Gaurav Dutt and Martin Ravalin said that Poverty Gap Index is calculated for which of the following reasons ?

Question

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Correct — option (2). The Poverty Gap Index measures how far below the poverty line the poor actually are, not merely how many of them there are. For every poor person you take the shortfall between the poverty line and that person's income or consumption, divide it by the poverty line so that it becomes a proportion rather than a rupee amount, and then average those proportions over the entire population, counting everyone above the line as a zero shortfall. What comes out is a single number that answers exactly the question printed in option (2): multiply the index by the poverty line and by the total population and you have the aggregate income shortfall of the poor — the minimum sum of money that would have to reach them, if it could be delivered with perfect targeting and no leakage, to lift every poor person precisely to the poverty line and so eliminate income poverty. That is why the measure is described as the cost-of-eliminating-poverty index. It is the reason the index exists alongside the head-count ratio: the head-count ratio tells you the incidence of poverty and nothing about its depth, so a transfer that moves the very poorest a long way up without crossing the line leaves the head-count ratio completely unchanged, while the Poverty Gap Index falls. Gaurav Datt and Martin Ravallion — the paper prints the names as 'Gaurav Dutt and Martin Ravalin' — are the World Bank economists whose work on measuring and decomposing poverty in India made this family of measures standard in Indian poverty analysis.

Why the other options are wrong — (a) This describes a calorie shortfall, and it is a plausible-looking trap in the Indian context because the official poverty line itself began as a calorie norm — the daily requirement of 2,400 calories in rural areas and 2,100 in urban areas, converted into the monthly expenditure needed to buy them. But the conversion runs one way only. Once the norm has been turned into a money line, every poverty measure built on it is measured in money, and the Poverty Gap Index is an expenditure gap, not a nutritional one. A calorie-deficit measure would also say nothing about the non-food component of the poverty line, which has grown steadily more important in successive Indian poverty estimates.  (c) Per capita income is an average taken over the whole population, and the arithmetic of the Poverty Gap Index deliberately avoids exactly that. An increase in average income can leave the poor untouched if the increase accrues to those already above the line, so no figure for the required rise in per capita income can be read off the index. The index measures the shortfall of the poor alone, which is a distributional quantity, and translating it into an average-income requirement would need an assumption about how any additional income is shared out — an assumption the measure is designed not to make.  (d) 'None of these' can only be right if all three preceding statements fail, and the second of them states the standard interpretation of the index correctly. An escape option like this is worth taking seriously only when each of the substantive choices can be positively ruled out; here the money-shortfall reading is not merely defensible but is the reason the measure was constructed, so the escape route is closed.

Concept: Poverty measures answer three different questions and it is worth keeping them apart. The head-count ratio answers how many are poor: it is simply the proportion of the population below the poverty line, and it is the figure quoted in political debate. It is also crude, because it treats a person one rupee below the line and a person destitute as identical, and it can be improved most cheaply by helping those who were nearly out of poverty anyway. The Poverty Gap Index answers how poor the poor are: it averages the proportionate shortfall from the line across the whole population and so registers depth, which makes it fall whenever any poor person's income rises, whether or not they cross the line. The squared poverty gap goes further and answers how unequal poverty itself is, by weighting each shortfall by itself so that the position of the poorest counts most. These three sit in one family, the Foster-Greer-Thorbecke class, distinguished only by the power to which the proportionate gap is raised — zero, one and two respectively. The practical value of the middle measure is that it converts directly into money: aggregate poverty gap equals the index times the poverty line times the population, which is the minimum perfectly targeted transfer that would end income poverty.

State PCS 2024 Q44 — Economy PYQ with Answer

State PCS 2024 Q44 — Economy PYQ with Answer