Publication: An Axiomatic Study Contrasting the Two Main Poverty Line Rules
Loading...
Date
2023-07-18
ISSN
Published
2023-07-18
Author(s)
Editor(s)
Abstract
The poverty line rule defines how the poverty line’s nominal monetary amount should be adjusted to prices and preferences. Official poverty lines are based on either of two main rules. “Objective” poverty lines capture the cost of a fixed list of achievements. “Welfaristic” poverty lines capture the cost of a fixed level of welfare. Longstanding debates oppose their respective proponents. This paper proposes the first axiomatic study contrasting these two types of poverty lines. The framework considers both heterogeneous prices and heterogeneous preferences. The results clarify the normative principles that differentiate them and shed some light on these debates. Which type of poverty line satisfies stronger versions of the axioms depends on the extent of preferences heterogeneity and thus on application for which poverty is monitored.
Link to Data Set
Citation
“Decerf, Benoit. 2023. An Axiomatic Study Contrasting the Two Main Poverty Line Rules. Policy Research Working Papers; 10519. © World Bank. http://hdl.handle.net/10986/40036 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Implications of Using Nonstandard Poverty Lines(Washington, DC: World Bank, 2023-05-15)Many developing countries’ official poverty methodologies rely on nonstandard poverty lines, which complicate poverty comparisons across space or time. The paper considers the case of the Arab Republic of Egypt, whose official poverty lines have two important nonstandard features. First, the line is neither absolute nor relative, but rather hybrid or “weakly relative.” Second, the poverty line’s implicit equivalence scales are not fixed, but are rather endogenous. This paper provides a conceptual and quantitative understanding of these two nonstandard features. The results reveal that the equivalence scale implicit in the official methodology is quantitatively very similar to the (simpler) per capita equivalence scale. Switching to a per capita equivalence scale would help address an implicit gender bias that the paper identifies in Egypt’s official poverty lines. The analysis shows that the official distribution of poverty across regions is very similar to that associated with a purely absolute line. In addition, the change in official poverty rates over the period analyzed (2015 to 2017/18) lies halfway between the larger increase captured by a purely absolute line (10 percentage points) and that captured by a purely relative measure (1 percentage point). However, the results show that these more standard poverty lines do not systematically perform better than the official methodology with respect to the identification of disadvantaged households.Publication Poverty Lines across the World(2010-04-01)National poverty lines vary greatly across the world, from under $1 per person per day to over $40 (at 2005 purchasing power parity). What accounts for these huge differences, and can they be understood within a common global definition of poverty? For all except the poorest countries, the absolute, nutrition-based, poverty lines found in practice tend to behave more like relative lines, in that they are higher for richer countries. Prevailing methods of setting absolute lines allow ample scope for such relativity, even when nutritional norms are common across countries. Both macro data on poverty lines across the world and micro data on subjective perceptions of poverty are consistent with a weak form of relativity that combines absolute consumption needs with social-inclusion needs that are positive for the poorest but rise with a country s mean consumption. The strong form of relativism favored by some developed countries -- whereby the line is set at a fixed proportion of the mean -- emerges as the limiting case for very rich countries.Publication Absolute and Relative Poverty Measurement(World Bank, Washington, DC, 2022-04)This paper reviews the debate opposing the absolute and relative approaches to monetary poverty measurement. The arguments for combining both approaches into a single “overall” monetary poverty measure are introduced. The most salient proposals of hybrid poverty lines are presented. Then, the reasons why specific poverty indices may be required when a hybrid line is used are discussed. The class of hierarchical poverty indices is described, focusing in particular on the hierarchical headcount ratio.Publication Estimating International Poverty Lines from Comparable National Thresholds(Washington, DC, 2016-03)World Bank's international poverty line of $1.90/day, at 2011 purchasing power parity, is based on a collection of national poverty lines, which were originally used to set the international poverty line of $1.25/day at 2005 purchasing power parity. This paper proposes an approach for estimating a more recent, complete, and comparable collection of national poverty thresholds from reported national poverty rates. The paper presents a set of international poverty lines based on this new database of national poverty lines. In contrast to the lines used to estimate the $1.90 international poverty line, this approach produces national poverty lines that are (1) consistent with national poverty rates, (2) expressed in common units, and (3) provide greater support to the estimated international poverty line. These national poverty lines are used to estimate an extreme international poverty line, and three higher lines that are more relevant for higher-income countries. A key finding provides evidence of the robustness and relevance of the $1.90 international poverty line as a measure of extreme poverty for low-income countries.Publication Unambiguous Trends Combining Absolute and Relative Income Poverty(Published by Oxford University Press on behalf of the World Bank, 2022-01-22)Over the period 1990–2015, many countries experienced a reduction in extreme absolute poverty and an increase in relative poverty. As a result, the global trend of “overall” income poverty, which combines absolute and relative poverty, may depend on arbitrary normative choices such as the priority given to the absolutely poor over the relatively poor. This article proves that, if one assumes that an individual who is absolutely poor is poorer than an individual who is only relatively poor, the overall poverty trend is sometimes independent of the priority parameter, even for cases for which absolute and relative poverty follow opposite trends. A survey conducted for this study suggests that this normative assumption collects broad support. This article applies overall poverty measures satisfying this assumption to assess the evolution of global poverty from 1990 to 2015. Results show that global overall poverty has been (at least) halved, regardless of the value chosen for the priority parameter.
