lines are based on mean income or median income. There are debates about which of these two should be used. Median income is less sensitive than mean income to incomes in the top of the distribution, and has thus a lower variance in random population samples (Atkinson et al., 2002). However, relative measures based on median income may exhibit strange behavior when inequality changes (de Mesnard, 2007; Kämpke, 2010). Finally, one must select the proportion of the income standard defining the poverty threshold. Typical values range from 0.4 to 0.6 (see for instance Garroway and Laiglesia, 2012).

# 2.4 Absolute poverty versus relative poverty

Assessing poverty with an absolute measure may yield very different conclusions than doing this with a relative measure. When comparing these two kinds of measures, Notten and De Neubourg (2011) show that they typically yield different levels of poverty. Moreover, they show that the sign of the evolution of poverty is often reversed when switching from one kind of measure to the other. Reversals also frequently happen when comparing two different countries at a given point in time.

Unsurprisingly, there have been conceptual debates among defenders of each of these two approaches. The intellectual exchange between Sen (1993, 1995) and Townsend (1995) is a notable example. The latter argues that poverty was essentially a relative phenomenon, whereas the former defends the view that relative aspects must ‘take the back seat’ when individual resources are too low. Interestingly, the capability theory proposed by Sen allows reconciling to some extent the two views. According to this theory, poverty is absolute in the space of functionings, but the resources necessary to meet a fixed level of functionings may depend on the context. In particular, the cost of participating in the everyday activities of a society may increase with its income standard. As a result, an absolute threshold in the space of functionings may translate into a relative threshold in the space of income.

In practice, the national poverty measures of most developing countries are absolute, whereas those of most OECD countries are relative. There are exceptions, notably the United States that use an absolute measure, which was established building on the work of Orshansky (1965).

Even when a country has made its choice between the two approaches, the controversies are not necessarily over. In the long run, countries using absolute measures tend to revise their poverty threshold upward as their income standards increase. For instance, developing countries like China, India or Indonesia increased their absolute threshold over time (Ravallion, 2012; Jolliffe and Prydz, 2021). Also, some developing countries set their national poverty line using methodologies that may incorporate some elements of relativity. For instance, the food poverty line in the Arab Republic of Egypt is computed as the cost of the average food bundle consumed by households in the bottom 40% of the distribution (World Bank, 2011). When standards of living increase, households adapt their consumption patterns towards more expensive calories, which implicitly raises the real value of the food poverty line. Among developed countries, the US absolute threshold has been criticized (Citro and Michael, 1995), leading to the introduction of a second ‘supplemental poverty measure’ (SPM), which incorporates similar elements of relativity in its design. In the short run, countries using relative measures may observe some counterintuitive evolutions of their measure during periods of strong economic growth (Whelan and Maître, 2010) or periods of rapid economic decline (Halleröd and Heikkilä, 2002).

When performing cross-country comparisons, each approach might be criticized on the basis that it does not take into account the essence of the other approach. On the one hand, relative 6