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Income poverty measures with relative poverty lines

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  • DECERF, Benoit

    (Université catholique de Louvain, CORE, Belgium; Bielefeld University, Germany.)

Abstract

I derive poverty indices taking into account both the absolute and relative aspects of income well-being. The trade-off made by the social planner between those two aspects is captured at individual level by a well-being ordering. This ordering evaluates the well-being of an agent based on her income and a reference statistic on the income distribution, typically the mean. A family of poverty indices respecting the judgements held in the ordering is axiomatically characterized. Then, I study the consequences of requiring the poverty indices to grant a minimal precedence to the absolute over the relative aspect of income well-being. This compelling requirement has strong implications. In particular, the Poverty Gap Ratio is the only index in the popular Foster-Greer-Thorbecke family to satisfy it.

Suggested Citation

  • DECERF, Benoit, 2014. "Income poverty measures with relative poverty lines," LIDAM Discussion Papers CORE 2014022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2014022
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    References listed on IDEAS

    as
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    Keywords

    relative poverty; absolute poverty; income poverty; poverty gap ratio;
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