Professional Documents
Culture Documents
Lecture 3: Poverty
FACULTY: ENGR. ALBERT E .LAMBERTE
SCHOOL OF ECONOMICS, DE LA SALLE UNIVERSITY-MANILA
*SLIDES ARE TAKEN FROM MR. LUISITO ABUEG, SOE
What is poverty?
The Growth Controversy:
1. What is the extent of relative inequality,
and how is this related to the extent of
poverty?
2. Who are the poor?
3. Who benefits from economic growth
4. Does rapid growth necessarily cause
greater income inequality?
5. Do the poor benefit from growth?
6. Are high levels of inequality always bad?
7. What policies can reduce poverty?
What is poverty?
Some definitions of Poverty:
UNDP: Income poverty is when a
familys income fails to meet a
federally established threshold that
differs across countries.
Common definition: It is a condition
where peoples basic needs for
basic necessities are not being met.
Extreme poverty standards:
ADB: $1.25/day
UNESCO: $1/day
Poverty is multidimensional
Coming up with a measure
implies that we not only
consider the well-being of the
general population, but most
especially that of the
vulnerability and
disadvantaged groups.
EXALTACION E. LAMBERTE
University Fellow
And DLSU Scientist-in-residence
TERMINOLOGIES IN POVERTY ANALYSIS
Annual Annual
income income
Total Total
poverty poverty
gap gap
relatively relatively
smaller E larger E
50 100 50 100
Percentage of population Percentage of population
Poverty in the Philippines
30.0
26.6 26.4
25.2
In Percent
25.0
21.6
20.0
10.0
5.0
0.0
2006 2009 2012 2015
Full Year
50.0
39.1 38.7
40.0 37.3 36.6 36.0
33.9
In Percent
30.0 27.6
24.4
22.4 22.0
19.7
20.0
15.8
13.1
11.2
9.1
10.0
3.9
0.0
ARMM XIII VIII XII X V IX VII IVB VI XI CAR II I III IVA NCR
19.2
20.0
17.8
15.3
In Percent
15.0
12.0
10.9
10.4
10.0
8.1
4.6 4.2
5.0 4.0
0.0
2006 2009 2012 2015
Full Year
35.0 33.8
31.5
30.4
30.0
25.1 24.4
25.0
21.6
In Percent
5.0
-
NCR CAR IVB IVA IX I VI II XI III ARMM VII VIII X XIII XII V
Absolute poverty
A state in which an individual lacks the resources necessary for subsistence.
Subsistence below the minimum requirements for physical well-being;
poverty line.
Disadvantages of the Absolute poverty measurement:
Poverty can only be defined in relative terms (Townsend 1974).
Based on standards set by the society (culture- specific)
Inter-generational problems.
Absolute vs relative poverty
Relative Poverty
Individuals or groups lack of resources compared to the other
members of society.
Argument: subjective is better than objective because of the
following reasons:
a. People can be excluded from and cannot participate in the social and
cultural life of their society.
b. Peoples choices are limited.
c. Avoidance of risks becomes a primordial concern.
d. People may perceive and feel that they lack control over their lives.
Dimensions of poverty (UNDP 2001)
4. Security Poverty
Physical habitat, population in
informal settlements, access to
police services, social problems
emerging in the community, and
perceptions on safety in the
neighborhood.
Security is a humans basic
necessity.
Dimensions of poverty (UNDP 2001)
5. Social Exclusion
Disadvantaged groups: ethnicity,
socio-economic status, religion
and gender.
Indicators include: Participation in
political and community-based
organizations, membership in
cooperatives, access to
information through media
channels, and perceived
satisfaction with the services and
attention provided by LGUs and
the National Government.
Measuring inequality
Size distribution
deals with individual persons or households and total
income received.
Distribution can be:
Quintiles divides the population into successive fifths
according to ascending income levels and wat
proportion of total income they receive.
Deciles divides the population into successive
tenths.
Measuring inequality
Lorenz curve
American Economist Max O. Lorenz
(1905): represent the inequality of
wealth distribution.
Shows the actual quantitative
relationship between the
percentage of income recipients
and the percentage of the total
income they received in a given
year.
Measuring inequality
Lorenz curve
The vertical axis represents the
share of total income received by
each percentage of population.
The horizontal axis represents the
percentage of income recipients.
Diagonal line- line of perfect
equality.
The Lorenz curve lies below the lie
of equality.
Measuring inequality
Gini coefficient
Named after Corrado Gini, an Italian
Statistician in the early 20th century.
Measures the relative degree of
income inequality.
Gini coefficient: area between the
Lorenz curve and the equality line
divided by the entire area under the
equality line.
0 = perfect equality
1 = perfect inequality
Philippines (2012): 0.43 (World Bank)
Gini cumulative
coefficient % income
1
(1912)
A
B Lorenz
curve
1
0 cumulative %
population
Pietra index cumulative
% income
1
Line of
absolute
The maximum distance equality
between x and the line of A
absolute equality is called
the Pietra ratio (or the
Robinhood index). Pietra
index B Lorenz
curve
1
0 cumulative %
population
Inverted U Kuznets curve (1955)
Kuznets
Increasing Decreasing
curve inequality
(shown by
inequality
(shown by
(1955) Gini) Gini)