The Many Dimensions of Deprivation in Peru: theoretical debates and empirical evidence

This paper aims at evaluating the empirical consequences of the theoretical debate on the nature of poverty, focusing in particular on the differences between Sen's capability approach and the mainstream monetary approach. The empirical analysis is performed using data from the ENNIV 1994 survey from Peru. Beginning with a brief review of the main issues emerging from the theoretical debate on the definition of poverty, a framework for comparing capability based and consumption based approaches is presented. A descriptive analysis of the various dimensions of deprivation is performed and the determinants of shortfall in basic capabilities are then modelled through 'capability production functions'. This analysis aims at identifying the relationship between monetary resources and individual achievements by testing for the significance and size of the 'parametric variations' which are at the core of Sen's argument against identifying poverty with monetary indicators. By elaborating on the results obtained, the importance of some of the non-monetary factors which affect individual achievements for individuals of different deciles is highlighted. Some conclusions with respect to the priorities of a poverty reduction strategy are then drawn.