Chapter Poverty Lines

The poor are those whose expenditure (or income) falls below a poverty line. This chapter explains how poverty lines are constructed and discusses the strengths and weaknesses of defining poverty lines based on three methods: the cost of basic needs, food energy intake, and subjective evaluations. The construction of a poverty line is the most difficult step in the practical measurement of poverty. The cost of basic needs approach is most commonly used. It first estimates the cost of acquiring enough food for adequate nutrition—usually 2,100 Calories per person per day—and then adds the cost of other essentials such as clothing and shelter. When price information is unavailable, the food energy intake method can be used. This method plots expenditure (or income) per capita against food consumption (in calo-ries per person per day) to determine the expenditure (or income) level at which a household acquires enough food. Subjective poverty lines are based on asking people what minimum income level is needed just to make ends meet. An absolute poverty line remains fixed over time, adjusted only for inflation, as in the United States. It allows the evolution of poverty over time to be tracked, and is also useful when evaluating the effects of policies and programs on the incidence of poverty. However, in most countries, poverty lines are revised from time to time, reflecting the evolution of social consensus about what constitutes poverty. Poverty lines that are revised in this way allow relative poverty to be measured, but not absolute poverty. The choice of poverty line depends on the use to which it will be put: thus, for international comparisons, the $1/day standard is helpful, while for targetin