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Testing poverty lines


Ravallion, Martin & Lokshin, Michael (2006). Testing poverty lines. Review of Income and Wealth, 52(3), 399-421.


In theory, a poverty line can be defined as the cost of a common (inter-personally comparable) utility level across a population. But how can one know if this holds in practice? For groups sharing common consumption needs but facing different prices, the theory of revealed preference can be used to derive testable implications of utility consistency knowing only the “poverty bundles” and their prices. Heterogeneity in needs calls for extra information. We argue that subjective welfare data offer a credible means of testing utility consistency across different needs groups. A case study of Russia’s official poverty lines shows how revealed preference tests can be used in conjunction with qualitative information on needs heterogeneity. The results lead us to question the utility consistency of Russia’s official poverty lines.


Reference Type

Journal Article

Year Published


Journal Title

Review of Income and Wealth


Ravallion, Martin
Lokshin, Michael