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Course ID Number: ADC 7010

Course Title: Inequality and Poverty: Measurement and Applications

No. of Credits: 1

Graduate School of International Relations International University of Japan

Term: Fall 2011

Instructor: Takahiro Akita E-mail: akita@iuj.ac.jp

Office: 313 Phone: 414

Course Introduction

This course is a one-credit course, designed to introduce some measures of inequality and poverty and present their meaning and applications. Topics covered in the course include: growth-inequality-poverty relationships, Kuznets hypothesis, meaning of inequality (income homogeneity, population homogeneity, and transfer principle), Lorenz curves and Lorenz comparisons, Lorenz-consistent inequality measures and decomposable inequality measures, Gini coefficient and its decomposition by factor components, generalized entropy class of measures (e.g., Theil indices) and their decomposition by population sub-groups, Theil indices and the Kuznets process, measurement of regional income inequalities, and measures of poverty such as the Foster-Greer-Thorbecke (FGT) index. Some STATA commands are introduced to conduct inequality and poverty analyses with household survey data. All the students are responsible for the lecture materials and the required readings. But, many

Inequality and Poverty: Measurement and Applications

ADC 7010

Fall 2011

Professor Takahiro Akita (akita@iuj.ac.jp; 025-779-1414; office room 313)

Introduction

This course is a one-credit course, designed to introduce some measures of inequality and

poverty and present their meaning and applications. Topics covered in the course include:

growth-inequality-poverty relationships, Kuznets hypothesis, meaning of inequality (income

homogeneity, population homogeneity, and transfer principle), Lorenz curves and Lorenz

comparisons, Lorenz-consistent inequality measures and decomposable inequality measures,

Gini coefficient and its decomposition by factor components, generalized entropy class of

measures (e.g., Theil indices) and their decomposition by population sub-groups, Theil

indices and the Kuznets process, measurement of regional income inequalities, and measures

of poverty such as the Foster-Greer-Thorbecke (FGT) index. Some STATA commands are

introduced to conduct inequality and poverty analyses with household survey data.

All the students are responsible for the lecture materials and the required readings. But, many

of the readings (papers and book chapters) listed in the Course Schedule and Suggested

Readings are just for your reference. Some homework sets will be assigned. Additionally, a

short research paper will be required. The research paper should be written by a group of 2 or

3 students. The research paper should be no longer than 10 1.5-spaced, type-written pages

including figures and tables (using the font Times New Roman 12 points).

The general policies of the Graduate School of International Relations apply. This means that

all students are expected to attend class regularly. Personal illness or family emergency, but

not placement activities, are considered grounds for excused absences. Penalties for

unexcused absences will be reflected in the class participation component of the course grade.

Course Evaluation

In determining your course grade, your work will be evaluated approximately in accordance

with the following weights:

Term paper 60%

Homework assignments (and presentation) 30%

Class participation (constructive) 10%

Office Hours

My regular office hours will be as follows:

Tuesday 16:30-17:30; Wednesday 14:30-15:30 (if there is no faculty meeting)

You may come to my office anytime other than these time periods, but it should be done by

prior appointment.

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Recommended Texts

1. Anand, Sudhir, 1983, Inequality and Poverty in Malaysia: Measurement and

Decomposition, Oxford University Press, London. (Anand 1983)

2. Fields, Gary S., 2001, Distribution and Development: A New Look at the Developing

World, MIT Press. (Fields 2001)

3. Sen, Amartya, 1997, On Economic Inequality, Expanded edition with a substantial

annexe by James E. Foster and Amartya Sen, Prentice-Hall. (Sen 1997)

4. Haughton, Jonathan, and Shahidur R. Khandker, 2009, Handbook on Poverty and

Inequality, World Bank.

You can download an electronic version of this book at the following site.

http://mail.beaconhill.org/~j_haughton/HandbookPovIneq.pdf

The following homepage site provides some household survey data and STATA

commands (STATA ado files) used in the Haughton and Khandker book.

http://mail.beaconhill.org/~j_haughton/povertymanual.html

5. Ray, Debraj, 1998, Development Economics, Princeton University Press, New Jersey.

(Ray 1998)

6. Todaro, Michael P., and Stephen C. Smith, 2003, Economic Development, 8th

edition,

Addison Wesley. (Todaro & Smith 2003)

Course Schedule and Suggested Readings

(*) indicates that the papers are very technical.

