Comparing poverty levels: a methodological caveat

Looking at cross-national differences in poverty incidence and trends clearly involves amply debated theoretical and methodological issues (see, for example, Atkinson, 1998; Brandolini, 2007; Goedemé et al, 2019). Some of these issues – such as the individuation of the threshold, the use of objective or subjective, relative (contemporary or anchored) or absolute poverty lines, drawing on consumption or income data, the choice of equivalence scale and therefore assumptions concerning economies of scale – are the same one has to face when assessing income poverty at the national level. But some are specific to cross-country comparisons. This applies to the reference threshold (national or cross-national?) and the comparability, in terms of purchasing power, of similar income levels or similar percentages of national income levels. The US$1.90 a day threshold (an absolute measure) used by the World Bank does not have a similar value even in the world's poorest countries. A poverty line of 50% or 60% of national income – the standard measure used in the EU − may mean a quite different level of living in different countries. It does not always indicate a similar or comparable situation in terms of poverty, and may even offer a distorted view of the distribution of poverty across countries. As Goedemé et al (2019) suggest, the picture of the distribution of poverty may differ depending on whether one uses the standard EU at-risk-of-poverty (AROP) indicator, which sets the poverty line at 60% of the national median equivalent disposable household income, or whether one contextualises it in terms of purchasing power standards (PPS), as suggested by Atkinson et al (2002).

Figure 2.1 shows clearly, for instance, that although the percentage of the AROP population in Hungary is on a similar level to that in Belgium and Sweden, the purchasing power of those below the poverty line in Hungary is much lower. Households living on the poverty line in Belgium can afford over 2.5 times more goods and services than similar households in Hungary. Italy and Poland have about the same AROP levels, but Italians living on the poverty line can afford about 50% more goods than the Polish households. The Luxembourg poverty threshold in PPS is over two times higher than that in Estonia, which is the country with the lowest AROP in 2018.