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Essay / Review of theoretical literature: the definition of poverty
It is the simplest and most commonly used because it is simple to understand and measure. But this does not show how poor the poor are (All JH, 2005). P0=Np/N where P0 is the proportion of households considered poor, Np is the number of poor households and N is the sample size. The second measure is the poverty gap index (P1). It measures the extent to which the household falls into the poverty category. poverty line (poverty gaps) as a proportion of the poverty line. Adding these poverty gaps together gives the lowest cost of poverty eradication, if transfers were perfectly targeted. But this measure does not show changes in inequality among poor households. The third measure is the squared poverty gap index (“poverty severity”) (P2). This is the average of the squares of the poverty gaps compared to the poverty line (All JH, 2005). Other measures of poverty are the time taken to determine what steps it would take on average for a poor person to move out of poverty, given an assumption about the rate of economic growth; it can be obtained by dividing the Watts index by the growth rate of income (or expenditure) of the poor (All JH, 2005). 2.1.3 Road development in