ABSTRACT

This chapter consists of two parts. In the first part (sections 2 to 5), I will discuss in detail possible interpretations the income evaluation approach, i.e. answers to the question: what are the responses to the Minimum Income Question (MIQ) and the Income Evaluation Question (IEQ) supposed to measure? The most prominent interpretation is the one put forward by Van Praag, who claims that the IEQ provides a cardinal and interpersonally comparable measure of welfare. If this claim were correct, the IEQ would also be the ideal measure of poverty, provided of course that poverty can be defined with reference to the concept of welfare that is measured by the IEQ. The following two sections are therefore devoted to Van Praag’s interpretation. The next section looks at the claim that the IEQ results have cardinal properties, using theoretical as well as empirical arguments from the relevant literature, supplemented by new empirical results from the Belgian Socio-Economic Panel (SEP). Section three is about the question whether the IEQ can be regarded as an interpersonally comparable measure of welfare. Both aspects of this issue will be discussed: whether it is interpersonally comparable, and whether it can be regarded as a measure of welfare. Section four considers an alternative interpretation of the MIQ, viz. that the answers are indicators of a consensual income threshold. In section five, I will introduce the interpretation of the income evaluation approach favored in this thesis.