Macro-level Drivers of Multidimensional Poverty in Sub-Saharan Africa:

Measuring Change in the Human Poverty Index

Poverty is increasingly recognized as a multidimensional phenomenon in the development literature, encompassing not only income, but also a range of factors related to broadening an individual’s freedoms to live a life of her own choosing. Poverty so understood suggests that alternative approaches to poverty measurement reflecting this multidimensionality may point toward alternative policies for poverty alleviation.

This study explores the factors that may account for changes in one metric of multidimensional poverty in developing countries, the United Nation Development Program’s Human Poverty Index, and will be primarily concerned with measuring the effects on the HPI of policies and activities that relate to, or are explicitly meant to encourage, economic growth, increased literacy and improved health, and asset development in Sub-Saharan Africa. 

The study focuses on the outcomes of a panel data set, created for the purpose of this study, of HPI scores for the Sub-Saharan region, between 1998 and 2007, and a range of indicators that the development literature and theory suggest should have an effect on income poverty, asking, what is the relationship between these indicators and multidimensional poverty?

A parallel set of models has been developed to measure the response of household consumption expenditure to changes in economic growth, human capabilities and asset development indicators.

In addition, and in light of the models’ findings, this study examines the policies and plans promoted by international financial institutions, namely the World Bank and the IMF, in Sub-Saharan Africa over, and prior to, the period of this study. The Sub-Saharan regional models suggest a somewhat different mix of strategies than is evident in the various regional plans for growth and poverty reduction to date. The economic growth, capabilities and asset models in this study suggest that prioritizing increases in foreign direct investment, imports as a percentage of GDP, and secondary school enrollment, could contribute to significant reductions in multidimensional poverty.  However, growth in the employment-to-population ratio appears to have the most beneficial effect on multidimensional poverty reduction in the region.

These findings suggest that development policies that focus primarily on economic growth, however achieved, as a means to addressing multidimensional deprivation in Sub-Saharan Africa may be misplaced, and that policies that place greater emphasis on increasing employment among the poor—whether in the private sector, the public sector, or in state-supported public works programs—may have a more direct effect on poverty alleviation.

All models are estimated using two-way fixed effects estimators and cluster robust standard errors in Stata 12.