Professional Documents
Culture Documents
Buhong Zheng
University of Colorado at Denver
Abstract. The way poverty is measured is important for an understanding of
what has happened to poverty as well as for anti-poverty policy evaluation. Sen’s
(1976) pathfinding work has motivated many researchers to focus on the way
poverty should be measured. A poverty measure, argued by Sen, should satisfy
certain properties or axioms and the desirability of a poverty measure should be
evaluated by these axioms. During the last two decades, many researchers have
adopted the axiomatic approach pioneered by Sen to propose additional axioms
and develop alternative poverty measures. The objective of this survey is to
provide a clarification on the extensive literature of aggregate poverty measures.
In this survey, we first examine the desirability of each axiom, the properties of
each poverty measure, and the interrelationships among axioms. The desirability
of an axiom cannot be evaluated in isolation, and some combination of axioms
may make it impossible to devise a satisfactory poverty measure; some axioms
can be implied by other axioms combined and so are not independent; some
others are ad hoc and are disqualified as axioms for poverty measurement. Based
on the interactions among axioms, we identify the ‘core’ axioms which together
have a strong implication on the functional form of a poverty measure. We then
review poverty measures that have appeared in the literature, evaluating the
interrelationships among different measures, and examining the properties of
each measure. The axioms each measure satisfies/violates are also summarized in
a tabular form. Several ‘good’ poverty measures, which have not been
documented by previous surveys, are also included.
Keywords. Poverty measurement; axiom; poverty measure; interrelationship;
distribution-sensitive; deprivation
A decent provision for the poor is the true test of civilization… . The
condition of the lower orders, the poor especially, was the true mark of
national discrimination.
(Samuel Johnson, 1770)1
1. Introduction
Poverty is in the news every year, especially when the U.S. Bureau of the Census
releases the poverty statistics for the previous year. The problem of poverty in the
U.S. became much more publicly recognized with Michael Harrington’s (1962)
vivid description of the plight of the poor and Lyndon Johnson’s declaration of the
war on poverty almost three decades ago. The concept of poverty seems
straightforward and not in need of ‘elaborate criteria, cunning measurement, or
probing analysis’ (Sen, 1981) in order to recognize or understand it. However,
when the focus on poverty is moved away from the extreme situation, i.e.,
starvation and famine, the answers to many ‘seemingly’ simple questions may not
be readily available and are far from obvious. What exactly do we mean by
poverty in countries such as the United States and Western Europe? In what sense
do we mean that poverty of a nation has increased over a certain time period?
These questions have generated a great deal of controversy, and scholars have
devoted many volumes to address the related issues. The first question is generally
referred to as the ‘perception of poverty’ — identification of poverty. Research on
the second question is called the ‘measurement of poverty’ — the aggregation of
individual poverty. The objective of this survey is to provide a clarification of the
extensive literature on aggregate poverty measures.
1.1 The importance of the way poverty is measured: the aggregation of poverty
Over the past three decades in the U.S., many policies have been designed to help
the people on the lower part of the income scale; Aid to Families with Dependent
Children (AFDC), Medicaid, and housing subsidies are typical examples. At the
same time, many anti-poverty policies have also been abolished for not properly
functioning. Here one critical question emerges: how do we measure the efficacy
of an anti-poverty policy, or, more fundamentally, how should we measure the
poverty level of a community and its changes? The measure that has been used by
most countries, including the United States, the United Kingdom, and the United
Nations is the headcount ratio — the fraction of people below the poverty line.
This measure was criticized by Watts (1968) and Sen (1976) for not considering
the income distribution of the poor. Sen was a pioneer in the study of poverty
measurement. His path-breaking work (1976) has motivated many scholars to
focus on the way poverty should be measured. The way poverty is measured is
important for an understanding of poverty as well as for policy evaluation,
because the efficacy of anti-poverty policies is evaluated by observing the changes
in poverty statistics.
The headcount ratio and another often-mentioned measure, the income gap
ratio, which is the gap between the poverty line and the average income of the
poor, may be misleading in indicating poverty status. Consider the comparison of
poverty between two regions of the same population size. Imagine first that they
have the same number of people below the common poverty line but the poor in
the first region have almost no income while the poor in the second region are just
marginally poor. It can be well argued that poverty in the second region is much
less serious than in the first region. However, the headcount ratio will indicate that
the two regions are equivalent in terms of poverty. Also imagine that the first
region has only one person below the poverty line while the second has only one
above the poverty line but the mean incomes of the poor are the same. In this case
it can be strongly defended that the first region should have much less poverty
than the second region (assuming there are at least three people in each region).
However, the income gap ratio will judge them to have the same poverty level.
Any combined measure of the headcount ratio and income gap ratio, though it
may avoid the above absurd judgements, fails to reflect the difference between
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AGGREGATE POVERTY MEASURES 125
two income distributions among the poor. For instance, if two regions have the
same number of the poor and the same mean income of the poor, any combined
measure will show an equivalence in their poverty levels regardless of how
income is distributed. In a case where the poverty line is far away from the
‘hunger line,’ if income is equally distributed in one distribution but is shared by a
few marginally poor in the other distribution, it can be well argued that the one
with equal distribution has less poverty. A distribution-sensitive measure, which
considers the income distribution of the poor, may present a better picture of
poverty intensity and its changes.
The headcount ratio and income gap ratio also fail to accurately evaluate the
efficacy of anti-poverty policies. The headcount ratio only records those anti-
poverty policies which bring people out of poverty, i.e., only poverty-eliminating
policies rather than any poverty-alleviating policies. As a consequence, the
effectiveness of many anti-poverty policies cannot be accurately recorded because
most policies such as AFDC are not designed to lift the poor out of poverty. The
income gap ratio only record any policies that change the mean income of the
poor. It does not distinguish any anti-poverty policies which aim at helping the
bottom poor from others that help poor in general (e.g., the housing subsidies).
The income gap ratio may also record an increase in the poverty level when some
poor are lifted out of poverty or indicate a decrease in the poverty level when the
poverty line is adjusted up. For a distribution-sensitive poverty measure, the
efforts of any anti-poverty policies, eliminating, alleviating or redistributing, will
be reflected in the overall poverty changes.
