Statistical inference for poverty measures with relative poverty lines

Relative poverty lines such as one-half median income have been increasingly used in poverty studies. This paper contributes to the literature by developing statistical inference for testing decomposable poverty measures with relative poverty lines. The poverty lines we consider are percentages of mean income and percentages of quantiles. We show that the estimates of poverty indices with relative poverty lines are asymptotically normally distributed and that the covariance structure can be consistently estimated. As a consequence, asymptotically distribution-free statistical inference can be established in a straightforward manner.