Watts Poverty Index

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The most widely used poverty measures of Foster-Greer- Thorbecke (FGT) do not show when poverty might be eliminated. But, in this section we will try to answer for the question how long are they going to stay in poverty? following Morduch, (1998) approach which is based on Watts poverty index and FGT class of poverty measures. Morduch shows that a simple linear transformation of the Watts index gives it cardinal properties that can be useful as well. To derive the average exit time measure of poverty, Morduch (1998) starts with an existing distributionally sensitive Watts measure. The original Watts measure is defined as ,where there are i individuals in the population indexed from 1 to N in ascending(positive) order of income (per capita monthly expenditure) and q is the number of people with expenditure y below the poverty line z, then the Watts poverty index, W, can be written as follows: …show more content…

Specifically, Morduch (1998) shows that simply dividing the Watts poverty measure by some hypothetical growth rate g, where g > 0, gives it an interesting cardinal interpretation. This transformed index reflects the average number of years that it would take the population to exit poverty if it were possible to ensure that all incomes grow at rate

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