An individual-centered approach to multidimensional poverty: The cases of Chile, Colombia, Ecuador and Peru

This paper deals with the problem of selecting the unit of analysis in multidimensional poverty analyses, which is a central decision to take, both from academic and normative points of view. The paper compares the results of an individual-level Multidimensional Poverty Index for Chile, Colombia, Ecuador and Peru with a household-based measure. In the construction of the index, four dimensions were initially identified: living conditions, health, education and labour. The motivating theoretical framework is based on Sen's Capability Approach and the index used is the Adjusted Headcount Ratio (AHR) of the Alkire-Foster (2009) family of indicators. Different literature fields acknowledged the fact that individuals have varying preferences depending on their age (Osberg, 2012), which do not necessarily agree with the collective preferences of the household. The present paper adopts Sen's approach, noting that capabilities are mainly an individual concept. The individual index is constructed using three age groups: children (less than 18 years old), adults (between 18 and 59 years) and elderly (60 years or older). Multidimensional poverty is considerably different than income poverty in all countries. A simple ranking constructed with the Multidimensional Index and using the four countries for every individual approach, shows that the ordering prevails for smaller levels of the deprivation cut-off. In every scenario, Chile has the best scores of multidimensional poverty, followed by Colombia. Differences between Ecuador and Peru show that the rank-ordering does not prevail when the unit of analysis or cut-offs change.

JEL-Classification: IE320, D630, D120

Keywords: counting methods, poverty measurement, multidimensional poverty, individual poverty, capability approach