Unpacking the Mpi: A Decomposition Approach of Changes in Multidimensional Poverty Headcounts

39 Pages Posted: 20 Apr 2016

See all articles by Jorge Perez Perez

Jorge Perez Perez

Brown University

Carlos Rodríguez-Castelán

World Bank

Jose Daniel Trujillo

Departamento Administrativo Nacional de Estadística - DANE

Daniel Valderrama

World Bank

Date Written: December 14, 2015

Abstract

Multidimensional measures of poverty have become standard as complementary indicators of poverty in many countries. Multidimensional poverty calculations typically comprise three indices: the multidimensional headcount, the average deprivation share among the poor, and the adjusted headcount ratio. While several decomposition methodologies are available for the last index, less attention has been paid to decomposing the multidimensional headcount, despite the attention it receives from policy makers. This paper proposes an application of existing methodologies that decompose welfare aggregates--based on counterfactual simulations--to break up the changes of the multidimensional poverty headcount into the variation attributed to each of its dimensions. This paper examines the potential issues of using counterfactual simulations in this framework, proposes approaches to assess these issues in real applications, and suggests a methodology based on rank preservation within strata, which performs positively in simulations. The methodology is applied in the context of the recent reduction of multidimensional poverty in Colombia, finding that the dimensions associated with education and health are the main drivers behind the poverty decline.

Keywords: Poverty Assessment, Poverty Impact Evaluation, Poverty Lines, Poverty Diagnostics, Small Area Estimation Poverty Mapping, Poverty Monitoring & Analysis

Suggested Citation

Perez Perez, Jorge and Rodriguez-Castelan, Carlos and Trujillo, Jose Daniel and Valderrama, Daniel, Unpacking the Mpi: A Decomposition Approach of Changes in Multidimensional Poverty Headcounts (December 14, 2015). World Bank Policy Research Working Paper No. 7514, Available at SSRN: https://ssrn.com/abstract=2703658

Jorge Perez Perez (Contact Author)

Brown University ( email )

Box 1860
Providence, RI 02912
United States

Carlos Rodriguez-Castelan

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Jose Daniel Trujillo

Departamento Administrativo Nacional de Estadística - DANE ( email )

Carrera 59 No.26-70 Interior I - CAN.
Bogotá
Colombia

Daniel Valderrama

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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