A New Multidimensional Poverty Index

The Oxford Poverty and Human Development Initiative (OPHI) has developed a new international measure of poverty – the Multidimensional Poverty Index or MPI – for the 20th Anniversary edition of the United Nations Development Program’s flagship Human Development Report. The new innovative index goes beyond a traditional focus on income to reflect the multiple deprivations that a poor person faces with respect to education, health and living standards. The new index has generated some controversy as to its merits.

Poverty is traditionally measured by income. And yet the poor are poor not just because of low income. They are poor because they have no access to health care, to education, to good nutrition. But income has been used for some time now as a proxy for poverty. And yet, it is not a sufficient proxy. OPHI has now developed a simple, robust, user-friendly multidimensional approach to measuring poverty.

The first country to adopt a national multidimensional poverty index was Mexico at the end of 1999. Other countries in Latin America are now considering developing their own multidimensional poverty measure, using the innovative Alkire Foster (OPHI) measure. (Bhutan used this same Alkire Foster methodology to develop its Gross National Happiness Index).

In July of this year, OPHI and the UNDP launched the new multidimensional poverty index (MPI), applying the multidimensional measure to 104 less-developed countries. The MPI measures acute poverty. The measure isolates three dimensions and within these a number of key indicators (for which data is available across countries):

  1. Education (each indicator is weighted equally at 1/6) • Years of Schooling • Child Enrollment
  2. Health (each indicator is weighted equally at 1/6) • Child Mortality • Nutrition
  3. Standard of Living (each indicator is weighted equally at 1/18) • Electricity • Drinking water • Sanitation • Flooring • Cooking Fuel • Assets.

Each indicator has specific cutoffs that determine deprivation or non-deprivation in that indicator. The MPI is the product of two numbers: the Headcount H or percentage of people who are poor, and the average intensity of deprivation A, which reflects the proportion of dimensions in which households are, on average, deprived.

The indicators are based on participatory exercises with poor people, emerging international consensus and the availability of suitable data. Most are linked to the Millennium Development Goals. The index mainly uses data from three household surveys: the Demographic and Health Survey, the Multiple Indicators Cluster Survey and the World Health Survey.

OPHI analyzed data from 104 countries with a combined population of 5.2 billion (78 per cent of the world total). Following are some findings:

  • About 1.7 billion people in the countries covered – a third of their entire population – live in multidimensional poverty, according to the MPI. This exceeds the number of people in those countries estimated to live on US $1.25 a day or less (1.3 billion).
  • The MPI also captures distinct and broader aspects of poverty. In some countries, the difference between MPI poverty and income poverty is particularly marked. For example, in Ethiopia 90 per cent of people are MPI poor compared to 39 per cent extreme income poor.
  • Half of the world’s poor as measured by the MPI live in South Asia (51 per cent or 844 million people) and over one quarter in Africa (28 per cent or 458 million).
  • The incidence of MPI poverty is greatest in Sub-Saharan Africa and South Asia. In Sub-Saharan Africa 64.5 per cent of people are MPI poor; in South Asia, 55 per cent. The intensity of poverty – the average number of deprivations experienced by each household – is also greatest in Sub- Saharan Africa and South Asia. The poorest country as measured by the MPI, Niger, also has the greatest intensity of poverty (where 93 per cent of people live in poverty and are deprived across 69 per cent of the indicators on average).
  • There are more MPI poor people in eight Indian states than in the 26 poorest African countries combined. India has experienced strong economic growth in recent years, yet the MPI reveals that extensive acute multidimensional poverty persists.

By directly measuring the nature and magnitude of overlapping deprivations at the household level, the MPI provides information that can inform better policies to reduce acute poverty. The MPI is the first international measure to reflect the intensity of poverty – the number of deprivations that each household faces at the same time. The MPI integrates them into a single measure that can be broken down by geographic area and population group and analyzed to explore how deprivations interconnect. This is useful to policymakers.

Here are the full results and detailed information on the index.

John Hammock is associate professor at the Fletcher School at Tufts University, co-founder of Oxford Poverty and Human Development Initiative, and past President of Oxfam America and ACCION International.