Measuring Capability Poverty : A Multidimensional Model-Based Approach

This paper proposes a model-based index for quantifying capability deprivation using multiple indicators for multiple dimensions. The proposed index, derived from a structural latent variable model, is a 'two-level' index which can be interpreted as a measure of the lack of freedom to achieve a minimal set of functionings. Applying our methodology to data on the two dimensions of knowledge and living conditions for Bolivian children, we find that deprivation is more intense among girls than boys and in rural areas, and the gender gap is slightly higher in the knowledge domain. Due to its model-based nature, our index enables us to identify the key explanatory factors of deprivation: in particular, parental education in the case of knowledge, and income level and economic diversification for living conditions. Comparison with traditional functionings-based measures confirm that outcome deprivation is different from choice-deprivation