Academic journal article Africa Policy Journal

Construction of Multidimensional Poverty Index of Kenya Using the Alkire-Foster Method

Academic journal article Africa Policy Journal

Construction of Multidimensional Poverty Index of Kenya Using the Alkire-Foster Method

Article excerpt

(ProQuest: ... denotes formulae omitted.)

Introduction

Background

Defining poverty as a phenomenon of multiple dimensions goes back to the seminal work of Amartya Sen. In practice, however, the vast majority of empirical work on poverty uses a onedimension measure of wellbeing, usually household income or expenditure. This is also the case in Kenya, although the conceptualization of poverty in the country has steadily evolved since 2003. In terms of defining multidimensional poverty measure, several possibilities have been proposed in theoretical and empirical literature.

Poverty is a multifaceted concept that includes social, economic, and political elements. Generally, poverty is viewed in three dimensions, which are standards of living, health, and level of education. The human development index is commonly used by the United Nations development program to calculate the poverty index of countries and rank them in order of the most developed country to the least. In 2010, a new method was used to calculate the poverty index of 104 countries. This method is known as the AlkireFoster (AF) method. This method is used to measure acute poverty by calculating the proportion of people who experience multiple deprivations and also by calculating the intensity of those deprivations. The deprivations are based on indicators that explain the three dimensions stated. The approach also satisfies several desirable properties, or axioms, including decomposability, which makes it particularly suitable for policy analysis and targeting.

The AF method is an accurate method for calculating the poverty index and it helps in making policies that are used to target the poor people in a country. This paper seeks to construct the multidimensional poverty index of Kenya by calculating the poverty index of Kenya's forty-seven counties then ranking from the wealthiest to the poorest.

Motivation for the Study

The motivation of this study is to reconstruct the poverty index of Kenya, which will guide the national government on how to share revenues among counties for the purpose of poverty reduction. Poverty index is one of the factors considered in Kenya's Revenue Allocation Formula, and it is calculated as a modification of HDI index. The modified formula is termed as Lucy's model, and is expressed as follows:

...

Where CA. is the revenue allocation for the ith county, PN. is the population factor, ES is the equal share factor, PI. is the poverty index, LA is the land area factor, FE. is the fiscal effort factor, and DF is the development factor.

In the model above, it is worth noting the poverty index bears one of the largest weights. The poverty index above was calculated using the human development index, which is used by the United Nations to calculate the poverty levels and development standards of a country or particular region. The Human Development Index is a welfare index that combines the aggregate dimensional achievements of all people into one overall score. In other words, this method identifies the poor and ignores the data of the nonpoor.

The Alkire-Foster (AF) method is a new approach that actually determines the number of people who are poor and the number of deprivations they have. This is important for economic policies since governments can use this information to plan and cater for the poor in the economy. With the AF method, policymakers can identify the poorest people and the aspects in which they are most deprived. This information is also vital in investing resources where they are likely to be most effective at reducing poverty. Policymakers can identify which deprivations constitute poverty and which are most common among and within a group, so policies can be designed to address particular needs. The AF method integrates many different aspects of poverty into a single measure, reflecting interconnections among deprivations and helping to identify poverty traps. …

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