Incorporating public transfers into the measurement of poverty

Poverty measurement in India has been extremely controversial. The recent expert group of the Planning Commission, among other things, proposed incorporating variations in the costs of health and education expenditures of households in arriving at new state-level poverty lines. This approach, however, does not allow for differences in the availability of public goods and would only be strictly valid if these services are privately provided and are of equal quality. Our research proposes a method for adjusting the distribution of income based on the local availability of public goods. Our hope is that this would provide both more realistic poverty lines, but also guide future investments in public goods in directions that would lead to improvements in the conditions of the poor.

Researchers’ analysis of secondary data will focus on the NSSEU survey of 2009-2010. Most households are likely to have access to publicly funded schools in these areas. We, therefore, intend to restrict ourselves to the rural sample. This provided us data of about 60,000 households and more than 7,500 villages in total; 3,300 households and 416 villages in Bihar.