# **_Notes_**

1. Our review focuses on models dealing primarily with the income dimension of poverty. The Development Economics Development Prospects Group at the World Bank has established a framework known as MAMS or Maquette for MDG Simulation. This framework allows an economy-wide analysis of shocks and policies on income poverty and a set of Millennium Development Goals (MDGs) related to health, education, and infrastructure (see Löfgren and Diaz-Bonilla 2005).

2. Most economic models of behavior are based on the principle of optimization, according to which each agent attempts to implement the best possible action given her/his objective and the prevailing constraints. The maximum value function is the maximum attainable value of the objective function expressed in terms of the parameters characterizing the environment of the problem (see Dixit 1990).

3. POVCAL is programmed in Fortran 5.0 and uses the parametric specification of the underlying Lorenz curve. Currently, it supports the following specifications: (1) the general quadratic model (Villasenor and Arnold 1984) and (2) the Beta model (Kakwani 1980).

4. The ASCII data file must be in tabular form whereby each row of data corresponds to a record and columns represent the variable for the subgroups. Variables must be organized by order of subgroups.

5. In other terms, the household is facing a linear budget constraint. The institutional underpinning of this assumption consists of efficient markets with negligible transaction costs (Deaton and Muellbauer 1980).

6. According to Lindblom (2001), social coordination aims at minimizing conflict and promoting cooperation viewed as an exchange of help. Lindblom also notes a fundamental distinction between the notions of market and market system. There are markets whenever people frequently pay others to do something. A market system is a collection of markets designed to organize and coordinate social interaction.

7. This is a record of the foreign exchange inflows and outflows associated with trade, with factor and interest payments, and with institutional transfers, including migrant remittances.

8. It is assumed here that indirect taxes are paid at the factory gate. That is why, in the SAM, they appear as a payment by the activity account to the government account. However, such taxes may also be paid out of the commodity account.

9. The parameters can be estimated from household survey data. Alternatively, group density functions can be estimated from relevant parameterized Lorenz curves, as is done in the discussion of the PAMS framework.

10. Agénor, Chen, and Grimm (2004) consider the following categories: (1) rural workers, (2) urban workers in the informal sector, (3) urban unskilled workers in the formal sector, (4) urban skilled workers in the formal sector, and (5) capitalists-rentiers. This does not mean that any policy model should follow the same disaggregation. As mentioned earlier, disaggregation in terms of sectors, factor markets, institutions, and socioeconomic groups is dictated by the issues at hand, the availability and reliability of relevant data, and the adequacy of the resources available for information processing.

11. This presentation of the accounting framework follows Khan, Montiel, and Haque (1990).

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