Welfare-Consistent Global Poverty Measures

The paper provides new measures of global poverty that take seriously the idea of relative-income comparisons but also acknowledge a deep identification problem when the latent norms defining poverty vary systematically across countries. Welfare-consistent measures are shown to be bounded below by a fixed absolute line and above by weakly-relative lines derived from a theoretical model of relative-income comparisons calibrated to data on national poverty lines. Both bounds indicate falling global poverty incidence, but more slowly for the upper bound. Either way, the developing world has a higher poverty incidence but is making more progress against poverty than the developed world.