Absolute poverty: When necessity displaces desire

Abstract

A new basis for an international poverty measurement is proposed based on linear programming for specifying the least cost diet and explicit budgeting for non-food spending. The use of linear programming to specify the diet ensures that the diets reflect local prices while maintaining a uniform standard across countries that is defined in terms of nutritional requirements for good health. The non-food spending includes clothing, bedding, foot ware, fuel, and lighting. The specification varies between countries depending on climate. Nonfood spending also includes rent for accommodation shifting the poverty line between rich and poor countries to reflect the great differences in real estate costs. This approach is superior to the World Bank’s ‘$-a-day’ line because it is (1) clearly related to survival and well being, (2) comparable across time and space since the same nutritional requirements are used everywhere while non-food spending is tailored to climate, (3) adjusts consumption patterns to local prices, (4) presents no index number problems since solutions are always in local prices, and (5) requires only readily available information. The new approach implies much more poverty than the World Bank’s, especially in Asia.