Inter-Country Comparisons of Poverty Based on a Capability Approach

Abstract

We argue that inter-country comparisons of income poverty based on poverty lines uniformly reflecting the costs of the basic requirements of human beings are superior to the existing money-metric approaches. In this exercise, we implement a uniform approach to income poverty assessment based on basic human capabilities for three countries in three continents: Nicaragua, Tanzania, and Vietnam. We compute standard errors of the resulting poverty estimates and compare the incidence of income poverty across these three countries. The choice of approach affects both cardinal estimates and ordinal rankings of income poverty across countries and over time. We argue that meaningful and coherent inter-country poverty comparisons are best advanced through international co-ordination in survey design, and through the construction of income poverty lines that possess a meaningful and uniform interpretation (as the cost of achieving elementary income-dependent capabilities).