Towards a Multidimensional Poverty Index for Germany

This paper compiles a multidimensional poverty index for Germany. Drawing on the
capability approach as conceptual framework, I apply the Alkire-Foster method using
German panel data. I suggest new operationalizations for two dimensions: social
participation and practical reason, the latter drawing on recent findings in experimental
economics. The results are consistent with earlier findings, but also reveal several new
insights. Specifically, numerous decompositions of the poverty index prove helpful in
better tracking and understanding developments. Moreover, I find poor individuals
to be adversely affected by general trends in deprivation indicators. Comparing
multidimensional and income-based methods, I find only a modest overlap of people
considered as poor by both approaches. Moreover, I address the role of income as a
dimension in multidimensional poverty indices.