Sequential procedures for poverty gap dominance

Poverty evaluations differ from welfare evaluations in one significant aspect, the existence of a threshold or reference point, the poverty line. We build up normative evaluation models in which comparisons are made taking distances from this reference point rather than from the origin to be ethically relevant, by focussing upon poverty gaps and not incomes. When poverty lines differ for different groups in a socially heterogeneous population, choosing poverty gaps instead of incomes as the relevant indicator brings in normatively appealing classes of poverty indices not previously accommodated, for which poverty comparisons are implemented through sequential poverty gap curves (or poverty gap distributions) dominance. These conditions are logically related to those suggested by Atkinson and Bourguignon (Arrow and the foundations of the theory of economic policy, Macmillan, London, 1987) and Bourguignon (J Econom 42:67–80, 1989) for welfare comparisons. However, the proportion of poor individuals in the society and their average poverty gap play a role in our comparisons, though they do not in the existing poverty dominance criteria for heterogeneous populations.