Challenges in measuring subjective poverty: a policy application to Ecuador

Traditional monetary poverty metrics used in policy analysis have well-known limitations: small changes in thresholds or methodology can markedly alter who is counted as poor. Subjective poverty indicators—based on individuals’ own assessments—offer a complementary lens by capturing perceived deprivation.

This study uses Ecuador’s ENEMDU household survey (2009–2022), combining repeated cross-sections with a two-period panel spanning a major reform of the Bono de Desarrollo Humano (BDH) cash transfer program. In 2013–2014, a sharp tightening of the welfare index cutoff increased benefits for households below the threshold while making those just above it ineligible, generating an abrupt loss of transfers for some near-cutoff households. The panel allows us to track poverty dynamics around this shock.

We compare two objective poverty measures (income-based, using official poverty lines) with two subjective measures (self-reported poverty status and a minimum-income-based “subjective poverty line”). First, we document trends over time and test basic coherence, including whether higher income is associated with lower subjective poverty and how the subjective poverty line evolves. Second, exploiting the BDH reform as a quasi-experiment, we compare households just below and just above the eligibility cutoff to estimate—via a regression discontinuity design—how losing the transfer affects each poverty metric.

We expect objective and subjective measures to diverge in informative ways: some households above the monetary poverty line may still feel poor, while some income-poor households may not self-identify as such, reflecting adaptation and social comparison. We also hypothesize that subjective poverty is more responsive to the transfer loss than income poverty status. The results will clarify what each metric captures, whether different subjective measures behave similarly, and inform poverty targeting and social policy design by combining “poverty on paper” with perceived economic vulnerability.