Economic Development: Multi-dimensional Poverty Index (MPI)

The Multi-dimensional Poverty Index (MPI) is a composite index designed to measure poverty beyond income alone. It considers multiple deprivations experienced by individuals and households. This provides a more comprehensive understanding of poverty than traditional income-based measures.

What is the MPI?

The MPI was developed by the World Bank and the Oxford Poverty and Human Development Initiative (OPHI). It identifies households as poor if they suffer from a significant deprivation in at least two out of the eight dimensions considered.

The Eight Dimensions of Deprivation

The MPI considers the following eight dimensions of deprivation:

• Nutrition: Malnutrition and food insecurity
• Health: Risk of death for children and adults
• Education: Lack of schooling for adults and children
• Standard of living: Lack of access to basic amenities like electricity, sanitation, and clean water
• Security: Fear of violence and crime
• Access to assets: Lack of assets like land, savings, or housing
• Social exclusion: Discrimination and marginalization
• Lack of voice: Lack of participation in decision-making

How is the MPI Calculated?

The MPI is calculated as the proportion of the population that is considered multidimensionally poor. A household is classified as multidimensionally poor if it suffers from deprivations in at least two of the eight dimensions.

The MPI is a weighted average of the proportion of people deprived in each dimension. The weights are based on the severity of the deprivation.

MPI Formula

The MPI is calculated using the following formula:

$$MPI = \sum_{i=1}^{8} p_i \cdot m_i$$

Where:

• $p_i$ is the proportion of the population deprived in dimension $i$
• $m_i$ is the severity of the deprivation in dimension $i$ (ranging from 0.02 to 0.4)

Advantages of the MPI

The MPI offers several advantages over traditional poverty measures based solely on income:

• Comprehensive: Captures a wider range of deprivations beyond income.
• Sensitive: Can identify households that are poor even if their income is above the poverty line.
• Policy Relevance: Provides insights into specific areas where interventions are needed.
• Cross-country Comparison: Allows for comparisons of poverty across different countries and regions.

Disadvantages of the MPI

Despite its advantages, the MPI also has some limitations:

• Data Availability: Reliable data on all eight dimensions may not be available in all countries.
• Subjectivity: Determining the severity of deprivation can be subjective.
• Aggregation: Aggregating the dimensions into a single index may mask important nuances.

MPI Data and Trends

The World Bank regularly publishes MPI data for countries around the world. This data shows that while overall poverty rates have declined in recent decades, multidimensional poverty remains a significant challenge in many developing countries.

Country	MPI Score (2018)	MPI Percentage
India	0.215	22.0%
Bangladesh	0.188	18.8%
Nigeria	0.283	28.3%
Ethiopia	0.356	35.6%
Pakistan	0.336	33.6%

Policy Implications

The MPI provides valuable information for policymakers to design targeted interventions to address poverty. By identifying the specific deprivations faced by poor households, policymakers can develop more effective and efficient programs. These programs may focus on improving access to education, healthcare, sanitation, and other essential services.

Conclusion

The Multi-dimensional Poverty Index is a powerful tool for measuring and understanding poverty in all its dimensions. It complements traditional income-based measures and provides a more nuanced picture of the challenges faced by poor households. The MPI is increasingly being used by governments and international organizations to inform poverty reduction policies.