A Latent Class Application to the Measurement of Poverty

Poverty is an object of normative, administrative and methodological interest for various actors. This means that it is inevitably a political concept and therefore, per se, continuously debated (Alcock 1993, 3). In very general terms poverty can be defined as living at the bottom of welfare distribution. Hence, poverty is closely related to inequality, though it is not the same as inequality: if a society is equal but the standards of living are low across the society, it follows that everyone in the society is poor, not that there is no poverty. The reason why special attention is paid to the bottom of welfare distribution is the belief that there is a level of welfare below which people suffer some form(s) of deprivation (see Creedy 1998, 25). This is why the concept of poverty threshold (or poverty line, cut-off point, etc.) has a central place in definitions of poverty and in poverty research in general. The poverty threshold represents the fundamental idea of the poverty measurement that there is a threshold in welfare distribution below which well-being drops sharply - so much so that it is reasonable to think of it as a qualitative difference.