Consumption Poverty and Functioning Deprivation in Bosnia Herzegovina

In this paper we present a multidimensional analysis of poverty in Bosnia and Herzegovina (BiH), based on the 2001 World Bank LSMS data. After Amartya Sen’s approach to the definition of poverty in terms of deprivation of capabilities and functionings, we aim at identifying relative deprivation for the Bosnian population. We follow an empirical strategy based on the identification of functionings, and the consequent construction of two synthetic deprivation indexes. Such an approach allows to overcome the structural limits of measures based on consumption expenditures, as all aspects related to high unemployment, children’s living conditions, and people’s displacement—all relevant in the case of BiH—make an approach based on multidimensional deprivation particularly interesting. Relative deprivation is then compared with other standard measures of poverty for the case of BiH. It is shown how it is possible that the two different categories of measures diverge in the measurement of poverty and the impact of current and potential poverty. As it turns out, some population sub-groups—like the unemployed, low-salary or irregular workers or households with many children—are particularly prone to poverty potential, especially in transition economies as they are the most exposed to those economic policy choices typical of the transition process.