Week 1 (October 4, Tuesday: 2:40-4:10)

Growth, Inequality, and Poverty

(Fields 2001) Chapter 3: Economic Growth and Inequality, pp.35-71.

(Ray 1998) Chapter 7: Inequality and Development: Interconnections, pp.74-97.

(Todaro & Smith 2003) Chapter 6: Poverty, Inequality, and Development, pp. 195-258

Ahlwalia, M.S., 1976, ‘Income distribution and development: Some stylized facts’,

American Economic Review, 66(2), pp.128-135.

Deininger, K., and L. Squire, 1997, ‘Economic growth and income inequality:

Reexamining the links’, Finance and Development, March, pp.38-41.

Deininger, K., and L. Squire, 1998, ‘New ways of looking at old issues: inequality and

growth’, Journal of Development Economics, 57(2), pp.259-287

Kuznets, S., 1955, ‘Economic growth and income inequality’, American Economic

Review, 45, pp.1-28.

Measuring Economic Inequality and Poverty: Introduction

(Todaro & Smith 2003) Chapter 6: Poverty, Inequality, and Development, pp. 195-258

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Week 2 (October 11, Tuesday: 2:40-4:10)

Meaning of Inequality

(Fields 2001) Chapter 2: The Meaning and Measurement of Income Inequality, pp.13-

18.

(Ray 1998) Chapter 6: Economic Inequality, pp.169-178.

Measuring Economic Inequality 1: Lorenz Curves and Lorenz Comparisons

(Fields 2001) Chapter 2: The Meaning and Measurement of Income Inequality, pp.18-

28.

(Ray 1998) Chapter 6: Economic Inequality, pp.178-184.

Week 3 (October 18, Tuesday: 2:40-4:10)

Measuring Economic Inequality 2: Lorenz-consistent Inequality Measures and

Decomposable Inequality Measures

(Anand 1983) Appendix A: A Brief Review, pp.303-310. (*)

(Fields 2001) Chapter 2: The Meaning and Measurement of Income Inequality, pp.28-

34.

(Ray 1998) Chapter 6: Economic Inequality, pp.184-193.

(Sen 1997) Chapter 2: Measures of Inequality, pp.24-39.

Week 4 (October 25, Tuesday: 2:40-4:10)

Measuring Economic Inequality 3: Gini Coefficient and its Decomposition by Income

Sources

(Anand 1983) Appendix B: The Gini Coefficient, pp.311-326. (*)

Estudillo, J.P., 1997, ‘Income inequality in the Philippines’, 1961-1991, The

Developing Economies, 35(1), pp.68-95.

Pyatt, G., C. Chen, and J. Fei, 1980, ‘The distribution of income by factor

components’, Quarterly Journal of Economics, 95(3), pp.451-473. (*)

Zaman, Kazi A.U., and T. Akita, 2011, ‘Spatial Dimensions of Income Inequality and

Poverty in Bangladesh: An Analysis of the 2005 Household Income and Expenditure

Survey Data’, mimeo.

Week 5 (November 1, Tuesday: 2:40-4:10)

Measuring Economic Inequality 4: Generalized Entropy Class of Measures (e.g., Theil

Indices) and Their Decomposition by Population Sub-groups

(Anand 1983) Appendix C: The Decomposition of Three Inequality Measures, pp.327-

332. (*)

Akita, T., R.A. Lukman, and Y. Yamada, 1999, ‘Inequality in the distribution of

household expenditures in Indonesia: A Theil decomposition analysis’, The

Developing Economies, 37 (2), pp.197-221.

Shorrocks, A., 1980, ‘The class of additively decomposable inequality measures’,

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Econometrica, 48, pp.613-625. (*)

Shorrocks, A., and G. Wan, 2005, ‘Spatial decomposition of inequality’, Journal of

Economic Geography, 5(1), pp.59-81. (*)

Zaman, Kazi A.U., and T. Akita, 2011, ‘Spatial Dimensions of Income Inequality and

Poverty in Bangladesh: An Analysis of the 2005 Household Income and Expenditure

Survey Data’, mimeo.

Week 6 and 7 (November 8, Tuesday and November 15, Tuesday: 2:40-4:10)

Measuring Economic Inequality 5: Gini Coefficients and Its Applications

Adams, R.H. Jr., 1994, ‘Non-farm income and inequality in rural Pakistan: A

decomposition analysis’, Journal of Development Studies, 31(1), pp.110-133.

