August 9, 2010 at 8:44pm

    You’re entirely correct that the HDI and the MPI are calculated in very different ways. My observation that the MPI is the descendent of the HDI comes from a couple observations:
    1) The MPI is the focus of this year’s UN Human Development Report, which has the HDI as its core country-level indicator.
    2) If you read the MPI working paper on the ODHI website, the links to the HDI are explicit. (see page 12 along with the several tables that compare the HDI and MPI):

    The HDI is calculated at the country-level, using aggregate data. In contrast, the MPI is calculated using microdata and household-level information, which the MPI’s creators hold up as a strength, because it measures the extent to which deprivations in different subindicators overlap. But the unsatisfied basic needs indicators used in many Latin American countries since the 80s have the same general structure as the MPI.

  3. Jiesheng

    August 11, 2010 at 5:48pm

    “The HDI is calculated at the country-level, using aggregate data”

    i thought this depends whether it is the “global” HDI versus the country specific HDI

  4. Matt

    August 11, 2010 at 6:25pm

    Gabriel –

    1) point taken

    2) It seems to me that the ODHI paper is presenting the HDI and MPI as complements, not substitutes, much as you would present the income poverty rate and GDP together.

    (also I wasn’t picking on the connections you drew specifically, but more seizing an opportunity to talk about the functional differences between the two).

    Jeisheng – as far as I know, no one really looks at “global” HDI, mostly because technically development doesn’t really have an upper limit the HDI is good for comparisons between countries, but at least one of its components (income) is boundless. I hope the same holds true for life expectancy.

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