The importance of the weighting schemes used when compiling multi-dimensional poverty assessments has been highlighted in a research paper. The paper, written by a team in the Netherlands, points out that different weightings can result in different prescriptions for anti-poverty policies, where effectiveness is assessed by looking at the reduction in the numbers of those counted as being in poverty.

The paper uses data from the Survey on Health, Ageing and Retirement in Europe to evaluate how alternative weighting structures affect the measurement of poverty for the population of over-50s in ten European countries. It considers the three dimensions of income and wealth, housing conditions and health condition (including mental health).

Key findings

• A change in the weighting structure has an effect on the overall poverty assessment that cannot be unambiguously predicted by looking at the change in the weights and at the outcomes of the households originally classified as poor. The effect depends on the sample size, together with the outcomes of the households changing their poverty status from one weighting scheme to the other and of those that are classified as poor according to both weighting schemes.
• Changes in the weighting scheme produce substantial differences in the set of households classified as poor. In particular, households who enter or exit poverty when passing from equal weighting to 'hedonic' weighting (ie based on life satisfaction self-assessments) explain most of the variation in the overall poverty assessments.
• When considering the contribution of each dimension to the overall poverty level, it is found that they widely change across weighting structures. For instance, health explains 51.8 per cent of the overall poverty with frequency weights and more than 83.5 per cent with hedonic weighting. This variability is also confirmed when looking at the other dimensions. And changing the weighting scheme also has an effect on the comparisons of poverty levels by country, age and household size.

The paper's authors conclude that policy-makers should choose the dimensions to target by considering not only the weights of indicators but also the number of households who could exit poverty thanks to the intervention.

Source: Danilo Cavapozzi, Wei Han and Raffaele Miniaci, Alternative Weighting Structures for Multidimensional Poverty Assessment, Research Institute SOM, Faculty of Economics & Business, University of Groningen (Netherlands)
Links: Paper