How Serious is the Neglect of Intra‐Household Inequality in Multidimensional Poverty and Inequality Analyses? Evidence from India

• Published date: 01 September 2021
• Author: Stephan Klasen,Rahul Lahoti
• Date: 01 September 2021
• DOI: http://doi.org/10.1111/roiw.12491

© 2020 International Association for Research in Income and Wealth

705

HOW SERIOUS IS THE NEGLECT OF INTRA-HOUSEHOLD

INEQUALITY IN MULTIDIMENSIONAL POVERTY AND INEQUALITY

ANALYSES? EVIDENCE FROM INDIA

by Stephan KlaSen†

University of Goettingen

AND

Rahul lahoti*

ETH Zurich

Monetary poverty measures as well as most existing multidimensional poverty indices (MPI) assume

equal distribution within the household and thus are likely to yield a biased assessment of individual

poverty, and poverty by age or gender. We show that the direction of the bias of such household-based

assessments in measuring poverty or inequality among individuals depends on how these measures

use individual data to determine the poverty status of households. We use data from the 2012 Indian

Human Development Survey and compare a standard household-based MPI to an individual-level

MPI. The poverty rate among women is 14 percent points higher than that of men in our individual

MPI measure but almost the same when using the household-based measure. 22 percent of males and

27 percent of females are misclassified as poor or non-poor using the household-based measure. We

also show that intra-household inequality is 30 percent of total inequality.

JEL Codes: I32, D13, D63, O53

Keywords: multidimensional poverty, multidimensional inequality, poverty measurement, intra-

household inequality, India

1. intRoduction

The ultimate objective of measuring poverty and inequality is to determine

the wellbeing of individuals. But most empirical analyses of poverty take a house-

hold perspective and determine whether entire households are poor. Taking such a

household perspective assumes that resources are distributed equally, or according

to need, within the household.

But the assumptions of equal or needs-based distribution is inconsistent with

the theoretical literature on intra-household bargaining, which has shown that

well-being outcomes depend on the bargaining power within the household where

equal distribution would be more of the exception than the rule. These bargain-

ing models have received overwhelming empirical support in the literature (e.g.

Manser and Brown, 1980; McElroy and Horney, 1981; Chiappori, 1988, 1992;

†Note: The editors are deeply saddened to inform that Professor Klasen passed away on October 27,

2020 in Göttingen after battling the incurable disease Amyotrophic Lateral Sclerosis (ALS) for five years.

*Correspondence to: Rahul Lahoti, ETH Zurich, Bangalore, India (rahul.lahoti@gmail.com).

Review of Income and Wealth

Series 67, Number 3, September 2021

DOI: 10.1111/roiw.12491

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Review of Income and Wealth, Series 67, Number 3, September 2021

706

© 2020 International Association for Research in Income and Wealth

Grossbard-Shechtman, 1993; Lundberg and Pollak, 1993; Lundberg et al., 1997;

Gersbach and Haller, 2001; Edlund and Korn 2002).

More generally, there is overwhelming evidence collected across multiple con-

texts over the last two decades on intra-household inequalities, all providing evi-

dence against the need-based or equal distribution assumption (e.g. Alderman et al.,

1995; Haddad et al., 1997; Quisumbing and Maluccio, 2000; Aronsson et al., 2001).

In particular, substantial and consequential gender inequalities in the allocation of

resources have been shown to exist in many contexts, with particular sizable gaps

existing in some regions of the developing world, particularly parts of South and East

Asia and the Middle East (e.g. Rosenzweig and Schultz, 1982; Hazarika, 2000; Klasen

and Wink, 2002, 2003; Asfaw et al., 2010; World Bank, 2011; Tian et al., 2018).

As a result of this, it is likely that household-based assessments of poverty by

gender understate the gender gap in poverty, at least in some parts of the develop-

ing world.1 And similarly, often-done analyses of child poverty or poverty among

the elderly will yield biased results as the equal distribution assumption is unlikely

to hold (e.g. Dreze and Srinivasan, 1997; Deaton and Paxson, 1998; Corak et al.,

2008). More generally, poverty rates might be biased and their distribution by

region or household type distorted, leading to biased assessments of individual

well-being and policies, and biased targeting.

Even though this has been long recognized there have been only a few attempts

at measuring poverty and inequality using truly individual level achievements. The

dominant approaches in both unidimensional monetary and multidimensional

poverty measurement use the household as the unit of analysis to determine the

poverty status of individuals.

In 1990, Haddad and Kanbur assessed how serious the neglect of intra-house-

hold distribution is when considering poverty in a unidimensional case, using cal-

orie intake as the metric (Haddad and Kanbur, 1990). Using Philippine data they

show that 30 percent to 40 percent of all inequality is intra-household inequality

and would be missed if individual data were ignored. They also find that ranking

between males and females reverses when using individual data, with poverty rates

among women being higher when using some individual poverty measures.

In monetary poverty measures using expenditures or consumption, the house-

hold perspective has been particularly dominant as it is hard to ascribe household

expenditures to individual members, also because of the presence of household-spe-

cific public goods (such as housing, durable goods, service access, etc.). Nevertheless,

several methods have been developed in recent years that allow one to estimate

intra-household inequality using only household-level monetary information

(Chiappori et al., 2002; Lise and Seitz, 2011; Browning et al., 2013; Dunbar et al.,

2013; Cherchye et al., 2015). Case and Deaton (2003) and Chiappori and Meghir

(2015) provide an excellent review of the various approaches used in the literature.

But first and foremost they note the serious challenges when doing so. This is due to

the presence of public goods within the household, the difficulty in identifying the

1At the same time, there have also been some unverified claims about gender gaps in poverty, such

as the widely made claim in the 1990s that 70 percent of the world’s monetary poor are female. If one

assumes equal distribution at the household level, it is impossible to arrive at such a figure; but since no

information existed on the actual unequal distribution of poverty, this number was a pure conjecture.

See Marcoux (1998) and Klasen (2007) for a discussion.