Disparities between monetary and multidimensional poverty: Evidence from Vietnam

People who are poor according to monetary poverty measures are not always multidimensionally poor, a new study published in the OPHI working paper series has found.

The researchers used panel household survey data in Vietnam from 2007, 2008 and 2010 to analyse the prevalence and dynamics of both multidimensional and monetary poverty. Using the Multidimensional Poverty Index (MPI), a measure of poverty that accounts for multiple deprivations experienced by the poor across health, education and living standards, they compared the level of multidimensional poverty in Vietnam with the level of monetary poverty (set at the cut-off of $1.67 a day).

Their findings revealed that among those who are monetary poor (16.3% of the population), only a third are also multidimensionally poor (5.5% of the population).

The results show a large disparity between monetary and multidimensional measures of poverty, including variation across different groups of the population depending on households’ characteristics and their access to markets. Those who have better access to markets and public services benefit more from economic growth and are more likely to see a decline in monetary poverty, while their performance in the multidimensional measure is less impressive.

The authors note that this implies the results of economic growth are transferred more directly to the reduction in income poverty during the early years of development. They argue that the increase in income is necessary but not sufficient for the improvements in other indicators of poverty, which usually require a longer amount of time and additional efforts.

The study found that people from a less educated background, for example where the head of the household has no schooling or primary education only, are more likely to be poor according to both the monetary and multidimensional measures of poverty. They also experience a higher intensity of poverty.

The research also revealed a greater decrease in monetary poverty than multidimensional poverty over time. In particular, the poor made faster progress but with more fluctuations in monetary rather than multidimensional poverty. Conversely, the non-poor experienced more fluctuations and download mobility in indicators of multidimensional poverty.

The researchers emphasise that poverty reduction policies should pay explicit attention to improving non-income indicators of poverty, which have shown slower progress.

Read the full paper

‘Static and Dynamic Disparities between Monetary and Multidimensional Poverty Measurement: Evidence from Vietnam’, by Van Q. Tran, Sabina Alkire and Stephan Klasen, was published in the OPHI working paper series in August 2015.

Also published as a chapter in Measurement of Poverty, Deprivation and Economic Mobility.

Further information

Find out about the Global Multidimensional Poverty Index and results from the 2015 annual updates.