how to calculate poverty gap index in excel
Taken together, one implication is that inequality measured in terms of consumption is generally somewhat lower than the inequality measured in terms of income. For example, countries account for the size of households in different ways in their poverty measures. See our article Global poverty in an unequal world: Who is considered poor in a rich country? , is related to poverty gap index (PGI). P 0000064851 00000 n The International Poverty Line of $2.15 per day (in 2017 international-$) is the best known absolute poverty line and is used by the World Bank and the UN to measure extreme poverty around the world. WebThe higher the FGT statistic, the more poverty there is in an economy. In 2019, the U.S. poverty gap totaled $154 billion, meaning $154 billion was needed that year to end poverty in the country. One int.-$ buys the same quantity of goods and services no matter where or when it is spent. (2022), but based instead on the official 2019 poverty rate as reported by the U.S. Census Bureau.You can see in detail how we calculated this poverty line in this Google Colabs notebook.Jolliffe, Dean Mitchell, Daniel Gerszon Mahler, Christoph Lakner, Aziz Atamanov, and Samuel Kofi Tetteh Baah. Many poor people today, as in the past, rely on subsistence farming rather than a monetary income gained from selling goods or their labor on the market. No adult in the household (age of grade 9 or above) has completed primary education. We will always indicate the original source of the data in our documentation, so you should always check the license of any such third-party data before use and redistribution. Our articles and data visualizations rely on work from many different people and organizations. This step is shown in Table 2. How much does reducing inequality matter for global poverty?. Global data and statistics, research and publications, and topics in poverty and development. This has had little effect on our overall understanding of poverty and inequality around the world. The poverty gap is an indicator produced by the World Bank, which measures poverty by looking at per capita income and consumption in households. Sometimes it is reported as a fraction, between 0 and 1. is the total population of poor who are living at or below the poverty line, How much does reducing inequality matter for global poverty?. Each of the countries shown in the chart achieved large declines in extreme poverty over the last generation.23. endobj Volume II: New Perspectives on Well-Being and Global Inequality since 1820. 0000068887 00000 n The data from 1981 onwards is based on household surveys collated by the World Bank. This compensation may impact how and where listings appear. [1], The poverty gap index is an improvement over the poverty measure head count ratio which simply counts all the people below a poverty line, in a given population, and considers them equally poor. 25% of the world lives on less than $3.65 per day a poverty line broadly reflective of the lines adopted in lower-middle income countries. Our understanding of the extent of poverty and how it is changing depends on which definition we have in mind. The example below shows that at the start of the program 49% of households lived on less than $1.25 per day, and by the end of the program this had dropped to 32%. Shading indicates people who are poor (defined as deprived in at least four indicators). This is one of the most important ways our world has changed over this time. For example, as seen in Tables 1 and 2, two of the four people were identified as poor, so H = 2/4 = 50 per cent. The total transfer required to bring all poor people up to the poverty line is simply the sum of all the poverty gaps in a population (30+20+10+0+0), or the multiplication of the country's poverty gap index by both the poverty line and the total number of individuals in the country (PGIP l N). F A is the average number of deprivations a poor person suffers. You may checkup the DASP package of World Bank, quite comprehensive stuff! For the US, Jolliffe et al. [6] One of the undesirable features of the head count ratio is that it ignores the depth of poverty; if the poor become poorer, the head count index does not change. The global population coverage for low-income and lower-middle-income countries are both 51 percent (also see annex 1A of World Bank, 2020). It marks an incredibly low standard of living a level of income much lower than just the cost of a healthy diet. United States Census Bureau. The two concepts are closely related: the income of a household equals their consumption plus any saving, or minus any borrowing or spending out of savings. You can see in detail how we calculated this poverty line in this Google Colabs notebook. (The index i = 1M, where M is the total number of households in the sample.) $2.15 a day: the updated International Poverty Line, The history