Multidimensional poverty measurement and preferences

Poverty measurement based on income or consumption fails to be consistent with welfare: a higher utility (that is, preference satisfaction) of an individual may go together with an increase in the contribution of this individual to poverty. The equivalence approach, which consists of computing the money needed to maintain a given level of utility, is the way to adjust income poverty measurement so that it becomes consistent with welfare. We review four equivalence approaches, and we compare the properties that each approach satisfies or fails to satisfy. Poverty measurement based on deprivation measures, on the other hand, cannot be adjusted to become consistent with welfare. We discuss how weights and deprivation thresholds can be designed to decrease the discrepancy between poverty and welfare in deprivation measures.