A Multidimensional Approach to Subjective Poverty

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A Multi-dimensional Approach to Subjective Poverty

• Bernard van Praag Ada Ferrer-i-Carbonell
• Faculty of Economics and Econometrics, Tinbergen
  Institute, SCHOLAR,AIAS,
• University of Amsterdam

Many Dimensions of Poverty, Brasilia August 2005
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Subjective poverty

• Poverty is an individual feeling and not an
  objective status
• Operational definition of subjective poverty as
  being below a certain degree of satisfaction

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Multi-dimensional poverty

• We distinguish several domains of life, and
  consequently, several types of poverty.
• It is justified to see poverty as a
  multi-dimensional concept.
• Poverty 'with life as a whole' may be decomposed
  into poverty components with respect to life
  domains

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Literature

• Goedhart, Halberstadt, Kapteyn, van Praag,
  1977. The Poverty Line Concept and Measurement.
  The Journal of Human Resources, 12 503-520
• Pradhan Ravallion, 2000. Measuring poverty
  using qualitative perceptions of consumption
  adequacy. Review of Economics and Statistics, 82
  462-471.
• Van Praag Ferrer-i-Carbonell, 2004. Happiness
  Quantified A Satisfaction Calculus approach.
  Oxford University Press, Oxford UK.

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Satisfaction question module
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Subjective poverty

• i-poor
• My satisfaction with my financial situation is
  evaluated by i (i3,4,5,6,)
• Different poverty classes, e.g.
• Extremely poor lt4
• Poor 4
• On the margin of being poor 5

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Latent Variable Satisfaction
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Estimation by Probit of ? and ß

• Poverty border lines
• Other domains (health, job,etc) are described by
  latent domain satisfaction variables
• with thresholds

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Two layer model
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Aggregate General Satisfaction with life

• .
• Poverty is multi-dimensional
• Domain poverties are correlated but much less
  than perfect (R2?0.5)
• Overall poverty may be defined
• Aggregate of domain poverties