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Income poverty measurement in India: defining group-specific poverty lines or taking preferences into account?

Author

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  • Aditi Dimri

    (University of Warwick)

  • François Maniquet

    (Université Catholique de Louvain)

Abstract

We study absolute income poverty measurement when households differ in preferences and face different prices. The difficulty arising from price heterogeneity is typically solved using equivalent income, but the choice of the reference price vector remains arbitrary. We provide a way to solve this arbitrariness problem by making the poverty measure consistent with preferences: a household qualifies as poor if and only if she prefers the poverty line bundle to her current consumption bundle. We then prove that defining group/region specific poverty lines is another way of recovering consistency with preferences, provided one uses the headcount ratio. Comparing the resulting three approaches using Indian data, we show that the different approaches lead to different poverty conclusions. We find that not taking preferences into account leads to severely underestimating urban poverty.

Suggested Citation

  • Aditi Dimri & François Maniquet, 2020. "Income poverty measurement in India: defining group-specific poverty lines or taking preferences into account?," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(2), pages 137-156, June.
  • Handle: RePEc:spr:joecin:v:18:y:2020:i:2:d:10.1007_s10888-019-09434-6
    DOI: 10.1007/s10888-019-09434-6
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    Cited by:

    1. Decerf,Benoit Marie A & Ferrando,Mery & Quinn,Natalie N., 2021. "Global Income Poverty Measurement with Preference Heterogeneity : Theory and Application," Policy Research Working Paper Series 9844, The World Bank.
    2. Domenico Moramarco & François Maniquet, 2022. "On the measurement of well-being with reference consumption," Working Papers 629, ECINEQ, Society for the Study of Economic Inequality.
    3. François Maniquet & Domenico Moramarco, 2022. "On the Measurement of Well-Being with Reference Consumption," Working Papers ECARES 2022-41, ULB -- Universite Libre de Bruxelles.

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