Purpose
The purpose of this assignment is to practice working with quantitative data to calculate
measures of poverty and inequality and make judgments about the patterns that you
observe in these development indicators.
Course Learning Outcomes
CLO1 Calculate basic measures of poverty and inequality
CLO5 Use economic models and empirical methods to evaluate development policy
Skills
The purpose of this assignment is to practice the following skills that are essential to
your success in analyzing the ways in which development programs impact poverty:
● use software to view and manipulate data sets
● perform basic statistical analysis
● draw inferences about policies and programs based on basic statistical
analysis
Knowledge
This assignment will require you to be familiar with the following course content:
● Microsoft Excel or Google Sheets
● statistics
● methods for measuring poverty and policy impact
Task
To complete this assignment, you will:
1. Review the case (below), the related data table (Excel file), and the report template
(Word file).
Case. Countries periodically run poverty assessments to characterize the state of
poverty, both overall and for particular sub-groups of the population. You will work
with the data for the level of household consumption expenditure from a
representative household survey of the population of Guatemala. Your task is to
characterize poverty in Guatemala, with particular emphasis on heterogeneity
between rural/urban populations. You have an Excel table that provides the annual
household consumption expenditure per capita, denominated in US dollars for the
year 2000. I have aggregated the data for you to each percentile, ranked by
consumption level from lowest to highest. Data are for three population groups: the
whole population and the urban and rural populations. The poverty line is provided in
an additional column.
2. Save the Excel file and the Word report template where you can access them (and
consider adding your surname to the file title). The following steps will guide the
analysis that you need to complete in your Excel data set as well as generating the
numbers you need to add to your report. Once you are done with your data analysis,
you will write a brief narrative on the findings in your report.
The purpose of this assignment is to practice working with quantitative data to calculate
measures of poverty and inequality and make judgments about the patterns that you
observe in these development indicators.
Course Learning Outcomes
CLO1 Calculate basic measures of poverty and inequality
CLO5 Use economic models and empirical methods to evaluate development policy
Skills
The purpose of this assignment is to practice the following skills that are essential to
your success in analyzing the ways in which development programs impact poverty:
● use software to view and manipulate data sets
● perform basic statistical analysis
● draw inferences about policies and programs based on basic statistical
analysis
Knowledge
This assignment will require you to be familiar with the following course content:
● Microsoft Excel or Google Sheets
● statistics
● methods for measuring poverty and policy impact
Task
To complete this assignment, you will:
1. Review the case (below), the related data table (Excel file), and the report template
(Word file).
Case. Countries periodically run poverty assessments to characterize the state of
poverty, both overall and for particular sub-groups of the population. You will work
with the data for the level of household consumption expenditure from a
representative household survey of the population of Guatemala. Your task is to
characterize poverty in Guatemala, with particular emphasis on heterogeneity
between rural/urban populations. You have an Excel table that provides the annual
household consumption expenditure per capita, denominated in US dollars for the
year 2000. I have aggregated the data for you to each percentile, ranked by
consumption level from lowest to highest. Data are for three population groups: the
whole population and the urban and rural populations. The poverty line is provided in
an additional column.
2. Save the Excel file and the Word report template where you can access them (and
consider adding your surname to the file title). The following steps will guide the
analysis that you need to complete in your Excel data set as well as generating the
numbers you need to add to your report. Once you are done with your data analysis,
you will write a brief narrative on the findings in your report.
2
3. Calculate poverty and poverty decomposition. In the Excel file, you will find a table in
which you can fill in following information. You will transfer most of this information
into your Word report. Each correct answer is worth 2 points.
3.1 Determine the percentage of the population in each sub-group: urban, rural.
(2 pt.)
3.2 Determine the average per capita consumption of the poor and the non-poor
overall and in each of the two sub-groups. (2 pt.)
3.3 Determine the headcount ratio P0 overall and in each sub-group. (2 pt.)
3.4 Since you know the share of the population that is in each group, calculate
what is the contribution to P0 made by each subgroup. (2 pt.)
3.5 Calculate the P1 indicator—the depth of poverty. To determine P1, calculate
the poverty gap (i.e., the expenditure deficit to reach the poverty line) for
each household in poverty overall and in each sub-group. (2 pt.)
3.6 Calculate the P2 indicator. (2 pt.)
4. Estimate the size of the welfare budget that would be needed to eliminate poverty in
each population group and an allocation of welfare to different groups by answering
the questions below.
