Multidimensional Poverty Measurement using the Capability Approach in Germany and the Euro-pean Union

• Applicant: Professor Dr. Wolfram F. Richter
• Subject Area: Economic Policy, Applied Economics
• Term: from 2014 to 2017
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 245037744

The objective of the present research project is to empirically examine poverty in Germany and the European Union. For this purpose a multidimensional poverty index is suggested using both the Alkire-Foster method and the Capability Approach (CA), with the latter serving as normative and conceptual framework. Therefore, poverty is conceived as capability deprivation and thus as a constitutive multidimensional phenomenon. The research project will make use of the European Union Statistics in Income and Living Conditions (EU-SILC) and the German Socio-Economic-Panel (SOEP). Three stages of the project can be distinguished. In stage one the relevant dimensions and ad-equate indicators have to be selected. Key for this exercise is, that from a CA perspective various domains of life are not as such of intrinsic interest, but instead the so-called functionings, i.e. the doings and beings individuals have reason to value. A person's capability is the set of all function-ings an individual actually can choose. Poverty then is understood as capability deprivation. Thus it is crucial that indicators reflect both the conceptual demands of poverty as capability deprivation and the underlying functionings they are meant to capture. Drawing upon this set up, Alkire-Foster-methods can be applied, to first identify the multidimensional poor and then to provide aggregate measures for the poverty in a society. In stage two poverty is empirically analysed. Beyond calculating the simple incidence and inten-sity, particular use will be made of the Alkire-Foster measures' decomposability to address the fol-lowing questions: Which dimensions and deprivations are the key contributors to poverty? Is it possible to distinguish between different types of poverty? Does poverty vary with specific subpop-ulations, such as elderly or single parents? Moreover, intertemporal aspects of poverty are studied, such as entrances and exits, but also chronic poverty. In stage three the chosen methods are to be improved. On the hand, improvements for the con-struction of indicators will be made, to better reflect the notion of poverty as capability deprivation. On the other hand, both completely missing and insufficiently captured dimensions are to be identi-fied. Moreover, it is examined how to incorporate income into multidimensional poverty measure-ment. According the CA, income is of instrumental relevance only, implying that there is no straightforward reason to consider income as a dimension on its own. However, income may pro-vide additional information on both underlying reasons for poverty and deprivations not yet included in the index. To improve conclusions based on Alkire-Foster measures, the use of bootstrap methods for calculating the standard errors is explored.

• DFG Programme: Research Grants
• International Connection: United Kingdom
• Participating Person: Professorin Dr. Sabina Alkire