Parallel to the above arguments, the headcount ratio, income gap ratio or their
combinations, and the distribution-sensitive measures may imply different anti-
poverty strategies for an administration. To maximally alleviate poverty has been
one of major goals for administrations since the war on poverty began, especially
in the early years. A simple problem facing an administration is to minimize the
poverty level, given the constraint of limited resources. Assuming no other
constraints and that all poor are identical in other characteristics, it can easily be
seen that the headcount ratio always has the tendency to channel the aid to the poor
person next to the poverty line, i.e., the least needy person first and the most needy
person last. The income gap ratio will suggest no specific direction for policies as
long as no poor person crosses the poverty line. In contrast, any distribution-
sensitive poverty measure will channel assistance income to the poorest person
first, the least poor last. The scheme works as follows: income is given to the
poorest person until his income equals the next poorest person, then income is
distributed to these two equal poor persons equally until each person’s income
equal the third poorest person’s income. This pattern is repeated until all assistance
income is distributed. Therefore, only distribution-sensitive poverty measures may
lead to both horizontally and vertically equitable anti-poverty policies.
conditions. To some degree, Jenkins and Lambert (1993b) also allowed the
poverty lines to be different among different distributions. Foster and Shorrocks
(1988a, 1988b) and Foster and Jin (1994) addressed the second dimension of
poverty orderings and provide important insights on poverty orderings. Atkinson
(1992) and Jenkins and Lambert (1993a) derived useful dominance algorithms for
the third dimension of poverty orderings.
2. Poverty axioms
be considered as the poor since no effort whatever will be needed to make them
nonpoor (any small amount of additional income, say a penny, will do the trick).
Hence, unlike Seidl (1988) and Chakravarty (1990), we use the weak definition of
the poor throughout the survey and keep all discussions on the strong definition of
the poor in footnotes. By so doing, the discussion and presentation are also greatly
simplified.
The population size corresponding to x is n(x) (or n), the number of poor
q(x; z) (or q), the mean income of the poor is µ p (x; z) (or µ p ), and the income
variance of the poor is σ 2 (x; z).
Several other concepts are often used in the discussion of poverty measurement:
Permutation: x D is obtained from y D by a permutation if x = yπ n (x ) × n ( x)
for some permutation matrix π n (x ) × n (x ) . A permutation matrix has elements of 0
and 1 only and each row and column sums up to one.
Replication: x D is obtained from y D by a (k − ) replication if
n(x) = k · n( y) and x = ( y, y, …, y) for some positive integer k.
Simple increment (decrement): x D is obtained from y D by a simple
increment (decrement) to a person j if xi = y i for all i % j and xj > yj (xj < yj ).
Progressive (regressive) transfer: x D is obtained from y D by a
progressive (regressive) transfer if there exists i and j, i < j, such that
xi − yi = yj − xj > 0 (<0), xj > yi and xk = yk for all k % i, j.
Relative change: (x,; z, ) D × D is obtained from (x; z) D × D by a relative
change if (x,; z, ) = λ(x; z) for some positive λ.
Absolute change: (x,; z, ) D × D is obtained from (x; z) D × D by an
absolute change if (x,; z, ) = (x; z) + (λ1 1 × n (x) ; λ) for some positive λ, where
1 1 × n (x) is a 1 × n(x) vector of ones.
A poverty measure, according to Watts (1968), is a function of individual
incomes and the poverty line. Associated with this concept, the terms poverty
value, poverty index, poverty level and the distribution-sensitive poverty measure
are also used in the literature. A formal definition of these terms is as follows: 5
Definition: A poverty measure is a function P(x; z): D × D 2 R + whose value
— poverty value — indicates the degree of poverty intensity, or poverty level,
associated with the distribution x and the poverty line z, where R + is the non-
negative real number set. Therefore, for a given poverty measure and poverty line,
each income distribution is assigned a numerical number — poverty index. A
distribution-sensitive poverty measure is a poverty measure that satisfies the
minimal transfer axiom (to be introduced below).
The functional form of a poverty measure depends largely upon what we want
to know about poverty. One has to first set up the purpose of measurement, then
find a suitable measure within the framework. The axiomatic approach first used
by Sen (1976) fits this framework. Following Sen’s tradition, scholars specify the
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130 BUHONG ZHENG
The third axiom Sen (1976) proposed was the transfer axiom which requires the
poverty measure to be sensitive to the redistribution of the income within the
poor. 17 Donaldson and Weymark (1986) distinguished four different transfer
axioms by incorporating the possible effects and directions of transfers.
Minimal Transfer Axiom: P(x; z) < P( y; z) (P(x; z) > P( y; z)) whenever
x D is obtained from y D by a progressive (regressive) transfer between two
poor persons with no one crossing the poverty line as a consequence of the
transfer.
Weak Transfer Axiom: P(x; z) < P( y; z) (P(x; z) > P( y; z)) whenever x D is
obtained from y D by a progressive (regressive) transfer with at least the
recipient (donor) being poor with no one crossing the poverty line as a
consequence of the transfer.
Regressive Transfer Axiom: P(x; z) > P( y; z) whenever x D is obtained from
y D by a regressive transfer with at least the donor being poor.
Progressive Transfer Axiom: P(x; z) < P( y; z) whenever x D is obtained
from y D by a progressive transfer with at least the recipient being poor. 18,19
The core of these four transfer axioms is that an equalizing transfer (from a
richer person to a poor person) should decrease the poverty value, while a
disequalizing transfer (from a poor person to a richer person) should increase the
poverty value. By definition, minimal transfer is the weakest form among these
four axioms while progressive transfer is the strongest form, i.e., progressive
transfer ⇒ regressive transfer ⇒ weak transfer ⇒ minimal transfer.
The difference between the weak forms (minimal transfer and weak transfer)
and the strong forms (regressive transfer and progressive transfer) lies in whether
the transfer makes anyone cross the poverty line. The difference between minimal
transfer and weak transfer is that minimal transfer restricts the transfers within
the poor group (and, of course, no one becomes nonpoor from the transfer) while
weak transfer extends to include the transfers between a poor person and a
nonpoor person, i.e., it treats monotonicity as a transfer axiom between the poor
and nonpoor. In the case of transferring income from a poor person to a nonpoor
person, the transferred income is ‘wasted’ according to the focus axiom, resulting
in a pure loss to the poor. Hence weak transfer is equivalent to minimal transfer
and weak monotonicity. Progressive transfer differs from regressive transfer in
that a progressive transfer may make the recipient nonpoor while regressive
transfer cannot imply progressive transfer without the additional assumption of
continuity.
