Contrasting Monetary and non-monetary measures of poverty in developing countries: a survey

Abstract

While the study of poverty is popular amongst academia, there is yet to be a consensus on what defines such a phenomenon. Basing their arguments on different conceptual frameworks, some argue for a definition in monetary terms, as a lack of income or consumption, while others support a non-monetary approach focusing on shortcomings in diverse dimensions (health, education, nutrition…). Does it really matter that researchers do not agree on a definition of a poverty? Probing the empirical literature comparing monetary and non-monetary poverty in developing countries, this survey argues that different definitions of poverty lead to different populations identified as poor. Indeed, cross-tabulating poverty headcounts, it finds that a sizable portion of the non-monetary poor are excluded by the monetary approach. Moving to a subgroup level, it finds nonmonetary poverty amongst the monetary richest, and considerable disagreements with regards to poverty risks. In addition, these significant differences are not resolved when switching to a dynamic setting through panel studies. Policy implications are important: the risk mistargeting and misevaluation of policies is high if we do not consider both approaches concomitantly without one taking precedence over the other.