Income-Dependent Equivalence Scales and Choice Theory: Implications for Poverty Measurement

Abstract

The study of poverty is at the heart of economics, and the goal of overcoming it drives the efforts of policy-makers worldwide. Meeting such goals requires confidence (a) in the tools we have to measure poverty, and (b) in our understanding of the determinants of poverty. Here, we focus on the role of household composition in the measurement and analysis of poverty. After presenting some core concepts, we suggest new directions for further research. We offer a survey of evidence showing that, compared to richer households, poorer multimember households may have a disadvantage in obtaining and sharing public within-household goods such as housing, heating, and means of transportation. Therefore, commonly accepted tools for measuring poverty may underestimate its intensity and may hide some of its key determinants.