A Rank-Dependent Multidimensional Deprivation Index (MDI) for Binary Data

Authors

Keywords:

multidimensional poverty analysis, inequality, Gini index, dominance

Abstract

This article demonstrates the extension of the Sen-Shorrocks poverty index to the analysis of multidimensional deprivation, particularly when only dichotomous variables are available to assess deprivation across various domains, which is the most common case in the literature. More precisely, it introduces a rank-dependent multidimensional poverty index using a counting approach. The resulting multidimensional deprivation index, or MDI, offers a visually appealing representation (PUB curve), which turns out to be an extension of the so-called “Three I’s of Poverty” (TIP) curve of Jenkins and Lambert to the case of multiple deprivations. This representation is similar to the SD curve introduced by Lasso de la Vega (2010) while also emphasising the third “I” of multidimensional deprivation: inequality. The MDI is sensitive to inequality and satisfies desirable properties, but it cannot be broken down by population subgroups when using a standard decomposition method. Furthermore, it lacks the property of dimensional breakdown as typically defined in the literature. The article proves, however, the existence of an alternative  decomposition method by population subgroups that can be applied to the MDI. It also derives a decomposition by deprivation domain, analogous to the breakdown of the Gini index by factor components. An empirical illustration, based on deprivation data from four Central American countries (Guatemala, El Salvador, Honduras, and Nicaragua), highlights the usefulness of the MDI.

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Published

2024-01-20

How to Cite

Espinoza-Delgado, J., & Silber, J. (2024). A Rank-Dependent Multidimensional Deprivation Index (MDI) for Binary Data. Journal of Income Distribution®, 32(3-4). Retrieved from https://jid.journals.yorku.ca/index.php/jid/article/view/40595

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