Definition
Poverty gap ratio is the mean distance separating the population from the poverty line (with the non-poor being given a distance of zero), expressed as a percentage of the poverty line.
Goal/target addressed
Goal 1. Eradicate extreme poverty and hunger.
Target 1. Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day.
Rationale
The indicator measures the “poverty deficit” of the entire population, where the poverty deficit is the per capita amount of resources that would be needed to bring all poor people above the poverty line through perfectly targeted cash transfers.
Method of computation
The poverty gap ratio is the sum of the income gap ratios for the population below the poverty line, divided by the total population, which can be expressed as follows:
where z is the poverty line, yi is the income of individual i, q is the number of poor people and n is the size of the population. The poverty gap can also be expressed (and thus calculated) as the product of the average income gap ratio of poor people and the headcount ratio, that is,
where
,
where
All these formulas are calculated based on data on individuals (yi as individual income or consumption). If household-level data are used, the formulas have to be adjusted by the weight wi, which is the household size times sampling expansion factor for every household i.
Data collection and source
When based on the $1 a day poverty line, this indicator is calculated by the World Bank. When based on national poverty lines, the indicator is commonly calculated by national agencies.
The data required are the same as those for indicator 1.
References
World Development Indicators, annual, World Bank (www.worldbank.org/data).
Poverty Reduction Strategy Sourcebook, “Poverty measurement and analysis”, World Bank (www.worldbank.org/poverty/strategies/sourcons.htm).
Periodicity of measurement
Household budget or income surveys are undertaken at different intervals in different countries. In developing countries, they typically take place every three to five years.
Gender issues
Households headed by women may be concentrated in the poorer deciles. However, this relationship should be carefully studied to take into account national circumstances and the definition of head of household adopted in data collection, which is not necessarily related to being the chief source of economic support. Whether households are headed by women or men, gender relations affect intrahousehold resource allocation and use.
International data comparisons
World Development Indicators, annual, World Bank (www.worldbank.org/data).
Comments and limitations
The comments under indicator 1a and 1b also apply here.
This measure can also be used for non-monetary indicators, provided that the measure of the distance is meaningful. For example, the poverty gap in education could be the number of years of education missing to reach the defined threshold.
Agencies
National statistical offices.
World Bank.