GEP 15/02: Relative Social Status and Conflicting Measures of Poverty: A Behavioural Analytical Model

Summary

The paper considers a situation where the relatively ‘poor’ are concerned about their relative income status with respect to a relevant reference group. Such a concern is explicitly introduced in a utility function to study the consumption behaviour of the poor.

Abstract

We consider a situation where the relatively ‘poor’ are concerned about their relative income status with respect to a relevant reference group. Such a concern is explicitly introduced in a utility function to study the consumption behavior of the poor. We point towards a possible conflict between income based and nutrition-based measure of poverty. Changes in income distribution generate non-homothetic outcome for an “otherwise homothetic” preference structure and may convert an “otherwise normal” good into an inferior good.

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Authors

Sugata Marjit, Sattwik Santra and Koushik Kumar Hati

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