How we measure poverty underestimates its extent and depth

Abstract

The country’s official definition of poverty is based on a threshold income that fails to adequately account for nonfood needs and is unrelated to actual behavior and real choices facing households. The resulting underestimation of the extent of poverty and rate of poverty reduction gives a false sense of comfort to policy-makers. Other sources of data particularly those on nutrition, education, and housing corroborate the existing gap between reality and official measures. After a critical look at existing methods, this paper proposes alternative thresholds of absolute poverty, with special attention to housing, that may provide a more accurate picture of the incidence and extent of the remaining poverty in the country.

JEL Codes: I32, I24, R31