Poverty can be defined as the state of a person or a group of people that lacks a specified amount of money or material possessions. The World Bank defines poverty more specifically as follows: “Poverty is pronounced deprivation in well-being, and comprises many dimensions. It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life.”
The World Bank definition follows the concept of absolute poverty. This approach is usually used to measure poverty in developing countries, where poverty is often a matter of subsistence. According to this concept, poverty is defined as follows: extreme poverty is living on less than 1.25 U.S. dollars a day (Purchasing Power Parity) and moderate poverty is living on less than 2 U.S. dollars a day. Developed countries normally report poverty rates based on relative poverty. Relative poverty is typically determined based on a certain percentage of a society’s median income. Every person living of an income underneath this poverty line is considered poor.
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