Subjective considerations in the measurement of poverty in Peru

Abstract

The traditional approaches to measuring poverty use arbitrary assumptions and do not include the relative nature of this phenomenon. The main finding of subjective approaches in this field is that more people tend to consider themselves "poorer" than what is suggested by objective measures. This paper argues that these limitations could be overcome by means of the introduction of subjective considerations in poverty measurement.

Since measuring poverty through agents' reports is not totally reliable -because of the lack of appropriate mechanisms to reveal the correct information and the conditionality of these reports on psychological factors-, this paper uses an intermediate approach: contrasting poor people's poverty perception with socio-economic and demographic objective characteristics.

This paper uses information from the HOPE (Hogares de Pobreza Extrema, Severely Poor Households) survey to evaluate poverty self-perception through objective conditionals, and to calculate a Subjective Poverty Line. Finally, the paper discusses policy implications.