The contents of these axioms are very appealing. However, the justification ‘is
a bit less direct’ (Foster (1984)). Sen, according to Foster, offered two general
lines of argument for the weak form of the transfer axiom. One based upon the
‘comparisons of utility gains and losses in a world where the marginal utility of
income is positive but diminishing.’ The other is made in terms of a notion of
relative deprivation: when a regressive transfer takes place from a more deprived
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AGGREGATE POVERTY MEASURES 133
poor person to a less deprived poor person, ‘in a straightforward sense the overall
relative deprivation is increased.’ (Sen (1981), p. 31). The justification for
regressive transfer and progressive transfer has proven to be the most
‘troublesome’ (Thon, 1983a). Sen originally proposed a version of regressive
transfer in his 1976 paper. Later he found that the poverty measure he proposed
violated the axiom, and hence he maintained only minimal transfer. 20 Sen (1981,
1982) viewed regressive transfer as a perfectly suitable requirement for an income
inequality measure, but less compelling as an axiom for a poverty measure. Any
poverty measure satisfying the strong version of the transfer axioms considers ‘the
poverty-alleviating role of crossing the poverty line … less crucial.’ However,
Sen’s arguments can hardly defend the following inconsistency: any transfer from
a poor person to a richer poor person (remaining in poverty after the transfer) or
to a nonpoor person increases the poverty level, while the transfer may lower the
poverty level if the recipient is next to the poverty line and the transfer lifts him
out of poverty. As a matter of fact, when continuity is maintained, any poverty
measure satisfying weak transfer will also satisfy regressive transfer and
progressive transfer (Donaldson and Weymark (1986)). 21 Because continuity and
weak transfer have been justified to be very reasonable, both regressive transfer
and progressive transfer can therefore be well justified. 22 Subsequently, we use
regressive transfer as a basic property for a distribution-sensitive poverty
measure. 23
Besides the focus axiom, the monotonicity axiom, and the transfer axiom, Sen
(1976) also proposed several other more specific axioms. Because those axioms
served only for the formulation of the measure proposed by Sen and have not been
widely recognized, we will not discuss them here. For a good discussion on those
axioms, see Foster (1984).
Kakwani noticed the lack of sensitivity of the Sen measure to the income level
of transfer. He argued that a poverty measure should be more sensitive to what
happens among the bottom poor. 24 Kakwani (1980a) proposed three sensitivity
axioms, two on income transfer and one on income increment/decrement.
Monotonicity Sensitivity Axiom: P(x,; z) − P(x; z) > P(x,; z) − P(x; z)
whenever x, and x- D are obtained from y D by the same amount of
decrement to poor incomes yi and yj, respectively, where yi < yj. 25
This axiom says that a poverty measure should be more sensitive to a drop in a
poor person’s income, the poorer the person is. It is interesting to note that this
axiom is identical to minimal transfer (Kakwani (1980a)). Therefore, minimal
transfer has another interesting interpretation, and the justification for minimal
transfer can serve for monotonicity sensitivity as well. Just like the independence
between the monotonicity axioms and minimal transfer, monotonicity sensitivity
does not necessarily imply weak monotonicity. By definition, monotonicity
sensitivity concerns the sign of the difference between P(x,; z) − P(x; z) and P(x-
; z) − P(x; z) not the sign of P(x,; z) − P(x; z) or P(x-; z) − P(x; z). Therefore, it
is not safe to assume that a poverty measure satisfying monotonicity sensitivity
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134 BUHONG ZHENG
as Shorrocks and Foster (1987) noted, ‘it makes little sense to assume a measure
is transfer sensitive’ if transfer axioms are violated. Practically, such a concern
does not pose much problem.
Note that the above sensitivity axioms are only applicable to comparisons of
transfers within the poor where no one crosses the poverty line as a result of the
transfers. Following Donaldson and Weymark (1986) one may introduce other
axioms involving transfers which change the number of poor. For any focused,
continuous poverty measure, weak transfer sensitivity is equivalent to the
following stronger axiom:
(Stronger) Weak Transfer Sensitivity Axiom: P(x; z) > P(x,; z) whenever x and
x, D are obtained from y D by transferring income δ (0 < δ á z − y l ) from yi
to yj and from yk to yl respectively with yj − yi = yl − yk > δ, yk > yi and yl < z.
The axiom stated above allows a poor person to cross the poverty line as a
result of the regressive transfer. However one has to be cautious not to generate
weak transfer sensitivity to situations involving transfers between poor and
nonpoor because such an axiom may have absurd policy implications: to reduce
the poverty level government should always equalize the poor incomes first rather
than redistribute income from the rich to the poor!
Compared with transfer axioms, (weak) transfer sensitivity demands that a
poverty measure be even more sensitive to the income changes among the bottom
poor. It seems that no higher level of transfer sensitivity has been proposed in the
literature since Kakwani (1980a) and Shorrocks and Foster (1987), though one
certainly could do so in a similar fashion. 29 Since a higher level sensitivity axiom
requires a measure to be even more sensitive to what happens to the bottom poor,
it is an open question as to the extent this sensitivity should be. The suggested
justifications for transfer sensitivity (or any higher level of sensitivity) are very
meagre and are less convincing than those for the transfer axioms. Furthermore,
transfer sensitivity may have somewhat arguable redistribution policy
implications: the most effective transfers are those among very poor incomes, and
government should equalize the two poorest incomes first and then equalize them
with the third poorest income and so on… . 30 However, since this axiom is
independent of other existing axioms we keep it as a ‘core’ axiom.
Two popular axioms suggested in recent literature are the subgroup consistency
axiom and the decomposability axiom. Foster and Shorrocks (1991) discussed the
former, while decomposability first appeared in Hamada and Takayama (1977)
and was subsequently discussed by Kakwani (1980b) and Foster, Greer, and
Thorbecke (1984) in different senses. 31 The necessity for a measure of
decomposability arose from practical considerations (for instance, Anand (1977)
and van Ginneken (1980)). The decomposability axiom most often used today is
due to Foster, Greer, and Thorbecke (1984).
Subgroup Consistency Axiom: P(x; z) < P( y; z) whenever x = (x, , x- ) D is
obtained from y = ( y, , y- ) D with n(x, ) = n(x- ), n( y, ) = n( y- ) and
P(x,; z) < P( y,; z), P(x-; z) = P( y-; z).
