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Estimating Utility-Consistent Poverty Lines with Applications to Egypt and Mozambique

Sponsor:  Thematic Group on Poverty Impact Analysis, Monitoring and Evaluation

Presenter:  Channing Arndt (Purdue University)

When:  November 5, 12:30 - 2:00pm


Absolute poverty lines indicate the threshold level of welfare that separates the poor from the nonpoor, and also serve as deflators that permit inter-group or inter-temporal welfare comparisons. A fundamental premise of absolute poverty lines is that they represent the same level of utility over time and space. Yet, a series of recent studies in middle- and low-income countries have shown that even carefully derived poverty lines rarely satisfy this premise, and are thus utility-inconsistent. This paper by Channing Arndt and Ken Simler proposes an information theoretic approach to estimating utility-consistent poverty lines, building upon the Cost of Basic Needs (CBN) method. The practical application of the approach is illustrated using survey data from Egypt and Mozambique. The proposed approach provides a general method for ensuring the utility consistency of poverty lines, and enhances both the consistency and the specificity of CBN poverty lines.

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