Fair and Welfare-Consistent Global Income Poverty Measurement: Theory and Application

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

A new poverty indicator for Europe: The extended headcount ratio

“…The index defining our poverty measure is the extended headcount ratio (Decerf et al, 2021). The difference with the ‘standard’ headcount ratio is that the extended headcount ratio is not a clear headcount as it gives a higher weight to income shortfalls below the fixed threshold as compared to income shortfalls below the floating threshold.…”

“…Therefore, building on Decerf et al (2021), we propose a new income measure of poverty: the extended headcount ratio (EHC). 2 In our view, the indicator that we propose overcomes the aforementioned criticisms in a coherent way, while staying as close as possible to the indicators that are currently used in the EU to monitor poverty.…”

“…2.In Decerf et al (2021), the extended head-count ratio is referred to as the hierarchical head-count ratio.…”

Global Income Poverty Measurement with Preference Heterogeneity: Theory and Application

“…Hence, the escaping-poverty property is satisfied only if any only-relatively deprived individual is attributed a strictly smaller level of deprivation than any absolutely deprived individual, even if they live in societies with different values of median income. The view that only-relatively deprived individuals should always contribute a smaller amount to poverty than absolutely deprived individuals seems to be largely shared, as survey evidence suggests (Decerf and Ferrando, 2021).…”

“…6 A growing body of field and experimental evidence documents that social preferences are heterogeneous (Tversky and Griffin, 1991;Eckel and Grossman, 1998;Andreoni and Vesterlund, 2001;Blanco et al, 2011;Visser and Roelofs, 2011). evaluation of the global poverty trend at least as much as the design of the global line (Decerf and Ferrando, 2021).…”