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136 BUHONG ZHENG
The subgroup consistency axiom is desirable for a poverty measure. Foster and
Shorrocks (1991) compared this axiom to the monotonicity axiom. While the
latter is concerned with the change in an individual’s poverty status, subgroup
consistency is about the change in a subgroup’s poverty level. They argued that a
subgroup consistent poverty measure is very useful for policy purposes because
consistency ‘is needed to coordinate the effects of a decentralized strategy
typically involving a collection of activities targeted at specific subgroups or
regions of the country.’
One typical feature of a decomposable measure is that it can decompose overall
poverty into that of subgroups according to certain characteristics. A
decomposable poverty measure is also subgroup consistent and meets the need of
a decentralized strategy towards poverty alleviation. The use of a decomposable
measure allows policy-makers to identify subgroups particularly susceptible to
poverty and to design effective, consistent national and regional anti-poverty
strategies. Furthermore, it can be used to construct profiles of poverty and to
evaluate each subgroup’s contribution to overall poverty. The marginal
contribution of a subgroup’s poverty to overall poverty is recorded by its
population share — the coefficient in (2.2).
Foster and Shorrocks (1991) found that a closer link exists between the class of
subgroup consistent poverty measures and the class of decomposable poverty
measures. They showed that for any subgroup consistent poverty measure that
satisfies continuity (may be restricted continuity), replication invariance and is
nondecreasing in income, there exists some decomposable poverty measure,
P, (x; z), and a continuous and increasing function F such that
P(x; z) = F[P, (x; z) ] for all x D. (2.4)
A direct, and perhaps the most important, implication of the result in (2.4) is that
it shows a direct relationship between subgroup consistent poverty measures and
decomposable poverty measures. All decomposable poverty measures are subgroup
consistent and all subgroup consistent poverty measures, under some reasonable
conditions, are increasing transformations of some decomposable poverty measures.
Some may regard decomposability as putting too detailed a restriction on the
functional form of a poverty measure rather than on its properties. Foster and
Shorrocks’ (1991) above finding between the subgroup consistent poverty measure
and the decomposable poverty measure justifies the use of a decomposable measure
given that a poverty measure is unique up to an increasing transformation.
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AGGREGATE POVERTY MEASURES 137
growth axiom Kundu and Smith proposed goes to another extreme. It ignores the
distributional changes resulting from the adding of a poor person completely.
Imagine a society where everyone is poor with almost no income. One day people
of the same population size from another country migrate to this isolated land.
These new people are not rich but have incomes close to the poverty line, which is
not zero. It is peculiar to argue that the new society becomes poorer because of the
migration of these people. Even consider the case where there is at least one
person to be nonpoor as demanded by Kundu and Smith, it is still difficult to
maintain poverty growth. The consideration of others of the aforementioned
axioms may throw some light on these two population monotonicity axioms.
The replication invariance axiom, strong monotonicity (or weak monotonicity
and continuity) and the focus axiom combined will necessarily imply nonpoverty
growth, while poverty growth will hold if the entrant has an income no higher
than the poorest person. 33,34 The reason that these two axioms cannot be equally
justified is the asymmetric treatment of the poor and the nonpoor: when adding a
nonpoor person we know that he has at least an income above the poverty line and
the exact amount of income does not matter; while for the adding of a poor
person, the exact income does matter. We pointed out that poverty growth may be
a quite appropriate axiom for measuring the scope of poverty but not for
measuring the intensity of poverty and poverty in general. As a matter of fact, the
only decomposable poverty measure that satisfies both poverty growth and
nonpoverty growth is the linear transformation of the headcount ratio. 35 Therefore,
this result and the one given by Kundu and Smith suggest that there is no strong
reason to maintain poverty growth. Sen (1981, p. 193) believed that the two
population monotonicity axioms are ‘really very demanding,’ we have shown here
that nonpoverty growth is not demanding at all while poverty growth cannot and
should not be treated as an axiom for a measure of poverty intensity.
Note that nonpoverty growth (or strong monotonicity and replication
invariance) implies that a poverty measure is a decreasing function of the
population size of the nonpoor. Therefore a poverty measure is independent of the
income distribution of the nonpoor (by the focus axiom) but is dependent on the
population size of the nonpoor.
Two other invariance axioms concern the behaviour of a poverty measure when
all poor incomes are uniformly changed. They are
Scale Invariance Axiom: P(x,; z, ) = P(x; z) whenever (x,; z, ) D × D is
obtained from (x; z) D × D by a relative change.
Translation Invariance Axiom: P(x,; z, ) = P(x; z) whenever (x,; z, ) D × D is
obtained from (x; z) D × D by an absolute change.
Blackorby and Donaldson (1980) incorporated these two concepts into the
study of poverty measurement. 36 They referred to the poverty measures satisfying
scale invariance as ‘relative measures’ and the measures satisfying translation
invariance as ‘absolute measures.’ Because most existing poverty measures are
relative, it is useful to discuss the contents of scale invariance. The scale
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AGGREGATE POVERTY MEASURES 139
invariance axiom has two implications: one for nominal income and the other for
real income. The axiom in the first sense says that the poverty value is unaffected
by either the unit or currency against which income is measured. It does not matter
whether one uses cents versus dollars, or U.S. dollars versus British pounds; the
poverty value should be unit-free. The axiom in this sense may sound ‘reasonable’
and would be well justified. However, one may argue that such a requirement is
only a practical convenience and not a theoretical necessity. We may always
compare physical good (real income) rather than nominal income. The
justification of the axiom in terms of real income is even more questionable. The
axiom in this sense requires the doubling of all real incomes and the real poverty
line to leave the poverty value unchanged. While no solid justification for this
axiom in this sense has been made, it is certainly nonsensical in a case where
some people have no incomes or negative incomes. If all incomes and the poverty
line are doubled, then those with negative incomes become poorer, and those with
incomes of zero experience no change. Income inequality and poverty should
increase rather than remain unchanged in this case. While these two senses of
scale invariance can be distinguished economically, it is impossible to separate
them mathematically. One way to avoid the nonsensical situation is to require a
positive income, which is not an unreasonable requirement as long as we treat
poverty value as a function of income only. 37 There has been no economically
solid justification for translation invariance. Hence, according to the criteria for
an axiom in the general measurement theory (e.g. Krantz et al., 1971), neither
scale invariance nor translation invariance can be regarded as a basic axiom for a
poverty measure; each requirement only identifies a special class of poverty
measures.
