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Should poverty be measured using an "absolute" or a "relative" approach? This ageold question in poverty measurement is once again on the agenda, due to the ambitious proposals of Patricia Ruggles (1990) and the National Research Council of the National Academy of Sciences (Constance Citro and Robert Michael, 1995) to alter the way U.S. poverty is measured. Their wide-ranging suggestions include a new "hybrid" approach to setting the poverty threshold that, unlike the current absolute method, is sensitive to changes in the general living standard, but less sensitive than a purely relative approach. The proposals also recommend using aggregate indexes of poverty beyond the usual "headcounts," such as well-known "gap" measures and indicators of the distribution of resources among the poor. Important relative notions of poverty enter at this "aggregation" step as well. The effects of the various recommendations on the trend and cross-sectional profiles of poverty are actively being explored (see e.g., David Betson and Jennifer Warlick, 1997; Thesia Garner et al., 1997; David Johnson et al., 1997). At the same time it may prove useful to consider some of the conceptual measurement issues arising from the proposals. This is the direction taken in the present study.
This paper evaluates the multiple notions of relative and absolute poverty that arise in choosing poverty lines and in aggregating the data into an overall index of poverty. A general taxonomy is presented, and the question of robust comparisons is addressed within this general framework. Special attention is paid to distinguishing between (i) the general concept underlying the poverty line and (ii) the particular cutoff chosen. The paper concludes with a discussion of "hybrid" poverty lines and the associated parameter that is likely to play a key role in future discussions: the income elasticity of the poverty line.
I. Elements
Poverty measurement is based on a comparison of resources to needs. A person or family is identified as poor if its resources fall short of the poverty threshold. The data on families are then aggregated to obtain an overall view of poverty.
As for the "aggregation step," most U.S. studies report poverty levels for the demographic groups and then aggregate to obtain an overall level of poverty. Thus, they implicitly take the poverty index to be "decomposable"...