Poor, or Just Feeling Poor? On Using Subjective Data in Measuring Poverty

Abstract

Abstract: The challenges faced in calibrating poverty and welfare measures to objective data have long been recognized. Until recently, most economists have resisted a seemingly obvious solution, namely to ask people themselves: “Do you feel poor? ” The paper studies the case for and against this approach. It is argued that, while one would not want to use self-assessments as welfare metrics in their own right, there is scope for using such data to help calibrate multidimensional measures. Indeed, the idea of a “social subjective poverty line ” (below which people tend to think they are poor, but above which they do not) is arguably the most conceptually appealing way of defining poverty. However, the paper points to a number of concerns that have received insufficient attention, including the choice of covariates, survey design issues, measurement errors, frame-ofreference effects, and latent heterogeneity in personality traits and personal tradeoffs. Directions for future research are identified.

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