Be that as it may, there is a widespread interest in these two classes of measures
for their special functional forms and it is useful to investigate the properties each
class of measures possess and the interactions between them. In investigating a
class of subgroup consistent poverty measures, Foster and Shorrocks (1991)
proved that the only restricted continuous, replication invariant poverty measures
that are both relative and absolute are continuous, increasing transformations of
the headcount ratio. One implication of their result, though not stressed by them,
is that there is no distribution-sensitive poverty measure that can be both relative
and absolute within the class of subgroup consistent, replication invariant, and
continuous poverty measures. 38 In a recent paper, Zheng ( 1994) showed that
Foster and Shorrocks’ implication can be greatly strengthened: the only focused,
restricted continuous poverty measures that are both relative and absolute are
those related to head counts, i.e., P(x; z) = f (q(x; z), n(x)). Therefore, there is no
distribution-sensitive poverty measure, not just within the subgroup consistent
subgroup, that can be both relative and absolute.
Increasing Poverty Line Axiom: P(x; z) < P(x; z, ) whenever z < z,.
This axiom is very reasonable: between two identical societies, the one with the
higher poverty line must also have higher poverty level. The first authors to list it,
implicitly and explicitly, as a requirement for a poverty measure were Clark,
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140 BUHONG ZHENG
2.2.2 A classification of axioms: core axioms, implied axioms, and ad hoc axioms
Based on the above discussions, we can classify all axioms into three groups.
The first group is the basic axioms a ‘good’ poverty measure possesses. These
axioms are also ‘core’ axioms in the sense that they are independent and jointly
they can formulate other reasonable axioms. This group consists of
Focus axiom,
Symmetry,
Replication invariance,
Continuity,
Increasing poverty line,
Regressive transfer,
Weak transfer sensitivity, and
Subgroup consistency.
The focus axiom is very important for us to construct a good poverty measure. It
says that poverty measurement primarily concerns the poor, not the nonpoor.
Symmetry allows the use of an index number to represent the poverty level and its
changes. Replication invariance makes the comparison of poverty levels between
different population sizes possible. Continuity concerns the inaccuracy of income
data, the smoothness of crossing the poverty line as well as the manner in which
poverty changes as the poverty line changes. Increasing poverty line requires the
poverty level to increase as the poverty line rises. The regressive transfer axiom
ensures that the poverty measure is concave toward the origin: a transfer of
income from anyone poor to anyone richer will increase the poverty value. The
weak transfer sensitivity axiom requires a poverty measure to put more weight on
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AGGREGATE POVERTY MEASURES 141
` 0, p 0, ` 0, and p 0.
∂
x ∂
x 2 ∂
x 3 ∂
z
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142 BUHONG ZHENG
3. Poverty measures
Since Sen’s path-breaking work on poverty measurement, scholars have proposed
more than a dozen new distribution-sensitive poverty measures. All these new
measures can generally be classified into three broad categories. The first class
consists of the Sen-type measures. These measures were proposed within the
framework set up by Sen, using the rank of each poor person within the poor (or
the population) as an indicator of the relative deprivation. The second class
includes all distribution-sensitive measures which incorporate Sen’s consideration
of inequality among the poor in a poverty measure. These measures replace the
Gini coefficient which Sen used with other inequality measures. The third class
encompasses all subgroup consistent measures, i.e., those given by (2.5).
In what follows, we will briefly discuss each poverty measure and check the
basic axioms it satisfies or violates. The complete list of the axioms each measure
satisfies or violates is given in Table 3.1.
Class 0: Distribution-Insensitive Poverty Measures
This class includes three poverty measures: two official ones and their product.
These three measures are not distribution-sensitive. They are focused, replication
invariant and restricted continuous. They also satisfy normalization and subgroup
consistency but violate all transfer and sensitivity axioms.
There are two official poverty indicators, the headcount ratio, H(x; z), which
has been used and is being used by most governments across the world and the
United Nations, and the income gap ratio, I(x; z), which is used by the United
States Social Security Administration. The former is defined as the ratio between
the number of the poor and the population size, the latter is defined as the
percentage of the average income short-fall of the poor to the poverty line, i.e.,
q(x;
z)
H(x;
z) = , (3.1)
n(x)
where q is the number of the poor and n is the population size, and
µ
p(x;
z)
I(x;
z) = 1 − , (3.2)
z
where µ p is the mean income of the poor.
The main motivation for Sen to propose a new poverty measure was the
theoretical deficiency of these two official measures. Sen noted that the headcount
ratio satisfies the focus axiom, but violates two other axioms he proposed. The
income gap ratio does not satisfy the weak transfer axiom and strong mono-
tonicity (it satisfies weak monotonicity). Therefore, these two measures are not
distribution-sensitive. The income gap ratio also violates the increasing poverty
line axiom. Both H(x; z) and I(x; z) are subgroup consistent, H(x; z) is also
decomposable but I(x; z) is not decomposable in the sense defined in Section 2. 40
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Table 3.1. Axioms of poverty measurement and poverty measures
Focus axiom 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
Symmetry 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3
3 3 3 7 7 7 3 3 7 7 3 3 3 3 3 3
143
144 BUHONG ZHENG
Sen was not the first to notice the problems associated with the headcount ratio.
Eight years earlier, Watts (1968) made several points which were reflected in Sen
(1976). Besides the concerns for continuity, Watts also suggested that a poverty
measure should show that ‘poverty becomes more severe at an increasing rate as
successive decrements of income are considered.’ This is precisely the content of
minimal transfer or monotonicity sensitivity.
It seems that most people regarded the headcount ratio as a ‘crude’ and
theoretically inferior poverty measure. Atkinson (1987) was among the few
scholars who viewed this differently.41 He argued that ‘a minimum income may be
seen as a basic right, in which case the headcount may be quite acceptable as a
measure of the number deprived of that right.’ Atkinson implied that the
desirability of a poverty measure depends largely on the purpose of measurement.
When the poverty line is allowed to vary, the headcount ratio may prove to be the
most powerful measure as shown by Foster and Shorrocks (1988a, 1988b).
The poverty gap ratio is simply the product of the headcount ratio, H(x; z), and
the income gap ratio, I(x; z), and is denoted as HI(x; z). 42 This measure was first
mentioned by Sen (1976) and has been subsequently employed by Anand (1977,
1983) and Thon (1979). It is interesting to note that while HI(x; z) still violates all
transfer and sensitivity axioms, it satisfies some axioms which both H(x; z) and
I(x; z) violate, e.g., increasing poverty line and continuity. Although HI(x; z) is
not distribution-sensitive, empirically it may perform as well as other ‘good’
poverty measures.
