Electronic copy available at: http://ssrn.

com/abstract=2013234
Properties of Index of Inclusion
Abstract

The paper discusses some properties of Index of Inclusion defined earlier by the author
in his paper titled Measuring Inclusive Growth. It is argued that the Index satisfies
properties of monotonicity, decreasing marginal returns as one factor is held constant
and universal applicability. The Index can be used for testing and measuring the
degree of inclusiveness in the development process of particular social groups e.g.
castes, ethnic minorities, linguistic groups in addition to that of the poor.

The Index of Inclusion (IoI) has been defined in an earlier paper
1
by the author as :

IoI = K * (yp/z)

(SoI)

; 0<<1 and 0<<1 ------------ (1)

Where K >0 is the normalization factor so that 0<IoI< 1 and
z is the poverty line based on income / consumption
yp is the mean income / consumption of people below poverty line
SoI represents the Social Opportunity Indicator and is defined as :

SoI = (EI*HI*BNI)
1/3
------------(2)

where

EI , HI, BNI represent respectively the comparative access / achievements
in social opportunities like education, health and basic needs of people below the
poverty line as a proportion of those above the poverty line.


The Index thus defined attempts to examine specifically the condition of the poor
as compared to non-poor in both economic and non-economic spheres. We shall
now discuss some of the properties of IoI.

a) Normalization and applicability : It may be noted that in principle, the IoI can
be used for assessing the inclusiveness of any particular social group in
comparison to the general population and not only that between poor and non-
poor. To achieve this z is redefined as the mean income / consumption of the
general population and yp is the mean income / consumption of the particular
social group in consideration. Thus for example, for India yp could refer to mean
income / consumption of the Scheduled Caste population while z could refer to that
of general population. Similarly, Social Opportunity Indicator (SoI) measures the
relative opportunity for the particular group e.g. scheduled caste - as compared to
the general population.

However the notion of inclusiveness by its very definition assumes that certain
groups / class of individuals are not part of the mainstream development process
and hence the degree to which they are included or not included in the
development process needs to be measured. Thus if we put

K=1 .(3)
Electronic copy available at: http://ssrn.com/abstract=2013234

in equation (1) then a value of less than 1 signifies that the particular social group
is discriminated against and is not on equal footing as others in the development
process. On the other hand a value of 1 indicates that the social group in question is
not lagging behind, while a value of more than 1 indicates that the concerned group
is better off than others and hence by definition value of IoI has no specific
significance in this case.

Thus IoI can be seen both as a test and as a measure of degree of inclusiveness of
various social groups e.g. poor vis--vis non-poor, minority versus the rest, a
particular ethic group as compared to general population and so on. A value greater
than or equal to 1 means that the concerned group suffers from no discrimination,
while a value less than 1 indicates non-inclusiveness and also measures the
extent of non-inclusion.

b) Monotonicity - The Index of Inclusion is monotonic in yp, the mean income of the
poor and also in social opportunity indicator. For larger values of yp and SoI the
index increases monotonically.

c) Decreasing marginal returns - The income factor and social opportunities factor
respectively capture the relative economic and non-economic resources of well-
being. It is based on the premise that both the factors are necessary for growth. The
income factor is in a way an outcome measure while the non-income factor
captures the potential for future growth it is some sort of process measure.
Holding any one factor constant and increasing the other factor results in decreasing
marginal returns to inclusiveness.

d) Elasticity of income and non-income factors : The coefficients and
respectively are the elasticities of Index of Inclusion w.r.t changes in income and
non-income factors. The precise values of and are unknown a priori.
However its is reasonable to argue that IoI is more sensitive to changes in income
than to non-income factors so that we have :
> ...(4)

Also we will assume that

+ = 1 (5)
i.e. constant returns to scale

and further let
= 2 ...(6)

then using equations (3) to (6), the Index of Inclusion becomes :

IoI = (yp/z)
2/3
(SoI)
1/3
...(7)




Conclusion

The Index of Inclusiveness defined in equation (7) satisfies the properties of
monotonicity, constant returns to scale, decreasing marginal returns as one factor is
held constant and universal applicability. This measure can be used for testing and
measuring the degree of inclusiveness in the development process of particular
social groups e.g. castes, ethnic minorities, linguistic groups in addition to that of
the poor.

Reference

1. Badgaiyan, Bhupendra, Measuring Inclusive Growth (May 6, 2011). Available
at SSRN: http://ssrn.com/abstract=1833602 or
http://dx.doi.org/10.2139/ssrn.1833602


























_________________________________________________________________________________________________
Bhupendra Badgaiyan is an independent Consultant. He has earlier worked with
UNDP and UNICEF, India.
E-mail bdbadgaiyan@yahoo.co.in
Address 135 A Pocket B, Mayur Vihar, Phase II, Delhi 110091, India