More Relatively‐Poor People in a Less Absolutely‐Poor World

Relative deprivation, shame, and social exclusion can matter to the welfare of people everywhere. The paper argues that such social effects on welfare call for a reconsideration of how we assess global poverty. We argue for using a weakly‐relative measure as the upper‐bound complement to the lower‐bound provided by a standard absolute measure. New estimates of poverty are presented. The absolute line is $1.25 a day at 2005 prices, while the relative line rises with the mean, at a gradient of 1:2 above $1.25 a day, consistently with national poverty lines. We find that the incidence of both absolute and weakly‐relative poverty in the developing world has been falling since the 1990s, but more slowly for the relative measure. While the number of absolutely poor has fallen, the number of relatively poor has changed little since the 1990s, and is higher in 2008 than 1981.