Global Income Poverty Measurement with Preference Heterogeneity: Theory and Application

Benoit Decerf, Mery Ferrando, Natalie Quinn

Research output: Working paperDiscussion paperOther research output

234 Downloads (Pure)

Abstract

There is growing support for using global income poverty measures that account for both own income and relative income. The World Bank has adopted a global line that depends on both. Unfortunately, with preference heterogeneity over own and relative income, the standard poverty indices are not necessarily reduced when a poor individual escapes poverty. We develop a theory of global poverty measurement with preference heterogeneity. Surprisingly, a simple modification of the headcount ratio encapsulates the main features of our theory, in contrast to all of the standard indices. Notably, our proposed index decreases if a poor individual escapes poverty when her income rises above the absolute line. This alternative index is ready to use, as it does not require eliciting preferences. For the period 1999-2015, our proposed index implies a global poverty reduction that is 50% higher than the current estimates based on the headcount ratio.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages93
Volume2022-007
Publication statusPublished - 14 Mar 2022

Publication series

NameCentER Discussion Paper
Volume2022-007

Keywords

  • Global Income Poverty
  • Preference Heterogeneity
  • Welfare-Consistency
  • Relative Poverty
  • Absolute Poverty

Fingerprint

Dive into the research topics of 'Global Income Poverty Measurement with Preference Heterogeneity: Theory and Application'. Together they form a unique fingerprint.

Cite this