Poverty gap index

The poverty gap index is a measure of the intensity of poverty. It is defined as the average poverty gap in the population as a proportion of the poverty line. The poverty gap index is a measure of the intensity of poverty. It is defined as the average poverty gap in the population as a proportion of the poverty line. The poverty gap index is an improvement over the poverty measure headcount ratio which simply counts all the people below a poverty line, in a given population, and considers them equally poor. Poverty gap index estimates the depth of poverty by considering how far, on the average, the poor are from that poverty line. The poverty gap index sometimes referred to as poverty gap ratio or pg index is defined as average of the ratio of the poverty gap to the poverty line. It is expressed as a percentage of the poverty line for a country or region. The most common method measuring and reporting poverty is the headcount ratio, given as the percentage of population that is below the poverty line. For example, The New York Times in July 2012 reported the poverty headcount ratio as 11.1% of American population in 1973, 15.2% in 1983 and 11.3% in year 2000. One of the undesirable features of the headcount ratio is that it ignores the depth of poverty; if the poor become poorer, the headcount index does not change. Poverty gap index provides a clearer perspective on the depth of poverty. It enables poverty comparisons. It also helps provide an overall assessment of a region's progress in poverty alleviation and the evaluation of specific public policies or private initiatives. The poverty gap index (PGI) is calculated as,