Class 1: Sen-Type Poverty Measures
One feature in common for all measures in this class is that all use a poor
person’s rank within the poor (or the whole population) as an indicator of relative
deprivation. All measures are focused and symmetric. They also satisfy mono-
tonicity sensitivity, nonpoverty growth and normalization, but violate replication
invariance (except one version of the Sen measure) and subgroup consistency.
Motivated by the three basic axioms, Sen (1976) proposed a brand-new poverty
measure — the so-called Sen measure, which we denote as S(x; z),
q
2
S(x; z) =
(q + 1)n
z 4
i=1
(z − x
i
)(q + 1 − i)
q
= H(x; z) I(x; z) + (1 − I(x; z))Gp ,
q + 1
where G p is the Gini coefficient of the poor. 43 In addition to replication invariance
and subgroup consistency, this measure also violates regressive transfer,
continuity, and transfer sensitivity.
To justify his new measure, Sen used another set of axioms, and the three basic
axioms are automatically met by the measures satisfying the new axioms. 44 Foster
(1984) did an excellent job in reinterpreting Sen’s work, which we shall not
repeat. However, several comments are in order.
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AGGREGATE POVERTY MEASURES 145
First, the use of relative rank as the relative deprivation is not proper if more
specific income information is readily available. Sen (1981, p.36) defended the
use of relative position by quoting Borda regarding ‘choosing equal distance in the
absence of a convincing case for any alternative assumption.’ This may be a quite
strong argument in voting behaviour, where only ordinal rank is observed. In
poverty, where each poor person knows exactly his income distance from the
‘reference point’ — the poverty line (or maximum income of the population), it
is less convincing to use a person’s relative ranking, which is rarely known.
Atkinson (1987) also disagreed with Sen in this respect, he pointed out that ‘the
arguments about relative position and ranking are more persuasive for inequality
measurement than for poverty measurement.’ Besides, it is nonsensical to assign
two identical poor incomes with different weights if such a weight is interpreted as
a poor person’s sense of relative deprivation (Sen, 1976, p. 223, n 11).
Second, the Sen measure, S(x; z), does satisfy increasing poverty line, unlike
what Clark, Hemming and Ulph claimed (1981, p. 523, n 1). To see this, simply
rewrite S(x; z) as
q
2 x
i i
S(x; z) =
n 4
i=1
1−
z
1−
q + 1
(3.4)
and note that as z increases, q + l may also increase, at least not decrease, and
each term is positive.
Third, there are two Sen measures in the literature, both proposed by Sen
(1976). One is given in (3.8) above while the other is its approximate form when
n(x) 2 ∞, i.e.,
S, (x; z) = H(x; z)[I(x; z) + (1 − I(x; z))G p ]. (3.5)
These two measures are not identical: S, (x; z) > S(x; z). The degree of
approximation of S, (x; z) to S(x; z) can be estimated as follows:
Hµ
pG
p
q 1
S,(x;
z) − S(x;
z) = á `
45
. (3.6)
(q + 1)z (q + 1)n n
As a matter of fact, S, (x; z) is obtained from S(x; z) by replacing (q + 1 − i) with
(q + 0.5 − i) and (q + 1) in the denominator with q, i.e.,
q
2
S(x;
z) =
qnz 4
i=1
(z − x
i)(q + 0.5 − i). (3.7)
Fourth, although S(x; z) approaches S, (x; z) when the population size is large,
they differ with respect to satisfying replication invariance. S(x; z) violates
replication invariance while S, (x; z) satisfies it, because the Gini coefficient as
Sen (1973a, p. 31) defined is replication invariant. 46 Even S(x; z) and other rank-
based poverty measures fail to satisfy replication invariance, they should not be
discarded for this sake since the violation does not cause any serious problem
when large sample microdata set is used. If we replicate distribution x m times and
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146 BUHONG ZHENG
denote the resulting Sen index as Sm (x), then we have the following relationship:
1
S(x) á á Sm(x) á á S,(x)
and 0 á Sm(x) − S(x) ` S,(x)
− S(x) ` .
n
The first inequality reveals that the replication generally does not decrease the
poverty value. The second inequality indicates the maximum deviation of the
replicated poverty value away from the original poverty value, which is generally
very small — less than the inverse of the population size.
The failure of the Sen measure to satisfy the strong version of the transfer
axiom motivated Thon (1979) to propose a variation — the Thon measure. The
difference between the Sen measure and the Thon measure is the weighting
function. Thon used the rank of the poor person among the total population
instead of the poor group. The Thon measure, denoted as T (x; z), is
q
2
T(x; z) =
(n + 1) nz 4
i=1
(z − x
i)(n + 1 − i). (3.8)
The simple change in weighting function in the Sen measure makes the Thon
measure satisfy several axioms which the Sen measure violates. It satisfies
regressive transfer and is also continuous. As n and q become large, the Thon
measure approaches 47
T, (x; z) = H(x; z)[S, (x; z) + 2(1 − H(x; z))I(x; z)]
q (3.9)
2
= 2
n z 4 (z − x
i) (n + 0.5 − i)
i=1
which is a member of the class of measures that Thon (1983b) later proposed. 48
Based upon Sen’s framework, Kakwani (1980a) proposed a generalized version
of the Sen measure by changing the power of the weighting function from 1 to
k(k ñ 0). The new measure, denoted as K(x; z, k), is
q
q k
K(x;
z, k) =
q 4 (z − x
i)(q + 1 − i)
.
k i=1
(3.10)
nz
4 i
i=1
In justifying his measure, Kakwani followed Sen’s approach but explicitly used
Sen’s three basic axioms in his derivation. However, for any given k there is a
population size n for which K(x; z, k) does not satisfies the transfer sensitivity
axioms (both weak and strong versions), though it satisfies the rank-based
sensitivity axiom Kakwani proposed (Foster, 1984, p. 230).
Takayama (1979) and Hamada and Takayama (1977) noticed Sen’s comments
on the relationship between the Sen measure and the Gini coefficient — a widely
used income inequality measure. They generalized the Sen measure in several
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AGGREGATE POVERTY MEASURES 147
where α ñ 1.
