Measuring poverty – Do we need to cut the cake in two parts?

Simplicity can be one of the motivations behind cutting the populace cake along the poverty line into two haves as ‘poor’ and ‘non-poor’. Poverty measurements, since based on the concept of poverty line, suffer from the following three limitations. First, people close to poverty line on either side are categorized as poor and non-poor though they do not have any significant difference in their living standard. Secondly, a slight change (rise or fall) in the line gives the poverty picture differently with millions of people going in and out of the poverty. Thirdly, the poverty line, being generally low, is often criticized as the line of starvation. To get rid of these limitations this paper proposes to replace poverty line with two lines – ‘line of sustenance’ and ‘line of affluence’. The paper revisits the axioms of poverty measure to evaluate the appropriateness of the proposed measure. The proposed measure turns out to be better in terms of continuity and monotonicity axioms. Being more coincident to the actual income distribution of the population, the proposed measure has more practical significance. An empirical illustration is carried out to demonstrate the advantages of the new measure.