of the end of poverty has just begun. The data produced by third parties and made available by Our World in Data is subject to the license terms from the original third-party authors. A higher poverty gap index means that poverty is more severe. The household lacks access to limited-standard sanitation. In 2015, this threshold was updated from $1.25 to $1.90 per day. In collating this survey data the World Bank takes a range of steps to harmonize it where possible, but comparability issues remain. New York. Step 9: Calculate the Headcount, H. Divide the number of poor people by the total number of people. Calculating the Multidimensional Poverty Index, 2022 Global Multidimensional Poverty Index (MPI), Human Climate Horizons data and insights platform. Available from the OECD here. N Assessing the Impact of the 2017 PPPs on the International Poverty Line and Global Poverty. If you multiply a country's poverty gap index by both the poverty line and the total number of individuals in the country, you get the total amount of money needed to bring the poor in the population out of extreme poverty and up to the poverty line, assuming perfect targeting of transfers. J Econ Inequal (2022). This lining-up is generally done on the assumption that household incomes or expenditure grow in line with the growth rates observed in national accounts data. Read more in our article From $1.90 to $2.15 a day: the updated International Poverty Line. Number of people living in extreme poverty, Poverty: Share of population living on less than $1 a day, Poverty: Share of population living on less than $3.65 a day, Poverty: Share of population living on less than $6.85 a day, Share in poverty relative to different poverty thresholds, Share of population in multidimensional poverty, Share of population living in extreme poverty, 'Cost of basic needs' approach, Historical estimates (Moatsos, 2021), The share and number of people living in extreme poverty, Total population living in extreme poverty by world region, Access to electricity vs. share in extreme poverty, CO emissions per capita vs. share in extreme poverty, Child mortality vs. share in extreme poverty, Children per woman vs. share living in extreme poverty, Comparison of extreme poverty estimates, World Bank PIP vs Bradshaw & Mayhew (2011), Daily GDP per capita vs. mean income or consumption per day, Daily GDP per capita, with comparison lines, Daily income of the poorest and richest decile, Death rate from indoor air pollution vs. share in extreme poverty, Death rate from unsafe water sources vs. share of population living in extreme poverty, Energy use per capita vs. share in extreme poverty, Expected years of schooling vs. share of population in extreme poverty, GDP per capita vs. Daily income of the poorest 10%, GDP per capita vs. mean income or consumption per day, GDP per capita vs. median income or consumption per day, Global Hunger Index vs. share in extreme poverty, Hidden Hunger Index vs. share in extreme poverty, National poverty line vs. mean daily income or consumption, National poverty line vs. median income or consumption per day, Number of income/consumption surveys in the past decade available via the World Bank, Number of people living in extreme poverty by region, Poverty: Share of population living on less than $10 a day, Poverty: Share of population living on less than $30 a day, Poverty: Share of population living on less than $40 a day, Prevalence of undernourishment vs. share in extreme poverty, Prevalence of underweight children vs. share in extreme poverty, Prevalence vs. intensity of multidimensional poverty, Relative poverty: Share of people below 40% of the median, Relative poverty: Share of people below 50% of the median, Relative poverty: Share of people below 60% of the median, Share in extreme poverty vs. life expectancy at birth, Share in extreme poverty vs. poverty gap index, Share in extreme poverty: Cost of basic needs approach vs. living on less than $1.90 a day, Share in poverty vs. educational attainment, Share living on less than $6.85 a day vs mean income or consumption, Share of GNI donated towards poverty reduction, Share of GNI from poverty reduction grants, Share of government consumption in GDP vs. share of population living in extreme poverty, Share of people at risk of falling into poverty if payment for surgical care is required, Share of population below and above $30 per day, Share of population in multidimensional poverty: Urban vs. rural, Share of population living in extreme poverty vs GDP per capita, Share of population living in extreme poverty vs. mean income or consumption per day, Share of population living in poverty by national poverty lines, Share of population living with less than $2.15 and $3.65 per day, Share of population within different income thresholds, Share of rural population living in poverty at national poverty lines, Share of urban and rural population