similarly to relatively poor people one would risk diverting the focus away from what is surely the highest priority: to raise the living standards of the poorest in the world. An absolute measure is also defensible on welfarist grounds under the common assumption that individual welfare depends on own-consumption.<sup>3</sup> But what absolute line should be used? Prior to RDV, absolute poverty lines for global poverty measurement had been set in an arbitrary way.<sup>4</sup> Motivated by these observations, RDV and World Bank (1990) proposed that global poverty should be measured by the standards of the poorest countries. The latest available estimates of the extent of poverty by this measure used an international poverty line of $32.74 per month, or $1.08 a day, at 1993 PPP, based on the original set of national poverty lines in RDV (Chen and Ravallion, 2001). In 2004, about one in five people in the developing world (one billion people) were deemed to be poor by this standard (Chen and Ravallion, 2007).

This is clearly a conservative basis for measuring global poverty. One could hardly argue that the people in the world who are poor by the standards of the poorest countries are not in fact poor. This gives the global poverty line a salience in focusing on the world’s poorest that a higher line would not have. At the other extreme, suppose one judged poverty in developing countries by (say) US standards. Learning that (possibly) 95% or more of the population is poor by such a standard is unlikely to have much relevance, given that US standards of living are not within the foreseeable reach of most people in a typical developing country.<sup>5</sup> Relative poverty measures can also be defended if one believes poverty should ultimately be measured in the space of welfare and that relative deprivation matters to a person’s welfare.<sup>6</sup> Chen and Ravallion (2001, 2004) provide estimates of relative poverty measures in which a person is not poor if she meets a “$1 per day” absolute consumption standard and consumes more than one third of the mean consumption in the country of residence; a coefficient of one third gave the best fit to the RDV data set on poverty lines (Chen and Ravallion, 2001).<sup>7</sup> But

> 3 This is unlikely to be a sufficient statistic; supplementary measures will be needed to capture other aspects of welfare, notably access to non-market goods (such as health and schooling). These supplementary measures should aim to capture those things that are missing from a standard consumption aggregate, and one should try to avoid double counting; for further discussion see Ravallion (1996).

> 4 Prior to RDV the World Bank had used explicitly arbitrary lines; see Ahluwalia (1974).

> 5 For example, Pritchett (2006) proposes a poverty line of around $10 a day; we calculate (using _PovcalNet_ : http://econ.worldbank.org/povcalnet) that 95% of the developing world’s live below this line.

> 6 For further discussion of the theory and evidence on this point see Ravallion (2008).

> 7 This simple structure for a schedule of relative poverty lines was proposed by Atkinson and Bourguignon (2001), who discuss the rationale further.

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