Multidimensional Approach to Measuring Poverty: Theoretical Concepts and Empirical Evidence from the Iranian Economy from 1370 to 1392 Persian Calendar

Poverty is a multidimensional phenomenon, the analysis of all the dimensions of which would require an accurate understanding of it. In the past, poverty was used to be measured using the income approach, but such an approach fails to take other forms of poverty into account. For example, an individual may not be poor in terms of income, but may have to spend a significant portion of his income for the treatment of a terminal illness. Contrary to the income approach, the multidimensional approach to poverty measurement takes its multidimensional nature into account. Various ways have so far been introduced in order to take this multidimensional nature into account in providing poverty indicators. These methods include the dashboard of variables, composite indices, Venn diagrams, the dominance approach, the statistical approach, the fuzzy set approach and the axiomatic approach.
As one of the most common methods for measuring multidimensional poverty, Alkire and Foster method is a counting-based method developed by the United Nations to calculate the global multidimensional poverty index. To obtain this index, ten indicators in the three dimensions of education, health and living standards are examined. Assigning an equal weight to each of the above dimensions, and to each of the indicators associated with each dimension, a household identified as deprived in more than a third of the indicators is classified as poor (dual cut off). Next, the common accumulation functions were implemented with some adjustments, calculating the Alkire and Foster poverty indicators. In this study, the Alkire - Foster method has been applied to data from the urban and rural household’s income and costs survey conducted between 1370 and 1392 Persian calendar.
Findings: The headcount ratio has decreased from 35.4% to 10.1%, in rural areas and from 13.3% to 9.5% in urban areas during the period under investigation. This decrease can be explained by the simultaneous decrease in both the intensity and incidence of poverty. The statistical inference applied to the adjusted headcount ratio shows the difference between urban and rural areas during all these years to be significant at a significance level of 95%. Furthermore, differences with the values associated with the previous years have also been significant for both urban and rural areas in most of the years.
The Alkire-Foster index shows decreased multidimensional poverty in both urban and rural areas in Iran. This decrease, however, is more pronounced in rural areas. This more significant decrease in poverty in rural areas is caused by all the living facilities provided for rural households between 1370 and 1392 Persian calendar. During the years following the end of the Iran-Iraq war, many Iranian households living in rural areas did not have access to electricity, running water or separate toilets and bathrooms in their places of residence. However, actions taken during the 1370-1392 timeframe have taken such facilities to rural areas as well. Meanwhile, however, these changes have not been so tangible in urban areas, because most urban households have had access to such facilities since the beginning of the period under investigation.