Question

Assess the validity of the following statement.
Why is the squared poverty index the preferred measure of poverty in poverty-reduction policy analyses?  

Answer 1

Answer. Most of the government officials use squared poverty index as measure of poverty to formulate poverty-reduction policies. This is because it is the measure which focuses on the severity of poverty. In other words, it is helpful in measuring the inequality among the poor. This happens because when the poverty gaps are squared, it gives greater weightage to the gaps with highest poverty (larger gaps). Squaring is important in index because simply, poverty gaps may not specifically or correctly measure the distribution among the poor. On the other hand, squared poverty index will reflect upon the poor just below the povery line and poor far below the poverty line. Let say, if the government transfer money from the people near (below) the poverty line to the people far below the poverty line, i.e., from poor to the poorest, the simple poverty gap index will not account this change. However, squared poverty gap index will do so.

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