Relative Social Status and Conflicting Measures of Poverty - A Behavioral Analytical Model

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.