[4] It is expressed as a percentage of the poverty line for a country or region.
For example, The New York Times in July 2012 reported the poverty headcount ratio as 11.1% of American population in 1973, 15.2% in 1983, and 11.3% in 2000.
It also helps provide an overall assessment of a region's progress in poverty reduction and the evaluation of specific public policies or private initiatives.
is the total population of poor who are living at or below the poverty line,
In this calculation, individuals whose income is above the poverty line have a gap of zero.
Then an average increase of $25 per individual per year would eliminate extreme poverty.
The total increase needed to eliminate poverty is US$250 million—$25 multiplied by 10 million individuals.
The poverty gap index is an important measure beyond the commonly used headcount ratio.
Two regions may have a similar head count ratio, but distinctly different poverty gap indices.
In other words, the index can be used as an aggregate poverty measure, as well as decomposed for various sub-groups of the population, such as by region, employment sector, education level, gender, age, or ethnic group.
The poverty gap index ignores the effect of inequality between the poor.
As a theoretical example, consider two small neighborhoods where just two households each are below the official poverty line of US$500 income per year.
[10] Scholars such as Amartya Sen suggest poverty gap index offers a quantitative improvement over simply counting the poor below the poverty line, but remains limited at the qualitative level.
Focusing on precisely measuring income gap diverts the attention from qualitative aspects such as capabilities, skills and personal resources that may sustainably eradicate poverty.
A better measure would focus on capabilities and consequent consumption side of impoverished households.
[11] These suggestions were initially controversial, and have over time inspired scholars to propose numerous refinements.
It is calculated by averaging the square of the poverty gap ratio.
are same as in poverty gap index (see the calculation section in this article).