@techreport{9771d970cb9140d9afb07c7ab1fe5781,
title = "Global Income Poverty Measurement with Preference Heterogeneity: Theory and Application",
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.",
keywords = "Global Income Poverty, Preference Heterogeneity, Welfare-Consistency, Relative Poverty, Absolute Poverty",
author = "Benoit Decerf and Mery Ferrando and Natalie Quinn",
note = "CentER Dicussion Paper Nr. 2022-007",
year = "2022",
month = mar,
day = "14",
language = "English",
volume = "2022-007",
series = "CentER Discussion Paper",
publisher = "CentER, Center for Economic Research",
type = "WorkingPaper",
institution = "CentER, Center for Economic Research",
}