Measurement and Alleviation of Poverty: With an Application to the Effects of Macroeconomic Adjustment (Evaluation quantitative de la pauvreté et remèdes possibles: analyse des effets d'un ajustement

ing from complexities that are undoubtedly important, let us imagine the population divided into two mutually exclusive and exhaustive sectors. Let the population share of the first sector be xl, its mean income M1, and its share in national income r11. We will consider the effects of an increase in 7l and a corresponding decrease in r2= (1Tr). Thus, this is a pure expenditure-switching exercise; expenditure reduction will be considered presently. The key question is how the removal of income from sector 1 and its transfer to sector 2 is to be modeled. Without going into the explicit nature of the instruments in great detail, we can think of additive and multiplicative changes in individuals' incomes, in the manner discussed in the previous section. Let us start with the additive case. If everybody's income in sector 1 goes down by an amount A1, if this income is transferred to sector 2, and if everybody's income in sector 2 goes up by an amount of A2, then 78 MEASUREMENT AND ALLEVIATION OF POVERTY