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On the welfarist rationale for relative poverty lines

  • Ravallion, Martin

The theory and evidence supporting a relativist approach to poverty measurement are critically reviewed. Various sources of welfare interdependence are identified, including the idea of"relative deprivation"as well other (positive and negative) welfare effects for poor people of belonging to a better-off group. An economic model combines informal risk sharing with the idea of a"positional good,"and conditions are derived in which the relative deprivation effect dominates, implying a relative poverty measure. The paper then reviews the problems encountered in testing for welfare effects of relative deprivation and discusses the implications of micro evidence from Malawi. The results are consistent with the emphasis given to absolute level of living in development policy discussions. However, relative deprivation is still evident in the data from this poor but unequal country, and it is likely to become a more important factor as the country develops.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4486.

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Date of creation: 01 Jan 2008
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Handle: RePEc:wbk:wbrwps:4486
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  1. Groot, Wim, 2000. "Adaptation and scale of reference bias in self-assessments of quality of life," Journal of Health Economics, Elsevier, vol. 19(3), pages 403-420, May.
  2. J. Solnick, Sara & Hemenway, David, 1998. "Is more always better?: A survey on positional concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 37(3), pages 373-383, November.
  3. Maitra, Pushkar & Ray, Ranjan, 2003. "The effect of transfers on household expenditure patterns and poverty in South Africa," Journal of Development Economics, Elsevier, vol. 71(1), pages 23-49, June.
  4. de Janvry, Alain & Sadoulet, Elisabeth & Winters, Paul C. & Murgai, Rinku, 2000. "Localized and Incomplete Mutual Insurance," Working Papers 12905, University of New England, School of Economics.
  5. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
  6. Hagenaars, Aldi J M & van Praag, Bernard M S, 1985. "A Synthesis of Poverty Line Definitions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(2), pages 139-54, June.
  7. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975, July.
  8. McBride, Michael, 2001. "Relative-income effects on subjective well-being in the cross-section," Journal of Economic Behavior & Organization, Elsevier, vol. 45(3), pages 251-278, July.
  9. Kapteyn, A.J., 1994. "The measurement of household cost functions : Revealed preference versus subjective measures," Discussion Paper 1994-3, Tilburg University, Center for Economic Research.
  10. Jyotsna Jalan & Martin Ravallion, 1998. "Geographic Poverty Traps?," Boston University - Institute for Economic Development 86, Boston University, Institute for Economic Development.
  11. Ravallion, Martin & Lokshin, Michael, 2001. "Identifying Welfare Effects from Subjective Questions," Economica, London School of Economics and Political Science, vol. 68(271), pages 335-57, August.
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