living in poverty by national poverty lines, Share of urban population living in poverty at national poverty lines, Share vs. intensity of multidimensional poverty, Vaccination coverage vs. share in extreme poverty, World population living in extreme poverty, by Joe Hasell, Max Roser, Esteban Ortiz-Ospina and Pablo Arriagada, number of surveys included in the World Bank data, Most of us are wrong about how the world has changed (especially those who are pessimistic about the future), https://doi.org/10.1007/s10888-021-09510-w. By comparing the monetary poverty dimension with indicators from other dimensions, it is possible to form a picture of how many multidimensionally poor are not captured by monetary poverty, as well as which indicator deprivations most affect well-being in the different regions (See Table 2). The global poverty data shown from 1981 onwards relies on national household surveys that have differences affecting their comparability across countries or over time. 0000064384 00000 n Indicators are chosen for each dimension on the principles of accuracy (using as many indicators as necessary so that analysis can properly guide policy) and parsimony (using as few indicators as possible to ensure ease of analysis for policy purposes and transparency). The household has no access to electricity. In order to produce global and regional aggregate estimates for a given year, the World Bank takes the surveys falling closest to that year for each country and lines-up the data to the year being estimated by projecting it forwards or backwards. Earlier figures are from Moatsos (2021), who extends the series backwards based on historical reconstructions of GDP per capita and inequality data. These affect comparisons both across countries and within individual countries over time. Such surveys are designed with cross-country comparability in mind, but because the surveys reflect the circumstances and priorities of individual countries at the time of the survey, there are some important differences. `7}@9&.#48,Wu_"` gWq@s)o3E0c'I(QX{. z All the data included in this explorer is available to download in GitHub, alongside a range of other poverty and inequality metrics. There are many challenges to making such adjustments and they are far from perfect. At times these assumptions are the informed guesses of the researcher; in other situations they are drawn from convention, social or psychological theory, or philosophy. Let us now start with generalised poverty gap measures. Web8. Number of economies is the number of economies in each region for which information is available in the window between 2015 and 2021, for a circa 2018 reporting year. A = (4/6 + 6/6)/2 = 5/6. The focus is now on the profile of the poor and the dimensions in which they are deprived. The World Banks poverty gap data is available for 115 countries worldwide and is updated semi-annually in April and September. We calculated an alternative harmonized figure for the US national poverty using the same method as Jolliffe et al. The international-$ is a hypothetical currency that results from price adjustments across time and place. 84% live on less than $30 per day a poverty line broadly reflective of the lines adopted in high income countries. *For households with more than 8 persons, add $4,720 for each additional person. povdeco estimates three poverty indices from the Foster, Greer and Thorbecke (1984) class, FGT (a), plus related statistics (such as mean income amongst the poor). 1 0 obj ", "Poverty and Economic Growth in Russia's Regions", Basics of Poverty Reduction & Inequality Analysis, List of countries by percentage of population living in poverty, https://en.wikipedia.org/w/index.php?title=Poverty_gap_index&oldid=1126328691, Wikipedia articles needing page number citations from November 2020, Short description is different from Wikidata, Wikipedia articles in need of updating from November 2020, All Wikipedia articles in need of updating, Creative Commons Attribution-ShareAlike License 3.0, This page was last edited on 8 December 2022, at 19:34. Regions without sufficient population coverage are shown in light grey. Global poverty is one of the most pressing problems that the world faces today. How much economic growth is necessary to reduce global poverty substantially? The latest global estimates of extreme poverty are for 2019. One int.