Reference Groups and the Poverty Line: An Axiomatic Approach with an Empirical Illustration

Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting

ISBN: 978-1-78560-994-7, eISBN: 978-1-78560-993-0

ISSN: 1049-2585

Publication date: 16 November 2016

Abstract

A recent trend in the study of poverty is to consider a relative poverty line, one that is responsive to the nature of the income distribution. We develop an axiomatic approach to the determination of an amalgam poverty line. Given a reference income (e.g., the mean or the median), the amalgam poverty line becomes a weighted average of the absolute poverty line and the reference income, where the weights depend on the policy maker’s preferences for aggregating the two components. The paper ends with an empirical illustration comparing urban and rural areas in the People’s Republic of China and India.

Keywords

Acknowledgements

Acknowledgments

For comments and suggestions, the authors first thank participants to the ADB (Asian Development Bank) International Workshop on “Untold side of the Asian Poverty Reduction Story,” Southwest University, People’s Republic of China, November 19–20, 2013, in particular B. Zheng for helpful discussions and comments. The authors also wish to thank Bhaskar Dutta and participants to the UNU-WIDER Development Conference on “Inequality – measurement, trends, impacts, and policies,” Helsinki, September 5–6, 2014. Finally the authors are grateful to Iva Sebastian-Samaniego of the Asian Development Bank for helping them with the computations based on the Shorrocks-Wan algorithm.

Citation

Chakravarty, S., Chattopadhyay, N., Deutsch, J., Nissanov, Z. and Silber, J. (2016), "Reference Groups and the Poverty Line: An Axiomatic Approach with an Empirical Illustration", Inequality after the 20th Century: Papers from the Sixth ECINEQ Meeting (Research on Economic Inequality, Vol. 24), Emerald Group Publishing Limited, pp. 1-27. https://doi.org/10.1108/S1049-258520160000024002

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