Economics Welfare Economics Questions Medium
There are several different approaches to measuring poverty in welfare economics. These approaches can be broadly categorized into two main types: absolute poverty measures and relative poverty measures.
1. Absolute poverty measures: These measures define poverty based on a fixed threshold or poverty line, which represents the minimum level of income or consumption necessary to meet basic needs. The most commonly used absolute poverty measure is the poverty line approach, which sets a specific income or consumption level below which individuals or households are considered to be in poverty. This approach is often used in developing countries where basic needs may be more easily defined.
2. Relative poverty measures: These measures define poverty in relation to the overall distribution of income or consumption within a society. Instead of using a fixed threshold, relative poverty measures compare individuals or households to the average or median income or consumption level in a given society. The most commonly used relative poverty measure is the relative income or consumption approach, which sets a poverty line at a certain percentage (e.g., 50% or 60%) of the median income or consumption level. This approach is often used in developed countries where the focus is on income inequality and social inclusion.
In addition to these two main approaches, there are also other measures that take into account multidimensional aspects of poverty, such as the Human Development Index (HDI) and the Multidimensional Poverty Index (MPI). These measures consider not only income or consumption, but also other dimensions of well-being, such as education, health, and living standards.
It is important to note that each approach has its own strengths and limitations, and the choice of measure depends on the specific context and objectives of the analysis.