Poverty lines in Theory and Practice (Martin Ravallion) Flashcards
(12 cards)
What is the Food-Energy Intake (FEI) method?
A: This method sets the poverty line at the income or expenditure level where average calorie intake equals a pre-defined nutritional requirement (e.g., 2,100 calories/day). It attempts to define the income needed to avoid undernourishment.
Q7: What are Ravallion’s main criticisms of the FEI method?
It can produce inconsistent poverty lines across regions due to differences in food prices, activity levels, or tastes.
It may wrongly label urban areas as “poorer” simply because they consume more expensive calories.
It lacks welfare consistency—two people with equal access to basic needs might be classified differently due to regional diet or preferences.
It can understate or overstate poverty in ways that contradict real economic conditions.
What is the Cost-of-Basic-Needs (CBN) method?
The CBN method defines a consumption bundle deemed sufficient to satisfy basic food and non-food needs, and sets the poverty line as the cost of that bundle. It’s more grounded in actual consumption patterns and local prices than the FEI method.
How does Ravallion suggest determining the non-food component in CBN?
Use the food share of households whose food expenditure equals the food poverty line to estimate the minimum non-food spending.
Set upper and lower bounds for total poverty lines based on logical assumptions about priorities (e.g., people prioritize basic shelter before extra food).
Ravallion uses Engel curves to model food shares and anchor the total poverty line more rigorously.
Why is setting the non-food component contentious?
There’s no clear consensus on what constitutes “basic” non-food needs.
Choices are often arbitrary or opaque, yet they significantly affect poverty statistics.
Cultural and contextual factors complicate standardization, and small changes in assumed food shares can lead to large differences in poverty lines.
What is the Minimum Income Question (MIQ)?
The MIQ asks individuals what minimum income they personally need to make ends meet. It directly taps into subjective perceptions of adequacy and can be used to estimate a socially-perceived poverty threshold.
What is the “subjective poverty line” (SPL)?
The SPL is the income level at which individuals, on average, perceive their income as just adequate. It is found by regressing MIQ responses on actual incomes and identifying the income where reported minimum equals actual income (the 45-degree crossing point).
What are some limitations of subjective poverty lines?
Responses to MIQ are often correlated with actual income, undermining objectivity.
Cultural expectations and reference groups influence answers, making comparisons difficult.
There is heterogeneity in what individuals consider “adequate,” complicating aggregation.
How does Ravallion adapt subjective methods for developing countries?
He suggests using qualitative indicators of perceived adequacy (e.g., “Do you have enough food?”) instead of directly asking about income.
Then, using probit models, these responses are linked to actual consumption data to infer a latent poverty threshold without relying on numerical income estimates.
Why is Ravallion critical of using fixed poverty lines across regions or time?
A: Fixed lines ignore price differences, public goods access, and cultural norms, potentially misrepresenting who is poor. Poverty lines must adjust for these factors to ensure meaningful comparisons.
How does the choice of poverty line affect policy decisions?
It influences:
Who qualifies for assistance,
Where resources are targeted, and
How effective economic growth appears at reducing poverty.
A poorly constructed line can misguide interventions and waste resources.
What is the authors Critical Stance points through the paper?
Throughout the paper, Ravallion is consistently:
Skeptical of mechanical or oversimplified methods (especially FEI), highlighting how they can mislead policy.
Supportive of methods grounded in normative and economic reasoning—especially CBN, when carefully implemented.
Empirical and cautious—he stresses robustness checks, sensitivity analyses (e.g., upper/lower bounds), and contextual appropriateness.
Committed to policy relevance—arguing that poorly defined poverty lines can misallocate resources and distort development goals.
