regressions for subjective welfare but do not explicitly discuss the potential for bias due to systematic differences in scales (though they do note concerns about the possible endogeneity of some regressors).<sup>6</sup> A seemingly widely-held view is reflected in the authoritative survey paper by Frey and Stutzer (2002), which notes the scope for scale heterogeneity in self-reported welfare responses but claims that this does not invalidate regression models for such data. That claim is hard to defend on _a priori_ grounds given the aforementioned concerns about bias.

It would seem premature either to ignore the problem (following the advice of Frey and Stutzer) or to abandon subjective poverty/welfare regressions knowing only that there is a <u>potential for bias (following Bertrand and Mullainathan). More evidence is needed.</u> Asking survey respondents to place vignettes describing hypothetical situations on the same scale has been used to address scale heterogeneity in a few studies of subjective data on health status, political efficacy, and job satisfaction.<sup>7</sup> Following this approach, Beegle, Himelein and Ravallion (BHR) (2012) used vignettes to study frame-of-reference effects on subjective welfare and offered various tests for confounding effects of scale heterogeneity using data for Tajikistan.<sup>8</sup> BHR found that, despite the existence of scale heterogeneity, subjective welfare regressions that ignored the problem still gave quite similar results to those that address it.

The present paper makes two contributions, corresponding to the two applications described above. First, we propose a new measure of subjective poverty, anchored to a household vignette designed for describing a family that most would consider poor in the specific setting. Instead of counting as poor those who put themselves on (say) the lowest rung of a welfare ladder, with uncertain meaning and comparability, subjective poverty is measured by comparing the household’s self-assessed welfare to its assessment of the welfare of this specific poor household described in the vignette. In other words, we ask for explicit inter-personal comparisons of welfare against a common reference. The paper discusses this approach in theoretical terms and provides applications to three developing countries, Tajikistan, Guatemala

> 6 Some papers run linear regressions for the ordinal responses on subjective welfare rather than an OP. The assumption of constant scales is explicit in the OP but the problem is clearl still present in the linear models.

> 7 King et al. (2004) and King and Wand (2007) designed vignettes to establish common points on the heterogeneous reference scales regarding political efficacy in China and Mexico. Kristensen and Johansson (2008) used vignettes in anchoring subjective scales for job satisfaction. Kapteyn et al. (2008) use vignettes to compare life satisfaction between respondents in the U.S. and the Netherlands. Bago d’Uva et al. (2008) used them for correcting self-assessed health data for reporting bias.

> 8 This can be thought of as a contribution to ongoing efforts to employ qualitative data to help validate standard “objective” metrics of welfare and poverty. For an overview of various approaches see Shaffer (2013).

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