Testing Poverty Lines

23 Pages Posted: 16 Aug 2006

See all articles by Martin Ravallion

Martin Ravallion

Georgetown University

Michael Lokshin

World Bank - Development Research Group (DECRG); National Research University Higher School of Economics

Abstract

In theory, a poverty line can be defined as the cost of a common (inter-personally comparable) utility level across a population. But how can one know if this holds in practice? For groups sharing common consumption needs but facing different prices, the theory of revealed preference can be used to derive testable implications of utility consistency knowing only the "poverty bundles" and their prices. Heterogeneity in needs calls for extra information. We argue that subjective welfare data offer a credible means of testing utility consistency across different needs groups. A case study of Russia's official poverty lines shows how revealed preference tests can be used in conjunction with qualitative information on needs heterogeneity. The results lead us to question the utility consistency of Russia's official poverty lines.

Suggested Citation

Ravallion, Martin and Lokshin, Michael, Testing Poverty Lines. Review of Income and Wealth, Vol. 52, No. 3, pp. 399-421, September 2006. Available at SSRN: https://ssrn.com/abstract=924477 or http://dx.doi.org/10.1111/j.1475-4991.2006.00196.x

Martin Ravallion (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States

Michael Lokshin

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-1772 (Phone)
202-522-1153 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/mlokshin

National Research University Higher School of Economics

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

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