WEIGHTING DIMENSIONS OF POVERTY BASED ON
PEOPLE’S PRIORITIES Constructing a Composite Poverty Index for the Maldives
Hans de Kruijk & Martine Rutten
August 2007
IIDE discussion paper 200708-01
Whilst recognising that poverty is a multidimensional concept, many poverty studies fall back to one dimension when it comes to quantifying poverty. A multidimensional concept of poverty raises the question of how to quantify the various dimensions of poverty and how to weigh these dimensions to measure overall poverty. Existing attempts to solve the intractable weighting problem are unsatisfactory because they assign arbitrary (usually equal) weights to each component or obtain weights from the data using factor type analysis which may substantially differ from people’s perceptions about priorities. In the present paper the aggregation problem is solved by using a weighting structure that is derived directly from population preferences. It uses explicit information on the ranking of poverty dimensions as obtained from household surveys. These ranking are transformed into priority weights for each dimension so that a composite index can be obtained. An empirical application to the Maldives is given for the years 1997/8 and 2004, which allows for observing changes in the poverty situation over time for each dimension, for each region and for overall poverty.
Keywords: poverty measures, living standard dimensions, aggregation, composite index, Maldives
JEL categories: D31, D63, I32
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VULNERABILITY AND POVERTY DYNAMICS IN THE MALDIVES
Hans de Kruijk & Martine Rutten
August 2007
IIDE discussion paper 200708-02
Despite rapid economic and social development of the Maldives, the vulnerability of the island population in terms of poverty remains high. Using household panel data for the period 1997/98 – 2004 we show that,
although the majority of the poor manages to escape from poverty, a substantial part of the non-poor falls back into poverty at the same time. Using Logit regression analysis, the most influential determinants of escaping household poverty are shown to be: the level of education, participation in community activities, and the proportion of adults employed. Factors that have the largest impact on impeding a poverty escape are: the proportion of household members not working due to bad health, living in the North, and the proportion of female household members. The former two factors, in addition to household size, are also most influential on the odds of falling into poverty. Working in tourism, or the public sector, and taking out a loan to invest are important factors that prevent households from falling into poverty. Policy implications of these results are not only relevant at government level but also at household level. The government may consider paying more attention to the development of the two Northern regions, improve access to good quality education and health care, and further develop (private sector) tourism across the country. Household coping strategies involve investing in education, entering the labour market (especially in tourism and the public sector) and family planning.
Keywords: vulnerability, income poverty dynamics, Maldives, Logit regression,
probability of escaping from or falling into poverty
JEL categories: C23, C25, I32
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