Maia, Carlos and Van der Berg, Servaas (2010): When the remedy is worse than the disease: Adjusting survey income data for price differentials, with special reference to Mozambique.
Download (1764Kb) | Preview
In using survey data for money metric analysis of poverty and well-being, it is customary to adjust either the data or the poverty line for spatial prices differentials where data exist to make such adjustment. In developing countries where recorded price differentials between regions or provinces are large, using the remedy of adjusting for price differentials may sometimes lead to very wrong conclusions about the spatial distribution of poverty. This may have severe consequences for policy and may be detrimental to the poor. The paper deals with a specific situation, that of Mozambique, where large price differentials are said to exist between the capital (Maputo City) on the one hand, and the rest of the country. Official data that adjust for this may heavily over-estimate poverty in Maputo City, with consequences for the targeting of poverty. We use an asset index based on Multiple Correspondence Analysis (MCA) to show that the spatial poverty profile derived from the price-adjusted income data exaggerates poverty in Maputo City, and undertake further empirical analysis to show that not adjusting for the estimated spatial price differentials may have given more reliable estimates of well-being, judging by asset holdings.
|Item Type:||MPRA Paper|
|Original Title:||When the remedy is worse than the disease: Adjusting survey income data for price differentials, with special reference to Mozambique|
|Keywords:||Mozambique; poverty; prices differentials; multiple correspondence analysis|
|Subjects:||I - Health, Education, and Welfare > I3 - Welfare and Poverty > I32 - Measurement and Analysis of Poverty|
|Depositing User:||Carlos Maia|
|Date Deposited:||09. Nov 2010 19:59|
|Last Modified:||14. Feb 2013 12:20|
Asselin, L. (2002). Multidimensional Poverty: Composite Indicator of Multidimensional Poverty. Québec: Institut de Mathématique Gauss.
Booysen, F., Van der Berg, S., Burger, R., Von Maltiz, M., & Du Rand, G. (2008). Using an Asset Index to Assess Trends in Poverty in Seven Sub-Saharan African Countries. World Development , 36 (6), 1113-1130.
Direcção Nacional de Estudos e Análise de Políticas. (2010). Pobreza e Bem-estar em Moçambique: Terceira Avaliação Nacional. Maputo.
Fox, L., Bardasi, E., & Van den Broeck, K. (2005). Poverty in Mozambique: Unravelling Changes and Determinants. Poverty Background Paper to the Country Economic Memorandum 2005, World Bank, Washington DC.
Gibson, J., & Scott, R. (2005). Prices and Unit Values in Poverty Measurement and Tax Reform Analysis. The World Bank Economic Review , 19 (1), 69-97.
Instituto Nacional de Estatística (INE). (n.d.). Retrieved March 15, 2010, from http://www.ine.gov.mz/
Leibbrandt, M., & Woolard, I. (2001). Measuring Poverty in South Africa. In H. Bhorat, M. Leibbrandt, M. Maziya, S. Van der Berg, & I. Woolard, Fighting Poverty: Labour Markets and Inequality in South Africa (pp. 41-73). Cape Town: UCT Press.
Muller, C. (2008). The Measurement of Poverty with Geographical and Intertemporal Price Dispersion: Evidence from Rwanda. Review of Income and Wealth , 54 (1), 27-49.
National Directorate of Planning and Budget; Ministry of Planning and Finance; Economic Research Bureau; International Food Policy Research Institute; Purdue University. (2004). Poverty and Well-Being in Mozambique: The Second National Assessment. Discussion paper, Maputo - Mozambique.
Rahman, P., Matsui, N., & Ikemoto, Y. (2008). The Chronically Poor in Rural Bangladesh: Livelihood Constraints and Capabilities. London and New York: Taylor & Francis.
Ravallion, M. (1994). Poverty Comparisons. Chur, Switzerland: Harwood Academic Publishers.
Ravallion, M. (1992). Poverty Comparisons: A Guide to Concepts and Methods. Washington, D.C.: The World Bank.
Ravallion, M., & Bidani, B. (1994). How Robust Is a Poverty Profile? The World Bank Economic Review , 8 (1), 75-102.
Rowntree, B. (1901). Poverty: A Study of Town Life. London: Macmillan.
World Bank. (2003). Measuring living standards: Household consumption and wealth indices. Quantitative techniques for health equity analysis. Washington, D.C.: World Bank.
World Bank. (2004). Poverty reduction strategies papers sourcebook. Washington, D.C.: World Bank.