Multidimensional Poverty Index (MPI)

Table of Contents

The Multidimensional Poverty Index (MPI) is an indicator used to measure poverty in a more comprehensive way than just income or consumption levels. It goes beyond traditional measures that only consider income to capture various deprivations people face in their lives, including factors such as education, health, and living standards.

Why MPI?

Traditional Poverty Measures: Typically, poverty is measured based on income levels, with people below a certain threshold considered poor. However, this fails to account for other factors that affect quality of life, such as access to education, healthcare, and basic services.
Comprehensive View: MPI seeks to provide a broader perspective by identifying people who experience multiple deprivations simultaneously.

Components of the MPI

The MPI is based on three key dimensions, each with specific indicators. These three dimensions are:

Education:
- Years of schooling: If a household member has at least one adult with 5 years or more of schooling, they are not considered deprived in this dimension.
- Child school attendance: If any school-age child is not attending school up to the appropriate age, the household is considered deprived in this indicator.
Health:
- Nutrition: If any household member is malnourished, the household is considered deprived in this indicator.
- Child mortality: If there are any child deaths in the family, it is considered a deprivation in this dimension.
Living Standards:
- Cooking fuel: If the household uses solid cooking fuel (like wood or coal), it is considered a deprivation.
- Sanitation: Lack of access to improved sanitation facilities (e.g., toilets) counts as deprivation.
- Drinking water: If the household lacks access to clean drinking water, it is considered deprived.
- Electricity: If the household lacks access to electricity, it is considered deprived.
- Flooring: If the household has dirt floors or similar low-quality flooring, it counts as a deprivation.
- Assets: If the household lacks ownership of assets like a television, refrigerator, telephone, etc., they are considered deprived.

How MPI is Calculated

The MPI uses two key indicators for calculation:

Identification: The first step is identifying those who are multidimensionally poor, i.e., those who experience deprivations in multiple dimensions (education, health, and living standards). A person or household is considered deprived in each of the indicators when they fall below the threshold set for each dimension.
Intensity of Poverty: This refers to the number of deprivations experienced by a person or household. The MPI accounts not only for the number of people living in poverty but also the intensity or depth of their poverty.

Calculation Formula:

MPI = H x A, where:
- H (Headcount ratio): The proportion of people who are multidimensionally poor.
- A (Intensity of poverty): The average proportion of deprivations experienced by people who are considered poor.

Example Related to MPI

Let’s take an example of a household:

Family Member 1: The father has completed only 3 years of schooling (i.e., deprived in education).
Family Member 2: The child, under 5 years old, is malnourished (i.e., deprived in health).
Household Living Conditions: The family uses wood for cooking (deprived in sanitation), lacks electricity (deprived in living standards), and has a dirt floor (deprived in living standards).

Step 1: Identify Deprivations

The household faces the following deprivations:

Education: Deprived (father has <5 years of schooling).
Health: Deprived (child malnourished).
Living Standards: Deprived in cooking fuel, electricity, and flooring.

Thus, this household experiences 5 deprivations out of a possible 10.

Step 2: Calculate the Deprivation Score

Assuming the threshold for poverty in the MPI is set at 33.33% (i.e., experiencing at least 33% deprivations out of the possible 10 indicators), this household is considered multidimensionally poor since it faces 50% deprivations (5 out of 10).

If the intensity of poverty is considered, the MPI score for this family would be:

Deprivation Score = Number of Deprivations / Total Possible Deprivations = 5 / 10 = 0.5
MPI for the household = 0.5 (This indicates the severity of poverty faced by the household).

Step 3: Headcount Ratio (H)

The headcount ratio (H) refers to the proportion of the population that is considered multidimensionally poor. If 30% of the total population is facing similar deprivations, H = 0.30.

Step 4: Calculate MPI

Using the formula, if H (headcount ratio) is 0.30 and the deprivation score (A) is 0.5, the MPI for the population will be:

MPI = H x A = 0.30 x 0.5 = 0.15

This means that 15% of the total population is multidimensionally poor, considering both the headcount of the poor and the intensity of their deprivation.