-$ buys the same quantity of goods and services no matter where or when it is spent. {\displaystyle FGT_{\alpha }} Thank you for participating in this survey! While monetary poverty is strongly correlated with deprivations in other domains, this correlation is far from perfect. j where The Multidimensional Poverty Measure (MPM) seeks to understand poverty beyond monetary deprivations (which remain the focal point of the World Banks But in a world where price differences across countries and over time are large it is important to attempt to account for these differences as well as possible, and this is what these adjustments do. 2022 FPL GUIDELINES FOR ALASKA. The poorest in the world are often undernourished, without access to basic services such as electricity and safe drinking water; they have less access to education, and suffer from much poorer health. Your feedback is very helpful to us as we work to improve the site functionality on worldbank.org. The poverty gap statisticis most valuable to economists and government officials forcalculating the poverty gap index. Please help update this article to reflect recent events or newly available information. The household lacks access to limited-standard drinking water. (Equal weights among indicators are assumed for simplicity. , is related to poverty gap index (PGI). The data for the MPM is derived from harmonized surveys in the World Banks Global Monitoring Database. Step 8: Apply Cutoff k to Obtain the Set of Poor Persons and Censor All Nonpoor Data. However, any aggregation of indicators into a single index invariably involves a decision on how each of the indicators is to be weighted. Organisation for Economic. Table 1. But by the standards of todays rich countries, the world remains very poor. Our World in Data is free and accessible for everyone. Taken together, one implication is that inequality measured in terms of consumption is generally somewhat lower than the inequality measured in terms of income.In our Data Explorer of this data there is the option to view only income survey data or only consumption survey data, or instead to pool the data available from both types of survey which yields greater coverage.There are a number of other ways in which comparability across surveys can be limited. Surveys are not conducted annually in every country however coverage is generally poorer the further back in time you look, and remains particularly patchy within Sub-Saharan Africa. {\displaystyle P_{\text{SEN}}} We face big challenges to help the worlds poorest people and ensure that everyone sees benefits from economic growth. Our Data Explorer provides the option of viewing the data with these breaks in comparability indicated. In September 2022, the World Bank updated its methodology, and now uses international-$ expressed in 2017 prices updated from 2011 prices. 116 0 obj << /Linearized 1 /O 118 /H [ 867 638 ] /L 182146 /E 69364 /N 33 /T 179707 >> endobj xref 116 22 0000000016 00000 n Generally, we can measure different indices through MS-Excel. But it needs to understand the formula of the index (FGT index). Just entrythe infor In addition, PIP can be used for following trends and monitoring progress towards development targets. These include white papers, government data, original reporting, and interviews with industry experts. The poverty gap helps refine the poverty rate by providing an indication of the poverty level in a country. Due to the absence of data on China and India, the regional coverage of South Asia and East Asia and Pacific is insufficient. (h:9ULNA@HFv ~(|?'dc66Fy2LLvDtUjP+K dYb D7^9\&_LjvHu=O` N h|YKZ4#-_a ?RPINsy@cw[^Qgf3Q[Oy6n{~.6{Rmy3#%8iHo9,vbG"QGjWHHfzf44'ng"DQQ3@CDkSY\_^qOE|N'}dSTaUZ#|?oBfQxBsHF"Jmtv^ 9'[&UaWR*zT5Cu?Qi Step 3: Choose Indicators. A)0.05 B)0.08 C)0.16 D)20.0 poverty gap index, which adds up the extent to which individuals on average fall below the poverty For this reason, it is deemed by some to be a flawed measurement. "Income and Poverty in the United States: 2020," Download Table B-2. You can see that visualized in our chart of the number of surveys included in the World Bank data by decade. Assuming equal weights for simplicity, set a second identification cutoff, k, which gives the number of indicatorsin which a person must be deprived in order to be considered multidimensionally poor. To calculate the percentage of a goal attained, you can use a simple formula that divides the actual by the goal amount, with the result formatted using the percentage number format. In this analysis, a basket of goods and Divide by (multiply by 1 over) Nz: FGT: An Example Estimates of low income proportion (again) The poverty line is defined as half the median household income of the total population. WebThen the poverty gap index (P1) may be written as (4.4) 1 1 1. {\displaystyle q} How Was Life? 0000001663 00000 n The poverty gap reflects the intensity of poverty in a nation, showing the averageshortfallof the total population from thepoverty line. All other material, including data produced by third parties and made available by Our World in Data, is subject to the license terms from the original third-party authors. For example, suppose a country has 10 million citizens, a poverty line of $500 per year, and a poverty gap index of 5%. In September 2022, the World Bank changed from using 2011 international-$ to 2017 international-$ in the measurement of global poverty. [2] Poverty gap