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Foster-Greer-Thorbecke Index

The Foster-Greer-Thorbecke (FGT) index is a parametric class of poverty measures introduced by James Foster, Joel Greer, and Erik Thorbecke in 1984 that became the workhorse of applied poverty analysis. A single parameter alpha tunes how much weight the measure places on the depth and distribution of poverty: alpha = 0 gives the headcount ratio (the share of people below the poverty line), alpha = 1 gives the poverty gap (the average normalized shortfall), and alpha = 2 gives poverty severity (which weights larger shortfalls more heavily). Its defining virtue is additive decomposability — total poverty is the population-weighted sum of subgroup poverty — which makes it ideal for profiling poverty across regions, sectors, and demographic groups.

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Foster-Greer-Thorbecke (FGT) Class of Decomposable Poverty Measures

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Foster, J., Greer, J., & Thorbecke, E. (1984). A class of decomposable poverty measures. Econometrica, 52(3), 761–766. · DOI 10.2307/1913475

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