The Poverty Gap is a ratio that shows how far the typical person is from the poverty line, or the amount of money needed to meet basic needs for survival. In other words, it illustrates how severe a nation's poverty is. The idea of the poverty gap, which was created by the World Bank, is frequently used to evaluate how prevalent poverty is in various nations. The World Bank estimates that India's poverty rate was 4.8% in 2011.
Poverty Gap: What Is It?
The average deficit from the poverty line, given as a percentage of the poverty line (considering the non-poor as having no shortfall), is what the World Bank refers to as the "poverty gap."
The severity of poverty is measured by the poverty gap. It illustrates how many people, on average, live below the poverty level.
Greater levels of deprivation and a higher prevalence of poverty among individuals who live below the poverty line are indicated by a larger poverty gap.
In order to raise them out of poverty, the government must essentially send them more money.
In the graph below, Country A has a wider poverty gap than Country B and requires more resources to get its people out of poverty.
The poverty gap indicator was developed by the World Bank Development Research Group. By taking into account household income and per-capita consumption, poverty is calculated.
Everybody will be held to the same standard by the World Bank. By taking into account the global going rate for essential food, clothing, and shelter, it establishes an international poverty line at regular intervals, establishing the cost of living at any given time.
In 2015, the daily minimum was increased from $1.25 to $1.90. Since the levels of poverty in many nations vary, it is challenging to establish a consistent international poverty line.
For 115 countries, the World Bank provides data on the poverty gap, which is updated twice a year in April and September.
Poverty Gap Index
The severity of poverty can be assessed using the poverty gap index. It is described as the average poverty gap in the population, represented as a share of the poverty line. By examining how far on average the poor are from the poverty line, the poverty gap index determines the level of poverty.
To compute the poverty gap index
, economists and government officials rely on the poverty gap statistic. The World Bank also produces the index, which is calculated by dividing the average distance from the poverty line by its value.
The total amount of money necessary to move the poor out of extreme poverty and into the poverty line, assuming flawless transfer targeting, can be calculated by multiplying a country's poverty gap index by both the poverty line and the total population of the country.
Consider a nation with a 10 million-person population, a poverty line of $500 annually, and a poverty gap index of 5%. In this case, a $25 annual rise would be sufficient to take each person out of poverty. To end poverty, which is represented by $25 per person and 10 million individuals, an increase of $250 million must be made overall. $25 represents 5% of the poverty level.
The poverty gap index is a supplemental metric. In other words, the index can be separated by region, industry, level of education, gender, age, or ethnic group in addition to being used as a general indicator of poverty.
• The poverty gap illustrates the severity of poverty in a country by displaying the average population shortfall from the poverty line.
• The poverty gap is a World Bank indicator that assesses poverty in households by looking at per capita income and consumption.
• The data covers 115 nations and is updated twice a year in April and September.
• Economists and government authorities rely on the poverty gap statistic to calculate the poverty gap index.