Constructing Poverty Lines in Croatia Using Kakwani’s Model

Abstract

(ProQuest: ... denotes formula omitted.)IntroductionAggregation of the poor into an overall indicator, as Sen, A. (1989) concludes, is not an easy task because measurement must be integrated with evaluation. More on poverty measure issue can be found in research of Sen (1976), Alkire and Foster (2011) Bourguignon and Chakravarty (2003). Studying the evolution of poverty since the appearance of the first economic philosophers in ancient Greece, Rome, India, Egypt, and Babylon reveals the ambiguity of the concept and different views on the phenomenon itself throughout history. Various estimates of the number of poor confirm various methods of measurement. Atal (1999) observed that according to UNDP (1997), there are three different approaches to poverty: the income perspective, the basic-needs perspective, and the perspective. The income perspective focuses on the level of income of a person or family, and sets limits to draw a poverty line. The basic needs perspective views poverty from the angle of material deprivation rather than by income. A person or family is considered poor if it is not able to provide for minimally acceptable basic needs. The perspective focuses 'on the functioning' that a person can or cannot achieve, given the opportunities they have. Functioning refers to the various valuable things a person can do or be, such as living long, being healthy, being well-nourished, mixing well with others in the community and so on. Sen's capability approach was hugely influential during the 70s with the change in the paradigm of the development concept from GDP to development, and it is even today embodied in the new multidimensional measures.New measurements based on multidimensional poverty, introduced in Human Development Report 1997 and in World Development Report 2000/1, defined poverty as a lack or deprivation of well-being. Kakwani (2006) explained that in socioeconomic literature, several important approaches have been used to describe well-being: economic growth, quality of life and welfare. Balezentis and Brauers (2011) noted the importance of welfare and happiness in the society on the micro and macro level. There is a strong nexus between the quality of life and society sustainable development. Despite the shift to a multidimensional poverty concept (see more Lustig, 2011) and growing interest in the multidimensional poverty measurement (today there are a wide range of indicators; for example, Millenium Development Goals have 49 indicators), income measures of $1 and $2 a day, to be operationalized, are the most commonly used measures for poverty.Many critics conclude that monetary poverty is not considered a deprivation and does not ascribe any importance to specific deprivations and joint distribution. Although monetary measures cannot reflect the multidimensional character of poverty, they can complement other measures and approaches. Kolodko (2009) noted that efficient economic policy designs is a proper mix of financial and social engineering, technocratic macroeconomic governance and genuine social dialog, professional pragmatism and social sensitivity. By the end of the 90s, scientific interest in this issue had increased, which resulted in publication of reports on poverty indicators, implementation of household survey data, better implementation of statistics, better technology and better computing power. Despite the progress in the research on this topic evidenced in Bourguignon and Chakravaty (2003), the aggregation problem remains (how to shift from identifying poverty to measuring poverty). Existing measures have not provided insight into how well-being is distributed among households, which is important because the costs of transition were accompanied by high levels of inequality. Existing measures also did not complement the gap between monetary and non-monetary poverty (multidimensional deprivation) and did not monitor parallel living standards and nutrition indicators. …