An Evaluation O F Subjective Poverty Definitions: Comparing Results from the U.s. and the Netherlands

In this paper, results of applying the subjective definition of poverty, introduced by Goedhart et al. (1977), in the U S . and the Netherlands are compared. This definition focuses on the monetary amounts which people consider necessary to make ends meet for their households as provided in response to the Minimum Income Question (MIQ). National data from both countries in the early 1980s are analyzed. In regressions of reported minimum income, corrections are made for the omission of income components and selective non-response. For the first time the relationship between fixed expenditures and the MIQ is examined. Factors significantly related to reported minimum income include household income, household composition, age, education, sex, region, fixed expenditures, and whether the household experienced recent income changes. The income elasticity appears to be smaller in the U S . than in the Netherlands, while the effects of other socioeconomic factors are greater. On average, the resulting subjective income thresholds are above official poverty lines, but more so in the U S . than in the Nerherlands. Whether thresholds based on answers to MIQs should be regarded as poverty lines remains open to question.