Economic Definitions of Poverty

Poverty definitions and measurements are grounded in different conceptual spaces, either as monetary achievements, capabilities, or subjective well-being. Traditionally, poverty has been defined in terms of income, consumption, or another indicator of welfare expressed in monetary units. Monetary-based poverty estimates constitute economic definitions of poverty. Key concepts in understanding these definitions are poverty lines, poverty gap, and inequality.

The most commonly used indicators in devising economic measures of poverty are consumption expenditure and income. Consumption expenditure reflects the use of goods and services by an individual, and its computation thus involves aggregating money spent on all goods and services at current market prices. An individual’s income, in contrast, represents the maximum [Page 402]possible expenditure on goods and services she or he is able to incur. Economic ...