Measuring Poverty: Theoretical and Empirical Considerations

Abstract

This article discusses the theoretical underpinnings of different types of income poverty measures—absolute, relative, and a National Academy of Sciences (NAS) "quasi-relative" one—and empirically assesses them by tracking their performance over time and across demographic groups. Part of the assessment involves comparing these measures to subjective notions of poverty and nonincome hardship indicators. Overall, each of the income poverty measures is informative and should be viewed as a complementary source of information about people's economic well-being. The author's view, however, is that the quasi-relative poverty measure recommended by the NAS panel is the single most informative measure because of its theoretical attributes and its empirical performance thus far, although clearly more research on its empirical performance over time is necessary.