1 An Innovative Measurement Method of Basic Needs Mixing Objective and Subjective Information Work...

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An Innovative Measurement Method of Basic Needs Mixing Objective and Subjective Information

Work in Progress

Christophe Muller

DEFI, AMSE, Aix-Marseille University

July 2011

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1. Introduction

▪ A proper notion of poverty in society

– Corresponds to the well-thought opinions of citizens

– Conflicts with current approaches of poverty lines and poverty statistics

• Expert opinions

• Biological benchmarks

• Arbitrary statistics (1 $ a day, half median...)

– What people think poverty means

▪ Uses of Self-Reported Basic Needs

– Poverty and income distribution analyses

– Individual and household decision models

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Potential issues with self-evaluated basic needs

- COMPARABILITY ACROSS RESPONDENTS

- NON INDEPENDENCE FROM OUTCOMES TO EXPLAIN

• Application to assistance system

• Financial Incentives to lie

-LESS RELIABLE THAN OBJECTIVE MEASURES

-COMPARING SELF-ASSESSED NEEDS WITH CONSUMPTION FOR EACH HOUSEHOLD (I.E.

DISTRIBUTION MATCHES) YIELDS TOO NOISY RESULTS TO BE USABLE

- HARD TO OBSERVE ACCURATELY

- INSINCERE ANSWERS

- UNCLEAR TO RESPONDENT

- NO CLUES

- ERRATIC INDIVIDUAL EFFECTS

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Potential advantages of self-evaluated basic needs

-THERE IS RELIABILITY (~ 0.5)

- HOW TO BEST EXTRACT THE RELEVANT CORE INFORMATION

- NO CONSENSUS ON THE POVERTY LINE METHOD ANYWAY

• Unreasonable methods are not rare

• Using nutritional minima is unrealistic for many countries

- NOT SUBJECT TO THE IGNORANCE OF INDIVIDUAL SITUATIONS BY

EXTERNAL OBSERVERS

-UTILITY-CONSISTENT IF INDIVIDUALS KNOW WHAT IS BEST FOR THEM

- DO NOT ALWAYS REQUIRE EQUIVALENCE SCALES

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2. Context and Data

Republic of Mauritius in 2006/7

– 2006 Household Budget Survey

– Nutritional Poverty Profile

– Request for adaption of poverty statistics to an advanced development stage

A Special Survey for Measuring Subjective Basic Needs

– 2008 Living Condition Survey

– Collaboration CSO-UNDP

– Aim: getting better poverty lines anchored on realistic basic needs

– Sub-sample of 2006 Household Budget Survey

Uses of the new poverty lines

– Official poverty statistics

– Targeting statistics

– Design and improvement of social policies in Mauritius

Our Strategy for Basic Needs Indicators

Selecting logically consistent answers

– An observed household is deemed consistent when:

– either (1) its consumption is in excess of its self-stated basic needs AND it declares itself as non-destitute in a considered qualitative question;

– or (2) its consumption is below its self-stated basic needs AND it declares itself as destitute in a considered qualitative question.

– For different categories of goods

Controlling for individual erratic effects

- Concentrating on food basic needs: the better observed needs and consumption

- Aggregating to use a central tendency as anchor for the poverty line estimation

- Excluding outliers and mistakes

- Controlling for individual effects:

* A new econometric method for cross-section regressions

* Extracting individual effects from other basic needs equations

3. Estimated Basic Needs

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Consistent household (%)

Mean Self-assessment household food basic needs(LCS Nov2008) (Rs)

Average household expenditure on food(HBS2006/07)(Rs)

Ability of household to meet daily basic food needs?

61.1 4170 5997

Does household consume “riz ration”? 27.7 4438 4860

Is household self sufficient in fish/meat/chicken consumption?

28.2 4571 4823

Does household have to borrow money to buy food?

28.1 4462 4971

A New Method for Individual Effect Control

•Taking advantage of similar phenomena simultaneously measured for the same individuals

• Self-Assessment of basic needs for several consumption categories: food, housing, clothing, health, education

•SMij, j= 1,...5 are the goods, i is the individual index

• The model: SMij = gj(Xi) fi uij

•Xi are typical independent variables,

•fi is the unobserved individual effect variable

• uij are error terms

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• Simple estimators of individual effects fi can be generated from each secondary good equation

Empirical analogs of:

ln(SMij ) – Mean(ln(SMij)) - gj(Xi) + Mean(gj(Xi) )

•For j different from 1

•To include in the ln(SM1) equation for food.

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Correlates of Consistent Log Food Basic NeedsNumber of obs = 920 R-squared = 0.4793

