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Understanding Subjective Poverty Through a Multi-Dimensional Approach

This paper by Bernard van Praag and Ada Ferrer-i-Carbonell explores the concept of subjective poverty as an individual's perception of satisfaction in various life domains. Unlike traditional views that define poverty objectively, this study emphasizes how poverty is a feeling influenced by multiple factors, including financial stability, health, and job satisfaction. By establishing a framework that decomposes overall poverty into specific components, it highlights the complexity of poverty and the importance of considering individual experiences and satisfaction levels in poverty assessments.

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Understanding Subjective Poverty Through a Multi-Dimensional Approach

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  1. A Multi-dimensional Approach to Subjective Poverty Bernard van Praag & Ada Ferrer-i-Carbonell Faculty of Economics and Econometrics, Tinbergen Institute, SCHOLAR,AIAS, University of Amsterdam Many Dimensions of Poverty, Brasilia August 2005

  2. Subjective poverty • Poverty is an individual feeling and not an objective status • Operational definition of subjective poverty as being below a certain degree of satisfaction

  3. Multi-dimensional poverty • We distinguish several domains of life, and consequently, several types of poverty. • It is justified to see poverty as a multi-dimensional concept. • Poverty 'with life as a whole' may be decomposed into poverty components with respect to life domains

  4. Literature Goedhart, Halberstadt, Kapteyn, & van Praag, 1977. The Poverty Line: Concept and Measurement. The Journal of Human Resources, 12: 503-520 Pradhan & Ravallion, 2000. Measuring poverty using qualitative perceptions of consumption adequacy. Review of Economics and Statistics, 82: 462-471. Van Praag & Ferrer-i-Carbonell, 2004. Happiness Quantified: A Satisfaction Calculus approach. Oxford University Press, Oxford: UK.

  5. Satisfaction question module

  6. Subjective poverty i-poor My satisfaction with my financial situation is evaluated by i (i=3,4,5,6,…) Different poverty classes, e.g.: Extremely poor <4 Poor =4 On the margin of being poor =5

  7. Latent Variable Satisfaction

  8. Estimation by Probit of  and β • Poverty border lines: • Other domains (health, job,etc) are described by latent domain satisfaction variables : with thresholds:

  9. Two layer model

  10. Aggregate: General Satisfaction with life • . • Poverty is multi-dimensional • Domain poverties are correlated but much less than perfect (R20.5) • Overall poverty may be defined • Aggregate of domain poverties

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