MPI Values

MPI Value Range: MPI scores range from 0 to 1.
- 0: No one is multidimensionally poor.
- 1: Everyone is multidimensionally poor (i.e., facing maximum deprivations in all dimensions).
MPI Thresholds:
- A person is considered to be multidimensionally poor if their deprivation score is greater than a set threshold (e.g., 33.33% or 1/3 of the total deprivations in all dimensions).

Advantages of the MPI

Holistic View: It captures various factors contributing to poverty, beyond just income.
Policy-Driven: It helps policymakers understand the specific areas (e.g., education, health, sanitation) where poverty alleviation programs need to focus.
Better Comparison: It allows for better international comparison and tracking of poverty reduction progress over time.

Limitations of the MPI

Data Availability: MPI requires reliable and detailed data, which might not always be available, especially in rural or developing regions.
Weighting of Indicators: The MPI’s weighting of different dimensions and indicators can be debated, as different countries or contexts may require different approaches.
Complexity: The multidimensional nature of the index may make it harder to communicate the results to non-experts compared to simpler income-based poverty measures.

Example of MPI Calculation

Let’s say:

A family has one adult with only 4 years of schooling (deprived in education).
The family does not have access to electricity or improved sanitation (deprived in living standards).
The family’s children are malnourished (deprived in health).

If they face 3 deprivations out of 10 total potential deprivations in the MPI framework, their deprivation score would be 0.3. If the family is considered poor based on the threshold, they are multidimensionally poor.

Global MPI Rankings

The Global MPI published by organizations like the UNDP tracks multidimensional poverty across countries.
It often provides insight into how poverty varies not only by income but also in terms of access to education, healthcare, and basic services.

Example: MPI of India

According to the 2021 MPI report by UNDP, around 27.9% of India’s population was considered multidimensionally poor.
Key deprivations in India included lack of access to basic services like sanitation, cooking fuel, and electricity.

How MPI Can Help with Policymaking

1. Identifying the Scope and Extent of Poverty

Comprehensive View of Poverty: Unlike traditional income-based poverty measures, the MPI captures multiple aspects of deprivation, such as access to education, healthcare, sanitation, and living standards. This allows policymakers to identify which dimensions of poverty need attention.
- For example, a region may have low income levels but could be experiencing greater deprivations in health or education. Policies can then target these specific areas.
Data-Driven Insights: MPI provides reliable, evidence-based data that can guide targeted interventions. Governments and organizations can use this data to understand where the highest levels of deprivation exist and allocate resources more effectively.

2. Setting Priorities for Poverty Alleviation Programs

Targeting Specific Dimensions: If MPI data shows that a large portion of the population is deprived in nutrition, for instance, the government can prioritize food security and health programs in those areas.
- If education deprivations are high, programs such as scholarships, school infrastructure improvement, and teacher training can be focused on.
Geographical Focus: MPI can highlight regions where multidimensional poverty is most concentrated. These regions could receive more focused intervention, directing resources towards the areas with the highest need. For example:
- Rural areas with poor access to basic services (e.g., sanitation, electricity) could be prioritized for infrastructure projects.

3. Monitoring and Evaluating Poverty Reduction Programs

Tracking Progress Over Time: The MPI is useful for measuring the effectiveness of poverty alleviation programs by showing how poverty levels in different dimensions change over time. This allows for:
- Continuous monitoring of poverty reduction efforts.
- Adjustments to strategies based on how specific dimensions (e.g., education, sanitation, or healthcare) are improving.
Comparing Pre- and Post-Reform Data: Policymakers can track the success of new policies by comparing MPI scores before and after the implementation of programs. For instance:
- If the implementation of a health insurance scheme improves nutrition levels and reduces child mortality, it would show up in the MPI data.