4.1 Determine the total number of poor overall and in each subgroup. (2 pt.)
4.2 Calculate the budget needed to eliminate poverty overall and for each sub-
group by summing the poverty gaps in each percentile. (2 pt.)
4.3 Based on your 4.2 calculation, determine the percentage allocation of the
budget needed to eliminate poverty across all poverty groups. (2 pt.)
4.4 Determine the percentage of the total expenditures of the non-poor that
would be required to eliminate poverty. (2 pt.)
5. Characterize inequality in Guatemala by completing the following steps.
5.1 In your Word report, write up in your own words definitions of the measures
of inequality: the Lorenz curve, the Gini coefficient, and the Kuznets ratio. (2
pt.)
5.2 In your Word report, draw the Lorenz curves (2 pt.)
5.3 Calculate the following indicators for the three groups, All, Urban, Rural, and
enter your results in the table in your Word report:
(a) Average annual per capita consumption in 2000 (2 pt.)
(b) Gini coefficient in 2000 (2 pt.)
(c) Inter-decile ratio in 2000 (2 pt.)
(d) Kuznets ratio (Top 20%/Bottom 40%) in 2000 (2 pt.)
6. In the final section of your Word report, write up your findings in which you relate a
story that you see in these data. Describe the pattern of poverty and inequality in
Guatemala, offer an explanation of the pattern of poverty and inequality, and
suggest what your explanation implies for development policy in Guatemala. You
don’t need to address all the measures that you calculated in your narrative. At the
3. Calculate poverty and poverty decomposition. In the Excel file, you will find a table in
which you can fill in following information. You will transfer most of this information
into your Word report. Each correct answer is worth 2 points.
3.1 Determine the percentage of the population in each sub-group: urban, rural.
(2 pt.)
3.2 Determine the average per capita consumption of the poor and the non-poor
overall and in each of the two sub-groups. (2 pt.)
3.3 Determine the headcount ratio P0 overall and in each sub-group. (2 pt.)
3.4 Since you know the share of the population that is in each group, calculate
what is the contribution to P0 made by each subgroup. (2 pt.)
3.5 Calculate the P1 indicator—the depth of poverty. To determine P1, calculate
the poverty gap (i.e., the expenditure deficit to reach the poverty line) for
each household in poverty overall and in each sub-group. (2 pt.)
3.6 Calculate the P2 indicator. (2 pt.)
4. Estimate the size of the welfare budget that would be needed to eliminate poverty in
each population group and an allocation of welfare to different groups by answering
the questions below.
4.1 Determine the total number of poor overall and in each subgroup. (2 pt.)
4.2 Calculate the budget needed to eliminate poverty overall and for each sub-
group by summing the poverty gaps in each percentile. (2 pt.)
4.3 Based on your 4.2 calculation, determine the percentage allocation of the
budget needed to eliminate poverty across all poverty groups. (2 pt.)
4.4 Determine the percentage of the total expenditures of the non-poor that
would be required to eliminate poverty. (2 pt.)
5. Characterize inequality in Guatemala by completing the following steps.
5.1 In your Word report, write up in your own words definitions of the measures
of inequality: the Lorenz curve, the Gini coefficient, and the Kuznets ratio. (2
pt.)
5.2 In your Word report, draw the Lorenz curves (2 pt.)
5.3 Calculate the following indicators for the three groups, All, Urban, Rural, and
enter your results in the table in your Word report:
(a) Average annual per capita consumption in 2000 (2 pt.)
(b) Gini coefficient in 2000 (2 pt.)
(c) Inter-decile ratio in 2000 (2 pt.)
(d) Kuznets ratio (Top 20%/Bottom 40%) in 2000 (2 pt.)
6. In the final section of your Word report, write up your findings in which you relate a
story that you see in these data. Describe the pattern of poverty and inequality in
Guatemala, offer an explanation of the pattern of poverty and inequality, and
suggest what your explanation implies for development policy in Guatemala. You
don’t need to address all the measures that you calculated in your narrative. At the
3
same time, these measures, by themselves, may not provide you with enough
information to tell a story and you may need to draw on sources that enrich your
understanding of the Guatemalan context. (18 pt.)
same time, these measures, by themselves, may not provide you with enough
information to tell a story and you may need to draw on sources that enrich your
understanding of the Guatemalan context. (18 pt.)