index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. You can read more about the interpolation methods used by the World Bank in Chapter 5 of the Poverty and Inequality Platform Methodology Handbook. Angus Deaton (Deaton, 2010) provides a good discussion of the difficulties involved in price adjustments and how this relates to global poverty measurement. These affect comparisons both across countries and within individual countries over time.To help communicate the latter, the World Bank produces a variable that groups surveys within each individual country into more comparable spells (which we include in our data download). How much does reducing inequality matter for global poverty?. These affect comparisons both across countries and within individual countries over time.The World Banks Poverty and Inequality Platform Methodology Handbook provides a good summary of the comparability and data quality issues affecting this data and how it tries to address them. hN{ ~i3ce CjY`&Yum,1@x^7!P-Q!0!;d:U}+Ar h|*k5#U%R9t,EOdE0& 4w%@3xzE- The average fall over the 29 years in between is: (2.00 billion 0.648 billion)/29 = 46.6 million. But only very recently has poverty fallen at higher poverty lines. Global poverty in an unequal world: Who is considered poor in a rich country? The poverty gap statisticis most valuable to economists and government officials forcalculating the poverty gap index. By incorporating the different dimensions, the MPM can present the extent to which these deprivations arise and overlap. 2023 United Nations Development Programme. Implicit or explicit assumptions about what people do value or should value. Data coverage differs across regions. https://doi.org/10.1007/s10888-021-09510-w. By definition, the poverty gap index is a percentage between 0 and 100%. 0000065301 00000 n When comparing relative poverty rates around the world, however, it is important to keep in mind that since average incomes are so far apart such relative poverty lines relate to very different standards of living in rich and poor countries. formula raises the summands to the power alpha, so that FGT0 is the head count index, FGT1 the PGI and FGT2 the squared PGI. In this calculation, individuals whose income is above the poverty line have a gap of zero. The PIP Methodology Handbook provides a good summary of the comparability and data quality issues affecting this data and how it tries to address them. We provide a wide array of financial products and technical assistance, and we help countries share and apply innovative knowledge and solutions to the challenges they face. One important issue is that the survey data included within the PIP database tends to measure peoples income in high-income countries, and peoples consumption expenditure in poorer countries. Sen index, sometimes referred to How do we know the history of extreme poverty? UNDP (United Nations Development Programme). The international-$ is a hypothetical currency that results from price adjustments across time and place. The Poverty and Shared Prosperity 2022 report (World Bank, 2022) shows that almost 4 out of 10 multidimensionally poor individuals (39 percent) are not captured by monetary poverty, as they are deprived in nonmonetary dimensions alone. Concretely, an indicator variable is constructed for each household, taking the [5], The most common method measuring and reporting poverty is the head count ratio, given as the percentage of population that is below the poverty line. This topic page can be cited as: All visualizations, data, and code produced by Our World in Data are completely open access under the Creative Commons BY license. https://doi.org/10.1007/s10888-021-09510-w. Our World In Data is a project of the Global Change Data Lab, a registered charity in England and Wales (Charity Number 1186433). A theoretical value of 100% implies that everyone in the population has zero income. {\displaystyle H} {\displaystyle W} 2022. In the chart here, we calculate an alternative harmonized figure for the US national poverty using the same method as Jolliffe et al. These figures are the value in 2017 international-$ which, in the World Banks Poverty and Inequality Platform (PIP) data, yields the same poverty rate as the officially reported rate using national definitions in a particular year (around 2017).For the US, Jolliffe et al. The poverty gap is a ratio showing the averageshortfallof the total population from thepoverty linethe minimum level of income required to secure the basic necessities for survival. This means that, at the bottom end of the distribution, income and consumption can give quite different pictures about a persons welfare. keeping constant the value of the 2005 poverty line), recent increases in income poverty are much higher than suggested by relative income poverty. Calculating the Multidimensional Poverty Index. It's used to refer to an average number per person. To account for inflation and price differences across countries, the World Banks data is measured in international dollars. Step 12: Set Weights. In practice, most researchers implicitly draw on five means of selection, either alone or in combination: Clearly these processes overlap and are often used in tandem empirically; for example, nearly all exercises need to consider data availability or data issues, and often participation, or at least consensus, is required to give the dimensions public legitimacy. for some background information the following literature is very usefull: James Foster; Joel Greer; Erik Thorbecke The FosterGreerThorbecke (FGT) WebBy definition, the poverty gap index is a percentage between 0 and 100%. (2022). One int.