Poverty-Adjusted Life Expectancy : A Consistent Index of the Quantity and the Quality of Life
2022
Baland, Jean-Marie | Cassan, Guilhem | Decerf, Benoit
Poverty and mortality are arguably the two major sources of loss of well-being. Most mainstream measures of human development capturing these two dimensions aggregate them in an ad-hoc and controversial way. This paper develops a new index aggregating the poverty and the mortality observed in a given period in a consistent way. It is called the poverty-adjusted life expectancy index. This index is based on a single normative parameter that transparently captures the trade-off between well-being losses from being poor or from being dead. The paper first shows that the poverty-adjusted life expectancy index follows naturally from an expected life-cycle utility approach a la Harsanyi. The paper then proceeds to empirical comparisons between countries and across time and focuses on situations in which poverty and mortality provide conflicting evaluations. Once it is assumed that being poor is (at least weakly) preferable to being dead, the analysis finds that about a third of these conflicting comparisons can be unambiguously ranked by the poverty-adjusted life expectancy index. Finally, the paper shows that this index naturally defines a new and simple index of multidimensional poverty, the expected deprivation index.
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