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 poverty assessment based on basic human capabilities for three countries: Nicaragua, Tanzania, and Vietnam. We compute standard errors of the resulting poverty estimates and compare the incidence of poverty across these three countries. The choice of approach affects both cardinal estimates and ordinal rankings of poverty across countries and over time. Meaningful and coherent inter-country poverty comparisons can be advanced through international co-ordination in survey design and in the construction of income poverty lines that uniformly reflect the costs of the basic requirements of human beings.