Nature, Distribution and Evolution of Poverty & Inequality in Uganda

Concepts, methods and data2.4 Poverty gap measureThe poverty incidence measure does not indicatehow poor the poor are. It does not distinguishbetween a household whose consumption levelsare very close to the poverty line and a householdwhose consumption levels are far below it. Ifpeople below the poverty line were to becomepoorer, this measure does not change. The povertygap measure overcomes this problem.The poverty gap provides information onthe depth of poverty. It captures the averageexpenditure shortfall, or gap, for the poor in agiven area to reach the poverty line. The povertygap is obtained by adding up all the shortfalls ofthe poor (ignoring the non-poor) and dividingthis total by the number of poor. It measures thepoverty deficit of the population or the resourcesthat would be needed to lift all the poor in thatarea out of poverty, if one were able to perfectlytarget cash transfers towards closing the gap. Inthis sense, the poverty gap is a very crude measureof the minimum amount of resources necessary toeradicate poverty, i.e. the amount of money thatwould have to be transferred to the poor to liftthem up to the poverty line, under an assumptionof perfect targeting.To demonstrate, again using Northern Region asan example, results of this analysis suggest thatin 2002 the poverty gap for the rural populationin Northern Region was 24.3% (UBOS 2003). Thisimplies that, on average, every poor person in arural area in the Northern Region would requirean additional UShs 5,071 per month to reach thepoverty line (i.e. 24.3% of the UShs 20,872 ruralpoverty line). Thus, if 65% of the rural populationwas poor (according to the headcount index) in2002, implying roughly 3.1 million poor peoplein Northern Region, approximately UShs 15.8billion (US$ 8.7 million) per month would havebeen needed, in perfectly targeted cash transfers,to eradicate rural poverty in Northern Uganda in2002.The poverty gap for Northern Region at the subcountylevel is shown in Map 2.3. The green areasshow relatively low poverty gaps and the greyshading indicates high poverty gaps. The highestpoverty gap is found in Lopei (55%) in MorotoDistrict. This implies that, on average, every poorperson in this region would require an additionalUShs 11,508 per month to reach the poverty line.Therefore, to pull all the poor people (30,558)in this sub-county (with an overall populationof 31,182 people and poverty rate of 98%) to thepoverty line would require UShs 352 million (US$193,646; 1US$ = UShs. 1816) per month. Decisionmakers could use this information to identify areasof deep (or shallow) poverty and to estimate howmuch it would cost to raise standards of living insuch areas.However, like the head count index or povertyincidence, the poverty gap measure has someshortcomings. First, it is neither practical norfeasible to reach the whole population throughperfectly targeted cash transfers. Second, it doesnot measure inequality among poor people, i.e.the fact that some people might only be a fewshillings short of the poverty line while othersmight only have a few shillings to spend. The Ginicoefficient is a measure that captures this rangein people’s expenditures/incomes, i.e. it is a proxyfor income inequality.16 Nature, distribution and evolution of poverty and inequality in Uganda, 1992 - 2002