On the properties of the two main types of global poverty lines

Abstract

Global poverty lines belong to two main types that differ on how the poverty line’s nominal monetary amount is adjusted to prevailing prices and preferences. “Objective” poverty lines capture the cost of a fixed list of achievements. “Welfaristic” poverty lines capture the cost of a fixed level of welfare. Longstanding debates oppose their respective proponents. This conceptual paper is the first to contrast the properties of these two types of poverty lines. Our framework considers both heterogeneous prices and heterogeneous preferences. Our results clarify the normative principles that differentiate them and shed light on these debates. Which type of poverty line satisfies stronger versions of our properties depends on the extent of preferences heterogeneity. We show that, under heterogeneous preferences, the World Bank’s International Poverty Line cannot consistently reflect a fixed list of achievements.