4. Addressing Inequality in Poverty Reduction

Equity Focus: MPI not only identifies poverty but also highlights the intensity of poverty. This can help policymakers focus on the most deprived individuals within poor households or communities.
- For example, a household may be deprived in several dimensions but still considered above the poverty line using income measures. MPI helps ensure these households are also considered when designing interventions.
Reducing Regional Inequality: Some regions or communities may be more deprived than others across different dimensions. Using MPI, governments can focus their efforts on equity, ensuring that policies do not leave behind vulnerable or disadvantaged populations.

5. Improving the Design of Social Protection Programs

Targeted Assistance: By identifying specific deprivations (e.g., lack of sanitation, nutrition), governments can design social protection programs that directly address these issues.
- Cash transfers can be made conditional on the completion of schooling (addressing the education dimension) or improving nutrition levels (addressing the health dimension).
Comprehensive Welfare Programs: For instance, a national scheme targeting multidimensional poverty could provide healthcare access, nutritional support, and education scholarships to the same household, addressing multiple deprivations at once.

6. Designing Inclusive Growth Policies

Fostering Inclusive Growth: MPI helps ensure that poverty alleviation is not just about economic growth but is about improving the quality of life in all dimensions. Policymakers can craft policies that foster inclusive growth—policies that not only improve the economy but also address the needs of the most vulnerable sections of society.
Balancing Economic Growth with Social Welfare: The data from MPI can guide policymakers to find a balance between fostering economic growth and ensuring that the benefits of this growth reach the poorest and most deprived populations.

Real-World Examples of MPI Use in Policymaking

India:
- The Global MPI report showed that around 27.9% of India’s population was multidimensionally poor in 2021. This data allowed policymakers to tailor poverty alleviation programs such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) (financial inclusion) and Ayushman Bharat (healthcare) to directly target areas highlighted by the MPI.
UNDP:
- The UNDP Human Development Reports utilize MPI to track poverty in developing countries. MPI data is used to:
  - Highlight the regional disparities in poverty (e.g., rural vs. urban areas).
  - Advocate for policy changes that address multidimensional poverty, ensuring that interventions in education, healthcare, and living standards are integrated.
Rwanda:
- Rwanda’s government used the MPI to assess poverty in various regions, finding that children’s nutrition and education were key areas of concern. They introduced programs like school feeding programs and child health insurance to target these deprivations.

Sustainable development policies

The Multidimensional Poverty Index (MPI) can significantly influence sustainable development policies. The MPI’s comprehensive approach, which considers various deprivations beyond income, aligns with the concept of sustainable development as outlined by the United Nations Sustainable Development Goals (SDGs). Here’s how MPI can play a crucial role in shaping sustainable development policies:

1. Comprehensive Understanding of Poverty and Deprivation

The MPI measures poverty by looking at multiple dimensions such as education, health, living standards, and access to basic services like clean water, sanitation, and electricity. This multidimensional approach aligns directly with sustainable development by:

Addressing Social Inclusion: Sustainable development is not just about economic growth but ensuring inclusive growth. MPI helps identify and target vulnerable populations facing multiple deprivations, ensuring that social inclusion is at the core of development policies.
Measuring Well-being Beyond Economic Indicators: By considering factors like health, education, and living standards, the MPI reflects the quality of life, which is a key principle in sustainable development. This broader understanding can help policymakers focus on holistic development that enhances well-being, not just GDP growth.

2. Aligning with the Sustainable Development Goals (SDGs)

The UN SDGs set clear objectives for eradicating poverty, improving health, promoting education, and ensuring access to clean water, sanitation, and energy, among other factors. The MPI provides a data-driven way to assess progress toward these goals and can help policymakers focus on the most pressing issues.

MPI and SDG-Related Goals:

Goal 1: No Poverty:
- MPI directly measures multidimensional poverty and can track progress in poverty eradication by capturing not just income poverty but also access to basic services.
Goal 3: Good Health and Well-being:
- The health dimension of MPI, which includes nutrition and child mortality, ties directly to SDG 3. Policymakers can use MPI data to target regions where health disparities are most prominent.
Goal 4: Quality Education:
- MPI’s education dimension (school attendance and years of schooling) highlights areas where access to education is lacking, allowing governments to implement targeted policies to improve education and reduce inequalities.
Goal 6: Clean Water and Sanitation:
- The living standards dimension of MPI, which considers access to sanitation and drinking water, directly contributes to SDG 6. Policies can be designed to increase access to these basic services, particularly in rural and marginalized areas.
Goal 7: Affordable and Clean Energy:
- MPI’s inclusion of access to electricity helps policymakers identify households that lack clean energy access and can prioritize policies to ensure universal electricity access.