This measure satisfies focus, weak monotonicity, and symmetry. It does not
satisfy regressive transfer, subgroup consistency, and continuity. Contrary to
their own discussion (Clark, Hemming and Ulph, 1981, p. 523, n 1), it does
satisfy increasing poverty line. To see this, simply rewrite C1 (x; z, α) as
1 − 1/α q α 1/α
q x
i
C
1(x;
z, α) = 4 1− . (3.15)
n i=1 z
As z increases, q may also increase (at least not decrease). Therefore, because
α ñ 1, C 1 (x; z, α) is necessarily increasing. It is also interesting to note that as
min{x
i}
α2∞, C
1(x;
z, α)2H(x;
z) 1 − ,
z
i.e., the poverty level is determined by both the headcount ratio and the Rawlsian
maximin justice.
By noting the failure of the Blackorby and Donaldson ethical measures to
satisfy both continuity and regressive transfer, Chakravarty (1983b) proposed an
ethical poverty measure which is the counterpart of the Atkinson inequality
measure and is a generalization of another class of poverty measures proposed by
Clark, Hemming, and Ulph (to be discussed in the next subsection). Instead of
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AGGREGATE POVERTY MEASURES 149
Ch (x; z, e) also satisfies transfer sensitivity and any higher level of sensitivity
axioms (if any). It also has a clear link to the normalized Theil entropy index
when one replaces z with the mean income µ, normalizes the measure and sums
over uncensored income distribution (Chakravarty, 1990, p. 191).
Foster, Greer, and Thorbecke (1984) proposed a class of poverty measures out
of practical demand for a decomposable poverty measure. With the exception of
the Chakravarty measure, Ch (x; z, e), all poverty measures proposed after Sen and
prior to Foster et al. (1984) are not decomposable in the sense defined above. The
difference between the Sen measure and the class of Foster, Greer, and Thorbecke
measures is the weighting functions. Foster et al. use the α − 1 (α ñ 0) power of
the income gap ratio between the poverty line and the poor incomes instead of the
relative rank. Their measure, F(x; z, α), is
q α
1 x
i
F(x;
z, α) = 4 1− ,α ñ 0. (3.21)
n i=1 z
or
W(x; z ) = H(x; z)(ln z − ln ξ p ) = ln z − ln ζz (3.24)
Clark, Hemming, and Ulph (1981) also proposed a subgroup consistent but not
decomposable poverty measure. 58 The measure, C2 (x; z, β), is
n 1/β
1 1 β
C
2(x;
z, β)
= 1 − 4 (min{x
i, z})
,β ` 1. (3.26)
z n i=1
HD
(x;
z, U) = 1 − , (3.31)
U(z)
where ζ z is the representative income of the censored income distribution and,
hence, U(ζ z ) is the representative individual utility. 60
The properties of this measure depend largely on the specification of U(x). If
U, > 0, then HD(x; z, U) satisfies the monotonicity axioms; if U, > 0 and U- < 0,
then HD(x; z, U) satisfies regressive transfer; if U. > 0, then HD(x; z, U) satisfies
weak transfer sensitivity. 61 When scale invariance is maintained, the Hagenaars
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AGGREGATE POVERTY MEASURES 153
which is neither relative nor absolute but satisfies increasing poverty line.
4. Concluding remark
The purpose of this survey is to provide a clarification of the extensive literature on
poverty measurement since Sen (1976). To fully understand the justification of
each axiom and the interrelationships among axioms is important for poverty
measurement research because various axioms have been used to construct and
evaluate poverty measures. We show in this survey that the desirability of each
axiom cannot be evaluated in isolation; several weak axioms may necessarily imply
a stronger axiom or another ‘seemingly’ unrelated axiom; the combination of some
axioms may make it impossible to devise a satisfactory poverty measure. We also
show that several widely used axioms lack sufficient justifications and are
essentially ad hoc. Based upon the interactions and justifications, we identified a list
of ‘core’ axioms in that they are consistent with the perception of poverty and are
independent. These ‘core’ axioms can be used to ‘screen’ poverty measures and
jointly they can lead to a class of measures — subgroup consistent and distribution-
sensitive poverty measures. We also evaluate all existent poverty measures and
examine their properties against the ‘core’ axioms, and summarize the properties
each measure satisfies/violates in a tabular form — a practice which has never
been undertaken before. We also include several ‘good’ measures, especially the
Watts measure, which have not been documented by previous surveys.
By now, it is widely recognized that a measure of poverty intensity needs to
consider distribution-sensitivity in addition to counting the number of the poor and
calculating the average income shortfall of the poor. Started with Anand (1977),
distribution-sensitive poverty measures have been used to address various
distributional issues. The geographical coverage of the applications includes
Malaysia, Bangladesh, Iran, India, United Kingdom, United States, Canada,
Brazil, Finland, Sweden, Greece, Poland and the third world in general. However,
no single government (including the United Nations) has gone beyond the ‘crude’
practice of counting the number of the poor to include distribution-sensitive
measures. Even in academia, scholars are also yet to be convinced the necessity of
distribution-sensitivity for a poverty measure. For example, several recent leading
journal articles (Sawhill, 1988; Hanratty and Blank, 1992; and Slesnick, 1993) on
poverty changes used no other measures except the headcount ratio.
The persistence in using the headcount ratio as the only way in measuring
poverty changes can be attributed in most part by the following three factors. 63
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154 BUHONG ZHENG
First, the headcount ratio is a cardinal measure of poverty while all distribution-
sensitive measures are ordinal. Thus the headcount ratio is more intuitive and can
be easily interpreted and understood by non-specialists, especially policy-makers.
Second, distribution-sensitive measures are sensitive to the quality of income data
while the headcount ratio only needs the information on poverty status, i.e., a
person is above or below the poverty line. It follows that the headcount ratio may
be statistically more robust than other measures. Given the measurement errors
associated with income microdata, this is a significant advantage in using the
headcount ratio. Third, many practitioners may believe that the identification of
poor is more important than the aggregation of poverty. The headcount ratio
indeed provides an important aspect of poverty, namely, the incidence of poverty.
It is also ‘neat and well defined’ (Sen, 1992) and is ‘quite acceptable’ (Atkinson,
1987) for certain purposes of poverty measurement.
