WP 05/096 - Subjective Well-being Poverty versus Income Poverty and Capabilities Poverty?

Geeta Kingdon and John Knight

Date of Publication: 
July 2005

The conventional approach of economists to the measurement of poverty in poor countries is to use measures of income or consumption. This paper asks: to what extent are these different concepts measurable, to what extent are they competing and to what extent complementary, and is it possible for them to be accommodated within an encompassing framework? There are two remarkable gaps in the rapidly growing literature on subjective well-being. First, reflecting the availability of data, there is little research on poor countries. Second, within any country, there is little research on the relationship between well-being and the notion of poverty. This paper attempts to fill these gaps. We develop a methodology for using subjective well-being as the criterion for poverty, and illustrate its use by reference to a South African data set containing much socio-economic information on the individual, the household and the community, as well as information on reported subjective well-being. The estimated subjective well-being functions for South Africa contain some variables corresponding to the income approach, some to the basic needs (or physical functioning) approach, some to the relative (or social functioning) approach, and some to the security approach. Thus, our methodology effectively provides weights of the relative importance of these various components of subjective well-being poverty.

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