3. Targeting Deprivations for Sustainable Policies

MPI allows for the identification of specific deprivations that hinder sustainable development. For example:

Health Deprivations: High levels of child malnutrition and child mortality are common in regions with significant MPI scores. Addressing these issues through improved healthcare services, better nutrition, and maternal care is crucial for ensuring long-term sustainable development.
Education Deprivations: Lack of education is a significant barrier to achieving sustainable development. By using MPI to track areas where children are out of school or adults lack basic education, governments can focus on building better educational infrastructure, adult literacy programs, and increasing access to quality education.

4. Fostering Policy Integration

Sustainable development requires an integrated approach across sectors. The MPI’s multidimensional framework naturally supports this by showing that different forms of deprivation (e.g., poor education, lack of healthcare, inadequate living conditions) are often interconnected.

Policy Synergy: The MPI can influence the creation of integrated policies that simultaneously address several deprivations. For example, a poverty reduction policy focused on improving sanitation and nutrition can also improve health outcomes and educational achievement, fostering synergies across multiple SDGs.
Long-Term and Systemic Solutions: MPI encourages governments to think beyond short-term economic gains and focus on long-term systemic changes that tackle the root causes of multidimensional poverty. This aligns with the broader objectives of sustainable development, which aims for enduring prosperity, social inclusion, and environmental sustainability.

5. Supporting Climate Action and Environmental Sustainability

MPI also helps identify households or regions that face multiple deprivations, often in areas that are most vulnerable to climate change, such as rural regions or informal urban settlements.

Vulnerability to Climate Change: Many of the households identified as multidimensionally poor may live in areas with poor environmental conditions (e.g., areas prone to drought, floods, or poor air quality). By addressing these regions’ deprivations, governments can not only alleviate poverty but also reduce vulnerability to climate-related risks, thereby supporting environmental sustainability.
Green Development: Policies aimed at reducing poverty and promoting environmental sustainability (e.g., renewable energy programs, eco-friendly agriculture) can benefit from MPI data. For instance, MPI can help assess the impact of sustainable agriculture practices in reducing poverty by improving both income and access to healthy food.

6. Enhancing Localized and Contextual Approaches

MPI can be used to design localized development strategies that consider the specific needs of different regions and communities. Since poverty and deprivation are often context-specific, policymakers can tailor interventions in a way that aligns with the unique challenges faced by each area.

Customized Solutions for Rural vs. Urban Areas: In rural areas, where access to basic services such as clean water and healthcare is often limited, the MPI can direct sustainable development policies to address those particular needs. In urban slums, where living standards and education are key deprivations, policies can focus on improving infrastructure and education.
Tracking Inequality: MPI can track regional inequalities and ensure that sustainable development policies are equitable, ensuring that no region or community is left behind. This is essential for achieving the SDG of leaving no one behind.

7. Monitoring Progress Toward Sustainable Development

The MPI’s ability to provide an annual update on poverty levels and deprivations allows governments to regularly track the progress of poverty alleviation programs and sustainable development initiatives. This enables:

Data-Driven Adjustments: Governments can adjust their policies based on updated MPI data, making their approaches more agile and responsive.
Transparency and Accountability: MPI provides an easily understandable measure of poverty and development, making it easier for citizens and organizations to hold governments accountable for their development outcomes.

Conclusion

The Multidimensional Poverty Index (MPI) provides a nuanced understanding of poverty by measuring deprivations in key dimensions of human life such as health, education, and living standards. It offers a more comprehensive view compared to traditional income-based measures and serves as a valuable tool for policymakers aiming to address the root causes of poverty.

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