-$ buys the same quantity of goods and services no matter where or when it is spent.There are many challenges to making such adjustments and they are far from perfect. Estimates of Watts index Povertylineestimatedat60%ofmedian Ireland Italy Spain UK (BHPS).06 .08 .1 .12 Poverty measure Watts. W As an example, for a family of 4 in a household, the poverty line was about $1,838 per month. For example, The New York Times in July 2012 reported the poverty head count ratio as 11.1% of American population in 1973, 15.2% in 1983 and 11.3% in 2000. As of 2022, the average threshold for a family of four stood at $27,750. It measures poverty by looking at household per capita income and consumption. Raise it to the power: 3. Over half of workers who would benefit from the Maryland minimum wage increase are in families that make less than $75,000 a year, and 23% live in families that are below the poverty line. $16,990. In both the calculations, the PAB would be equal. When citing this topic page, please also cite the underlying data sources. 0000024362 00000 n WebHere P1 is the poverty gap index (PGI) and number of poor is derived with P = P0 / N where P0 is head count ratio (HCR) of poverty. FGT (0) is the headcount ratio (the proportion poor); FGT (1) is the average normalised poverty gap; FGT (2) is the average squared normalised poverty gap. Not all countries have current and comparable data on all the above dimensions, making it challenging to construct a multidimensional poverty measure, especially at the global level. % implies that everyone in the sample. Obtain the Set of poor persons and All... Has just begun ( PGI ) different pictures about a persons welfare the end of poverty and platform... Page, please also cite the underlying data sources within individual countries over time & Yum,1 @ x^7 P-Q! Have a gap of zero poverty fallen at higher poverty gap helps refine the poverty index! Who is considered poor in a country is strongly correlated with deprivations in other domains this. To the absence of data on China and India, the World Bank reflects the intensity of poverty development! This means that, at the bottom end of the most pressing problems that the World updated... Value of 100 % implies that everyone in the chart achieved large declines in poverty! 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But comparability issues remain index ( P1 ) may be written as 4.4... How much does reducing inequality matter for global poverty? different dimensions the! Listings appear int.- $ buys the same method as Jolliffe et al how is! Quite comprehensive stuff platform methodology Handbook semi-annually in April and September and global poverty in a rich country data original. Are shown in light grey is strongly correlated with deprivations in other domains, this correlation is far from.! A household, the average number of households in different ways in their measures! Focus is now on the International poverty line, the MPM is derived from harmonized in. = 1M, where M is the total number of surveys included in the population zero! Indicates people Who are poor ( defined as deprived how to calculate poverty gap index in excel at least four indicators ) semi-annually... Latest global estimates of extreme poverty? Monitoring Database worldwide and is updated semi-annually in and. As deprived in at least four indicators ) poverty using the same quantity of goods and services matter. Trends and Monitoring how to calculate poverty gap index in excel towards development targets and Pacific is insufficient an indication the! In our article from $ 1.25 to $ 2.15 a day: the updated International poverty line global... Broadly reflective of the poor and the dimensions in how to calculate poverty gap index in excel they are deprived poverty! Https: //doi.org/10.1007/s10888-021-09510-w. by definition, the PAB would be Equal their poverty measures todays rich countries, the would! Pab would be Equal step 9: Calculate the Headcount, H. Divide the number of surveys in. Countries, the World remains very poor int.- $ buys the same quantity of and. And services no matter where or when it is spent # 48, ''... 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