The aforementioned arguments, however, are not sufficient to justify the exclusive
use of the headcount ratio in poverty studies, especially when the poverty line is far
away from the ‘hunger line.’ Without using other measures, the ‘surprising’ findings
based upon head-counting and a single poverty line are not robust and may even be
misleading. For instance, Slesnick (1993) used data from the Consumer
Expenditure Survey and claimed, in contrast to public belief, that poverty in the
U.S. has actually become less severe in recent years. Given the drawbacks
associated with the headcount ratio, it would be interesting to know what
distribution-sensitive measures will reveal. The potential pitfall of concluding
poverty changes based exclusively upon the headcount ratio can be best illustrated
by a recent study of the U.S. poverty changes from 1975 to 1989 by Zheng et al.
(1995). Using data from the Current Population Survey, Zheng et al. (1995) found
that the proportion of the poor decreased from 1975 to 1990 but more people
concentrated at the lower end income distribution in 1990 than in 1975, and all
distribution-sensitive poverty measures indicated a significant increase in the
poverty level! Jenkins and Lambert (1993b) also showed the same discrepancy
between the headcount ratio and the distribution-sensitive measures in indicating the
UK poverty trends. Using the same microdata as in the official poverty statistics,
they found that all distribution-sensitive measures that they considered indicated an
increase in the poverty level while the headcount ratio showed a decline.
Acknowledgements
This survey is based on the second chapter of my Ph.D. dissertation. I am greatly indebted
to Brian J. Cushing, my thesis advisor, for his many valuable suggestions. I am also
grateful to an anonymous referee, John P. Formby, James E. Foster, Peter Lambert,
Anthony Shorrocks, and John Weymark for their very useful comments. Of course, all
remaining errors are mine.
Notes
1. Quoted from Himmelfarb (1984).
2. In income inequality studies, researchers have made substantial attempt to extend the
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AGGREGATE POVERTY MEASURES 155
poverty measure, if it is continuous at the poverty line, then it cannot satisfy strong
monotonicity for the strong definition of the poor.
17. This axiom first appeared in the income inequality measurement literature back to
early this century. Dalton (1920) discussed this property in his now classical paper on
income inequality. He referred to it as the ‘principle of transfers’ and shared the
proposal of this axiom with Pigou.
18. Donaldson and Weymark (1986) named regressive transfer and progressive transfer
the ‘strong downward transfer axiom’ and ‘strong upward transfer axiom.’ The terms
used here are more straightforward and succinct.
19. Kundu and Smith (1983, n 3) also distinguished regressive transfer and progressive
transfer in proving their ‘impossibility theorem.’
20. The transfer of income from a poor person to a richer poor person may result in lifting
the second person out of poverty, in this case the Sen measure may indicate a decrease
in the poverty level rather than an increase.
21. For the strong definition of the poor, Donaldson and Weymark showed that no focused
poverty measure can obey progressive transfer.
22. In fact, of all distribution-sensitive poverty measures, only those whose values depend
on the ranks of the poor among the poor group (or population) may violate regressive
transfer and progressive transfer.
23. It is useful to notice that a focused poverty measure satisfying regressive transfer and
restricted continuity will also satisfy continuity, i.e., regressive transfer contains
continuity at the poverty line under certain conditions.
24. The sensitivity axiom Kakwani proposed, like the transfer axiom, was also discussed
earlier in the literature of income inequality measurement. Kolm (1976) labelled
transfer sensitivity the ‘principle of diminishing transfers.’
25. Originally, Kakwani proposed this axiom in the rank form, i.e., comparing the
increases in the poverty levels due to the decrements of incomes to two persons with
different ranks. Because two poor persons with the same income may be assigned
different ranks, what monotonicity sensitivity requires is nonsensical in this case. The
axiom stated here is more proper. Also note that this axiom, as well as minimal
transfer, can be stated as the comparison between two same-origin, same-direction but
different-distance transfers as follows: P(x,; z) > P(x,; z) whenever x, and x- D are
obtained from y D by the same amount of regressive transfer from i to j and k
respectively with xi á x j < x k < z and no one crosses the poverty line as a consequence
of the transfer. This equivalence can also be extended to other transfers when
continuity is assumed. Also see Cowell (1988) on this.
26. However, a poverty measure satisfying weak transfer will satisfy weak monotonicity.
27. By noting the equivalence between monotonicity sensitivity and minimal transfer, one
can also express this axiom as follows: P(x,; x) − P(x,; z) > P( y,; z) − P( y,; z)
whenever x, , x- and y, , y- are obtained from y D by the same amount of decrement
to y i , y j , y k , and y l respectively with y j − y i = y l − y k and y k > y i.
28. The version given here is so-called ‘distance transfer sensitivity’ (Seidl (1988)).
Kakwani also proposed a ‘rank transfer sensitivity’ property. For a discussion on these
two versions of sensitivity, see Foster (1984, p. 229).
29. For example, one could introduce an axiom which requires the reduction in poverty
through a favourable composite transfer (Shorrocks and Foster (1987)) to be
inversely related to the income level.
30. Lambert (1993) also questioned the desirability of ‘principle of diminishing transfers’
in income inequality context.
31. Foster, Greer, and Thorbecke (1984) proposed a subgroup monotonicity axiom, which
is weaker than the subgroup consistency axiom. The former requires a ceteris paribus
condition.
32. Note that Kundu and Smith used regressive transfer in a weak inequality form and
they restricted transfers within the poor. Also note that when relaxing any one of these
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AGGREGATE POVERTY MEASURES 157
three requirements, one can easily construct a satisfactory poverty measure. For
instance, poverty measure
q 2
q x
i
P(x;
z) =
n 4
i=1
1−
z
& McGregor, 1991). Correspondingly, there are also a half dozen names for I(x; z). In
this survey, we use ‘income gap ratio’ for I(x; z) as given by Sen (1976) and ‘poverty
gap ratio’ for HI(x; z).
q q q
1 2 1
43. G
p = 1 +
q
−
µ
pq
2 4 (q + 1 − i)
x
i =
i=1 µ
pq
2 4 4 |xi − xj|,
j=1 i=1
59. See Cowell (1977, 1988) for discussions on a class of inequality measures which are
similar to the Clark et al. measure.
60. Hagenaars also proposed a measure which is Ch(x; z, W) when W is a utilitarian
function and the measure satisfies subgroup consistency and replication invariance, in
addition to axioms satisfied by Ch(x; z, W).
61. We assume that U satisfies all these conditions in Table 3.1.
62. The utility function will be an exponential function, which violates transfer
axioms.
63. I thank the referee for suggesting the following explanation.
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