In the past two decades, Thailand experienced a prolonged economic boom followed by a collapse. During the boom the incidence of absolute poverty fell dramatically but relative inequality increased. The collapse of 1997 had the reverse effects. The poor became significantly worse off in an absolute sense but proportionately less so than the rich; inequality thus declined. The significance of these events depends on a fundamental question: does the welfare of the poor depend on their absolute standard of living, as reflected in measures of poverty incidence, or on their position relative to the rich, as reflected in measures of inequality?
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