number of people who are multidimensionally poor, suffering deprivations in more than 25 percent of weighted indicators. _Intensity_ relates to the depth of poverty for the sub-group characterized as deprived.

The MPI is constructed based on the Alkire-Foster methodology, which requires a series of normative choices and technical decisions: (1) Focus groups of policy makers and representatives of civil society anchor the selection of achievements and deprivations, which describe multiple dimensions of nonmonetary poverty. (2) The technical team selects a source of household survey data, which often narrows the set of deprivations to be assessed as factors in multidimensional poverty. (3) Once a comprehensive list of deprivations has been selected, the analyst introduces a deprivation cut-off, which determines if a household is deprived in a specific area. (4) The binary variables are aggregated into a measure that reflects the overlap of all deprivations for each household. Aggregation requires that weights be selected for each deprivation, and calculation of the multidimensional poverty rate requires a decision about the poverty cut-off.

# **Defining Achievements and Deprivations**

The first step in constructing the measure of multidimensional poverty is to select dimensions that reflect achievements or deprivations. These indicators complement the national monetary poverty measure with information that better captures nonmonetary aspects of well-being. The primary dimensions of the measure are basic needs, housing, education, labor, and health. For example, while _health_ and _education_ can be partly accounted for in household purchases, it is difficult to price the value of public services. Thus, a consumption-based poverty measure would not fully account for deprivations in these areas. Furthermore, both health and education have an intrinsic value that might not be reflected in the cost of the goods consumed. Similarly, _labor—_ having a job _—_ has an intrinsic value beyond the salary earned; it gives a sense of accomplishment and belonging to the community and society. Finally, having adequate and affordable _housing_ is both important for the standard of living and related to human dignity. Overlap of these dimensions enables individuals to reach their capabilities. The relationship between an individual and his or her capabilities is the value the multidimensional poverty measure adds to monetary measures.

The selection of indicators and dimensions was facilitated by the roundtables with stakeholders. The decision to use the national ILCS survey to calculate the measure also had important implications for selecting deprivations: Because ILCS surveys go back to 2001, they could be used to construct a nationally representative time series that could be clearly linked to the estimation of consumption poverty. However, use of the ILCS data limited the selection of deprivations to the data available. With this in mind, the dimensions and indicators selected reflect subjective evaluations and focus on access, affordability, and the quality of public services and goods (see Tables 1 to 5).

**A. Basic needs goals:** End extreme poverty and allow each household to lead an independent life in dignity.

Even though Armenia has seen a substantial drop in the number of households living below the upper national poverty line, more than 2 percent of the population still lives in extreme poverty, which means that daily consumption does not go far beyond the basic nutritional inputs defined by the Food and Agriculture Organization (FAO).

The interpretation of deprivations in this dimension goes beyond financial means to describe the ability of every single individual and household to participate in and contribute to society. The indicator on “living life in dignity” evaluates welfare status at a subjective level and thus combines an absolute measure with the perception of being poor. A household is deprived if it does not have enough funds to buy very basic items like food or clothing that are crucial to personal dignity and functioning in society.

A primary purpose of any poverty alleviation strategy is to ensure that individuals who are marginally above the poverty threshold (often labelled as vulnerable) do not have to depend too much on external sources to sustain their living standards. Otherwise, any progress on poverty reduction can be swiftly lost because of 6