Multidimensional poverty and welfare

Abstract

This chapter develops an approach to poverty measurement based on the interpretation of poverty as a welfare loss. Following the standard approach in the normative theory of income inequality, poverty indices are derived here from a social evaluation function and some poverty thresholds. A welfare poverty index is defined as the relative welfare loss due to the insufficient welfare of those agents whose achievements do not reach the minimum established. The construction of those indices is formulated in a multidimensional context. We show that, under conventional assumptions, those indices can be expressed as the product of the incidence and the inequality-adjusted intensity of poverty. We include an application to the measurement or educational poverty using the data from PISA.