Estudillo, J.P., 1997, ‘Income inequality in the Philippines, 1961-1991’, The

Developing Economies, 35(1), pp.68-95.

Measuring Economic Inequality 6: Theil Indices and Their Applications

Akita, T., R.A. Lukman, and Y. Yamada, 1999, ‘Inequality in the distribution of

household expenditures in Indonesia: A Theil decomposition analysis’, The

Developing Economies, 37 (2), pp.197-221.

Akita, T., and J.K. Szeto, 2000, ‘Inpres Desa Tertinggal (IDT) program and

Indonesian regional inequality’, Asian Economic Journal, 14 (2), pp.167-185.

Eastwood, R.K., and M. Lipton, 2000, ‘Rural-urban dimensions of inequality change’,

WIDER Working Paper 200, UNU/WIDER, Helsinki.

Estudillo, J.P., 1997, ‘Income inequality in the Philippines, 1961-1991’, The

Developing Economies, 35(1), pp.68-95.

Glewwe, P., 1986, ‘The distribution of income in Sri Lanka in 1969–70 and 1980–81:

A decomposition analysis’, Journal of Development Economics, 24(2), pp.255-274.

Liu, A.Y.C., 2001, ‘Markets, inequality and poverty in Vietnam’, Asian Economic

Journal, 15(2), pp.217-235.

Tsakloglou, P., 1993, ‘Aspects of inequality in Greece: Measurement, decomposition

and inter-temporal change: 1974, 1982’, Journal of Development Economics, 40(1),

pp.53-74.

Week 8 (November 22, Tuesday: 2:40-4:10)

Measuring Economic Inequality 7: Weighted Coefficient of Variation, Theil Indices, and

Their Applications to the Measurement of Regional Income Inequalities

Akita, T., 2003, ‘Decomposing regional income inequality in China and Indonesia

using two-stage nested Theil decomposition method’, Annals of Regional Science, 37,

pp.55-77.

Akita, T. and A. Alisjahbana, 2002, ‘Regional income inequality in Indonesia and the

initial impact of the economic crisis’, Bulletin of Indonesian Economic Studies, 38 (2),

pp.201-22.

Akita, T., and R.A. Lukman, 1995, ‘Interregional inequalities in Indonesia: A sectoral

decomposition analysis for 1975-92’, Bulletin of Indonesian Economic Studies, 31 (2),

pp.61-81.

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Mathur, A., 1983, ‘Regional development and income disparities in India: A sectoral

analysis’, Economic Development and Cultural Change, 31(3), pp.475-505.

Fedorov, L., 2002, ‘Regional inequality and regional polarlization in Russia: 1990-99’,

World Development, 30(3), pp.443-456.

Week 9 (November 29, Tuesday: 2:40-4:10)

Measuring Poverty 1: Head Count Ratio and Foster-Greer-Thorbecke (FGT) Index

(Fields 2001) Chapter 4: The Measurement of Poverty, pp.73-94.

(Ray 1998) Chapter 8: Poverty and Under-nutrition, pp.249-292.

Foster, J.E., J. Greer, and E. Thorbecke, 1984, ‘A class of decomposable poverty

measure’, Econometrica, 52, pp.761-766. (*)

Zaman, Kazi A.U., and T. Akita, 2011, ‘Spatial Dimensions of Income Inequality and

Poverty in Bangladesh: An Analysis of the 2005 Household Income and Expenditure

Survey Data’, mimeo.

Week 10 (December 6, Tuesday: 2:40-4:10)

Measuring Poverty 2: Foster-Greer-Thorbecke (FGT) Index and Its Applications

(Ray 1998) Chapter 8: Poverty and Under-nutrition, pp.249-292.

Huppi, M., and M. Ravallion, 1991, ‘The sectoral structure of poverty during an

adjustment period: Evidence for Indonesia in the mid 1980s’, World Development,

19(12), pp.1653-1678.

Liu, A.Y.C., 2001, ‘Markets, inequality and poverty in Vietnam’, Asian Economic

Journal, 15(2), pp.217-235.

Ravallion, M., and B. Sen, 1996, ‘When method matters: Monitoring poverty in

Bangladesh’, Economic Development and Cultural Change, 44(4), pp.761-792.

Skoufias, E., A. Suryadahi, and S. Sumarto, 2000, ‘Changes in household welfare,

poverty, and inequality during the crisis’, Bulletin of Indonesian Economic Studies,

36(2), pp.97-114.