Poverty, inequality and social exclusion
This domain tests how poverty and inequality are defined, measured and distinguished. Questions ask you to interpret poverty lines, headcount ratios, poverty gaps, the Multidimensional Poverty Index and Gini coefficients, and to explain social exclusion as a process rather than merely a low income.
Defining and measuring poverty
- Absolute poverty uses a fixed threshold; the international extreme poverty line is $2.15 per person per day (2017 PPP). National lines differ, so headcounts are not directly comparable between countries.
- Headcount ratio = people below the line ÷ total population. It ignores depth, so the poverty gap index (average shortfall from the line) is used alongside it.
- Relative poverty compares income with the median in the same society.
- The MPI uses three dimensions - health, education and living standards - across ten weighted indicators. A household counts as multidimensionally poor if it is deprived in at least one third of the weighted indicators; MPI = headcount × average intensity.
Inequality
- The Gini coefficient runs from 0 (perfect equality) to 100 (one person receives everything) and can be read from a Lorenz curve as the gap between the curve and the diagonal.
- Quintile ratios compare the top 20% with the bottom 20% and are easier to explain than Gini.
- Inequality of opportunity (gender, ethnicity, disability, region) often persists even when income inequality falls.
Social exclusion
Exclusion is about denied participation: in schooling, healthcare, formal work, political voice, credit and legal protection. It is often produced by institutions - fees, language of instruction, registration rules, stigma - not only by low income.
Worked example
A household is deprived in nutrition (weight 1/6), child mortality (1/6), sanitation (1/12) and cooking fuel (1/12). Total = 0.167 + 0.167 + 0.083 + 0.083 = 0.50, above one third, so it is multidimensionally poor with intensity 50%. If 30% of households are poor with average intensity 45%, MPI = 0.30 × 0.45 = 0.135.
Traps that cost marks
Using Gini to describe poverty, or the headcount alone to describe severity; assuming a country with low inequality has little poverty; treating the international line as a national line; forgetting that income poverty misses service deprivation.