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The Poverty measurement and its determinants are the most important factors in poverty alleviation programs. In this paper, we estimate poverty line and its dimensions by using Linear Expenditure System. To that end, we use household level data from the Statistics Center of Iran during the period of 1994-2008. We examine the main determinants of poverty for urban households using a probit model. In this model, we assess the impact of key household characteristics on poverty. The results show that the poverty likelihood decreases if the educational level of the head of the household increases. In addition, the chance of being poor declines in a household headed by a male. The age of the head of the household, the ratio of income earners in the household, and the household size are other factors that have a significant role in the probability of being poor.

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The effect of equivalence scale on poverty line has been considered as a predetermined parameter in all previous studies about the estimation of poverty lines in Iran. As household’s members can benefit from economies of scale in consumption, the cost of reaching to a given level of welfare does not increase one to one in household scale. So the effect of household scale on poverty line as a predetermined parameter creates bias. The main purpose of this study is to estimate the poverty line regarding the household scale. The utility function and the indirect household expenditures under consumption behavior approach are estimated based on income-expenditure data for 204464 Iranian urban households during2001-2007. Then poverty lines (in nominal and real units) per household scale (1to 10 members) are calculated based on indirect household expenditures.