Poverty Measurement with Ordinal Data

Abstract:     
The Foster, Greer, Thorbecke (1984) class nests several of the most widely used measures in theoretical and empirical work on economic poverty. Use of this general class of measures, however, presupposes a dimension of well-being that, like income, is cardinally measurable. Responding to recent interest in dimensions of well-being where achievements are recorded on an ordinal scale, this paper develops counterparts to the popular FGT measures that are still meaningful when applied to ordinal data. The resulting ordinal FGT measures retain the simplicity of the classical FGT measures and also many of their desirable features, including additive decomposability. This paper also develops ordinal analogues of the core axioms from the literature on economic poverty, and demonstrates that the ordinal FGT measures indeed satisfy these core axioms. Moreover, new dominance conditions, which allow for poverty rankings that are robust with respect to the choice of poverty line, are established. Lastly, the ordinal FGT measures are illustrated using self-reported data on health status in Canada and the United States.

Number of Pages in PDF File: 27

Keywords: poverty measurement, ordinal data, FGT poverty measures, social welfare, dominance conditions

JEL Classification: I3, I32, D63, O1

working papers series