Template-type: ReDIF-Paper 1.0
Author-Name: Robert C. Allen
Author-Workplace-Name: New York University ABU Dhabi, UAE
Author-Email: bob.allen@nyu.edu
Title: Absolute Poverty: When Necessity Displaces Desire
Abstract: This paper proposes a new method for defining an international poverty line based on explicit
budgeting. The novel feature is that linear programming is used to deduce the diet that
minimizes cost and guarantees survival. Nonfood items are also explicitly budgeted and
amount to about one quarter of the cost of subsistence. A series of least cost diets are
calculated with increasingly demanding nutritional requirements for twenty countries using
prices from ICP 2011. The aim is to see which requirements rationalize the spending pattern
of the poor. The ‘reduced basic’ model does the job. When the cost of the nonfood items are
added to the cost of the ‘reduced basic’ diet, the resulting Linear Programming Poverty Line
(LPPL) averages $1.88 per day across the poor countries in the sample. The same model
rationalizes both the spending pattern of the poor and the World Bank Poverty Line. The
LPPL has the advantages that it is (1) clearly related to survival and well being, (2)
comparable across time and space since the same nutritional requirements are used
everywhere, (3) adjusts consumption patterns to local prices, (4) presents no index number
problems since solutions are always in local prices, and (5) requires only readily available
information, namely, the prices in ICP or equivalent.
Classification-JEL: I12, I32, O61, O63
Keywords: absolute poverty, diet problem, linear programming, World Bank poverty line
Length: 48 pages
Creation-Date: 2016-03-02
Number: _141
File-URL: http://www.economics.ox.ac.uk/materials/papers/14420/141marchallen.pdf
File-Format: application/pdf
Handle: RePEc:nuf:esohwp:_141