Users also downloaded
Showing related downloaded files
Publication World Development Report 2004(World Bank, 2003)Too often, services fail poor people in access, in quality, and in affordability. But the fact that there are striking examples where basic services such as water, sanitation, health, education, and electricity do work for poor people means that governments and citizens can do a better job of providing them. Learning from success and understanding the sources of failure, this year’s World Development Report, argues that services can be improved by putting poor people at the center of service provision. How? By enabling the poor to monitor and discipline service providers, by amplifying their voice in policymaking, and by strengthening the incentives for providers to serve the poor. Freedom from illness and freedom from illiteracy are two of the most important ways poor people can escape from poverty. To achieve these goals, economic growth and financial resources are of course necessary, but they are not enough. The World Development Report provides a practical framework for making the services that contribute to human development work for poor people. With this framework, citizens, governments, and donors can take action and accelerate progress toward the common objective of poverty reduction, as specified in the Millennium Development Goals.Publication Democratic Republic of Congo Urbanization Review(Washington, DC: World Bank, 2018)The Democratic Republic of Congo has the third largest urban population in sub-Saharan Africa (estimated at 43% in 2016) after South Africa and Nigeria. It is expected to grow at a rate of 4.1% per year, which corresponds to an additional 1 million residents moving to cities every year. If this trend continues, the urban population could double in just 15 years. Thus, with a population of 12 million and a growth rate of 5.1% per year, Kinshasa is poised to become the most populous city in Africa by 2030. Such strong urban growth comes with two main challenges – the need to make cities livable and inclusive by meeting the high demand for social services, infrastructure, education, health, and other basic services; and the need to make cities more productive by addressing the lack of concentrated economic activity. The Urbanization Review of the Democratic Republic of Congo argues that the country is urbanizing at different rates and identifies five regions (East, South, Central, West and Congo Basin) that present specific challenges and opportunities. The Urbanization Review proposes policy options based on three sets of instruments, known as the three 'I's – Institutions, Infrastructures and Interventions – to help each region respond to its specific needs while reaping the benefits of economic agglomeration The Democratic Republic of the Congo is at a crossroads. The recent decline in commodity prices could constitute an opportunity for the country to diversify its economy and invest in the manufacturing sector. Now is an opportune time for Congolese decision-makers to invest in cities that can lead the country's structural transformation and facilitate greater integration with African and global markets. Such action would position the country well on the path to emergence.Publication Unlocking the Power of Healthy Longevity(Washington, DC: World Bank, 2024-09-12)Noncommunicable diseases (NCDs) are among the major health and development challenges of our time. Every year, about 41 million people die due to NCDs. This makes up about 74 percent of all deaths globally, the majority of which are in low- and middle-income countries (LMICs). Countless more people live with NCDs every day. Yet, NCDs are largely treatable and preventable. The risk of developing NCDs and deaths from them can both be lowered with appropriate attention to prevention and treatment. However, weak health systems and limited access to affordable care and information, especially in LMICs, contribute to lapses in seeking and receiving appropriate and timely care. This compendium is a compilation of 18 chapters, each exploring a different but related topic in the nexus of NCDs, human capital, and productivity. It is based on a series of analytical work taken up by the World Bank to support the Healthy Longevity Initiative (HLI) - a collaborative effort between the World Bank, the University of Toronto, and key academic and development partners including the Harvard University and the University of Washington. The HLI presents one of a growing set of efforts to increase the urgency of policy response to NCDs across the world.Publication Choosing Our Future(Washington, DC: World Bank, 2024-09-04)Education can propel faster and better climate action in two crucial ways. First, education can galvanize behavior change at scale - not just for tomorrow, but also for today. Second, education can unlock skills and innovation to shift economies onto greener trajectories for growth. At the same time, education needs to be protected from climate change. Extreme climate events and temperatures are already eroding hard-won progress on schooling and learning. Climate change is causing school closures, learning losses, and dropouts. These will turn into long-run inter-generational earnings losses putting into jeopardy education’s powerful potential for spurring poverty alleviation and economic growth. Governments can act now to adapt schools for climate change in cost-effective ways. This report outlines new data, evidence, and examples on how countries can harness education to propel climate action. It provides an actionable policy agenda to meet development, education, and climate goals together, recognizing that tackling climate change requires changes to individual beliefs, behaviors, and skills – changes that education is uniquely positioned to catalyze.Publication Finance and Prosperity 2024(Washington, DC: World Bank, 2024-08-29)While financial sector risks in the larger and higher per capita countries are moderate, half of lower-income countries face significant risks over the next 12 months. Nearly 70 percent of countries facing high financial sector risks are currently not adequately prepared to handle financial stress. The report also identifies a particular risk facing financial sectors in several countries: a large and growing exposure to sovereign debt. This exposure surged to its highest level in the past decade. Finally, the report looks at how countries can enable more climate finance through the banking sector without compromising on the important goals of financial sector stability and inclusion for underserved people.