Coef. Std. Err. t P>|t|

ei_cloth | .0959786 .0171521 5.60 0.000

ei_housing | .0965442 .0248727 3.88 0.000

ei_health | .0208055 .0127216 1.64 0.102

age | .0016652 .0013742 1.21 0.226

room | .0016167 .0074483 0.22 0.828

sex | -.1685794 .0472513 -3.57 0.000

n13 | .0923126 .0240365 3.84 0.000

n410 | .0687213 .0181334 3.79 0.000

n1116 | .1238146 .0183668 6.74 0.000

n1721 | .1175631 .0185373 6.34 0.000

n2259 | .152178 .0125792 12.10 0.000

n60 | .1980666 .0254644 7.78 0.000

district_d~2 | .0792172 .0809322 0.98 0.328

district_d~3 | .1448836 .0819476 1.77 0.077

district_d~4 | .2223407 .0802721 2.77 0.006

district_d~5 | .2521609 .083598 3.02 0.003

district_d~6 | .1573245 .0841895 1.87 0.062

district_d~7 | .0275595 .0435975 0.63 0.527

district_d~8 | .2928428 .0860717 3.40 0.001

district_d~9 | .2066021 .0919369 2.25 0.025

district_~10 | .0630789 .0845483 0.75 0.456

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Poverty Line Estimation

- Accounting for consumer substitutions

-Based on an estimated food Engel curve

- Linearized QAIDS

- Mean self-assessment of their food basic needs by consistent households → defining food poverty thresholds: ZF

si = α + β ln(xi) + γ [ln(xi)]2 + Ni’ δ + εi,

- Food budget share of household i = si

- Total expenditure of household i = xi

- Household and environment characteristics = Ni

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Robust regression estimatesIndependent Variables Coefficient

(standard errors)Log total expenditure .113

( .0544)Squared Log total expenditure

-.0147(.00302)

Children 1-3 .0219(.00312)

Children 4-10 .0213(.00220)

Children 11-16 .0197(00225)

Adults 17-21 .0148(.00263)

Adults 22-59 .0230(.00166)

Elderlies 60 and over .0434(.00264)

District 1 -.0235.00685

District 2 -.0271(.00692)

District 3 -.0161(.00717)

District 4 -.0223(.00681)

District 5 -.0112(.00712)

District 6 .00799(.00599)

District 7 -.0306(.00599)

District 8 -.0277(.00788)

District 9 -.0166(.00812)

Education of the head (years) -.00196(.000326)

Intercept .571(.244)

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Solving for the poverty line

Once the parameters are estimated the poverty line, Zj is obtained by solving in Z

the following equation:

ZF/Z = Concentrated intercept + β ln(Z) + γ [ln(Z)]2

For example with a Newton method

Poverty line for Mauritius: 2217 Rupees a month.

For Rodrigues: 1556 Rupees a month.

7.06 percent of households are under the poverty line.

The poverty rates:

7.79 percent in the whole Republic

7.54 percent in Mauritius Island

15.2 percent in Rodrigues.

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Island of Mauritius Island of Rodrigues

Republic of Mauritius

Head-count index (%) 7.54(0.443)

15.2(1.90)

7.79(0.433)

Poverty gap measure (%) 1.49(0.119)

3.76(0.572)

1.57(0.117)

Poverty severity measure (%) 0.477(0.0527)

1.39(0.275)

0.506(0.052)

Watts poverty measure (%) 1.84(0.160)

4.85(0.791)

1.94(0.157)

Region Republic of Mauritius2006

Tunisia1995

Gambia2003

General poverty line

Nutritional poverty line


Urban 5.7 4.07 13.87 39.6

Rural 8.9 6.30 25.86 67.8

Table 1: Estimated Poverty Rates (%)

Comparison of general poverty profile and nutritional poverty profile :Table 2 – Headcount poverty rates by urban & rural regions

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Household sizeRepublic of Mauritius Tunisia Gambia

General poverty line



1 9.16 1.353.59

7.22 6.41 1.01 11.23 4.09 2.56 3.54 15.64 6.42 3.88 6.85 25.35 7.27 5.2 11.45 35.66 and more 15.0 14.5 14.91 40.57 and more NA NA 22.02 65.58 and more NA NA 27.81 NA

Table 2 –Headcount poverty rates by household size

•Higher general poverty for households led by :

Unemployed heads Separated heads or widows Female heads Elderly heads Little educated heads

Other categories of households especially affected by general poverty are:

Large size households Households dwelling in disadvantaged areas in terms of the Relative Development Index used in Mauritius to characterized disadvantaged area.

Higher levels of poverty measures than with nutritional profile, while still realistic.

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5. Conclusion

A NEW METHOD MIXING SUBJECTIVE AND OBJECTIVE INFORMATION TO ESTIMATE BASIC NEEDS AND POVERTY LINES

MORE REALISTIC THAN CURRENT METHODS, EXCEPT FOR EXTREMELY POOR COUNTRIES: ELICITING THE WELL-THOUGHT OPINION OF THE POPULATION

MATCHING A SPECIAL SURVEY WITH TYPICAL HOUSEHOLD BUDGET SURVEY

SELECTION OF CONSISTENT ANSWERS USING DESTITUTION INFORMATION

A NEW METHOD FOR CONTROLLING FOR INDIVIDUAL EFFECTS IN CROSS SECTIONS

LARGE NUMBER OF INDEPENDENT VARIABLES IN BASIC NEEDS EQUATIONS, INCLUDING INDIVIDUAL EFFECTS, LIVING STANDARD, DEMOGRAPHICS, HUMAN CAPITAL, ENVIRONMENT, COLLECTION CHECKS, RELATIVE INCOME…

CENTRAL TENDENCY FOOD TO ANCHOR POVERTY LINE INSTEAD OF MATCHING DISTRIBUTIONS OF NEEDS AND CONSUMPTIONS

YIELDS AN ‘OBJECTIVE’ CORE FROM SUBJECTIVE DATA

APPLICATION TO POVERTY ANALYSIS AND SOCIAL POLICY IN MAURITIUS

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