AN AXIOMATIC CHARACTERIZATION OF THE WATTS POVERTY INDEX

Although the first distribution-sensitive, decomposable poverty index, the Watts index has long been neglected by the profession even when it was searching for a decomposable index. This neglect is due partly to the lack of an axiomatic characterization for the Watts index. This paper adopts an axiomatic approach and complements the Watts index with such a characterization. Under a set of reasonable axioms, the Watts index is the unique index if a poverty index is perceived as the absolute amount of social welfare loss due to poverty. The Watts index is relatively easy to apply. It also satisfies all basic axioms for a good poverty index.