Perceived need and measured well-being: How well do subjective rankings capture relative poverty?

Subjective well-being rankings are widely used to target social protection programs, yet their ability to capture relative welfare and wealth remains debated. This study compares three commonly used subjective ranking methods: self-, peer-, and elite-based poverty rankings, against consumption- and wealth-based measures using a large household survey in Ethiopia, where about 20 households per village were ranked from most to least “needy” by themselves, their peers, and community leaders. We assess concordance between subjective and conventional welfare rankings and explore sources of divergence. Subjective rankings align more with relative wealth than consumption and with total rather than per capita welfare, suggesting they overlook household composition. Among the three subjective ranking methods, elite-based rankings best capture conventional measures, although overall concordance between subjective and welfare-based rankings remains weak. Subjective rankings also better reflect relative deprivation among households exposed to covariate shocks. A composite index combining all three modestly improves concordance with standard metrics. We find suggestive evidence that information asymmetry, favoritism, and welfare dynamics partly explain discrepancies between subjective rankings and conventional welfare measures. These findings offer important insights to improve targeting in data-scarce settings.