Monetary and Multidimensional Poverty: Correlation, Mismatches, and a Combined Approach

Abstract

We consider the relationships between multidimensional and monetary poverty indices in international and national poverty profiles, and empirically explore the consequences of identifying poor people relying on a combination of both approaches. Taking first a cross-country perspective, focusing on 90 countries in the developing world, we corroborate that the incidence of poverty by money metrics and the global Multidimensional Poverty Index, a non-monetary measure of poverty, are correlated. Digging deeper, we use microdata from six countries—Bolivia, Brazil, Ecuador, Ethiopia, Ghana, and Uganda—to study the joint densities of monetary and multidimensional welfare and the poverty identification mismatches for a comprehensive array of poverty line pairs. Mismatches are important, particularly in the poorer countries. Although mismatches could be avoided by combining both approaches in a dual cutoff-based poverty measure, the choice of the monetary poverty line remains a considerable issue as it changes the nonmonetary composition of poverty.