Inter-country Comparisons of Poverty Based on a Capability Approach: an Empirical Exercise

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 coordination in survey design and in the construction of income poverty lines that uniformly reflect the costs of the basic requirements of human beings. ∗ We are grateful to Carlos Sobrado of the World Bank, Emilian Karugendo of the National Bureau of Statistics of Tanzania, Patrick Ward of Oxford Policy Management, and the General Statistics Office of Vietnam for their help with household surveys for Nicaragua, Tanzania and Vietnam respectively. We thank Shaohua Chen for answering several questions about the World Bank's international poverty lines in these three countries. Howard Nye played a role in conceptualizing and implementing this project at an early stage. The Bureau of Development Policy and the International Poverty Center of the United Nations Development Programme provided essential support. We thank Terry McKinley for facilitating this support. We are grateful to Camelia Minoiu, Nanak Kakwani, Terry McKinley, participants of the international conference on the "many dimensions of poverty" held by the UNDP International Poverty Center, and participants in a workshop on capabilities and well-being evaluation held at the University of California at Riverside for helpful comments. Future revisions of this paper will be made available on: . ∗∗ Department of Economics, Barnard College, and Institute for Social and Economic Research and Policy, Columbia University; [email protected]. ∗∗∗ Department of Economics, Boston University; [email protected]. ∗∗∗∗ Department of Economics, Columbia University; [email protected]. 2 International Poverty Centre Working Paper no 27