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Relative or Absolute Poverty Lines: A New Approach

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  • Madden, David

Abstract

When measuring poverty over time analysts must choose the value of the income elasticity of the poverty line, which essentially determines whether an absolute or relative poverty line is being used. The choice of this parameter is ultimately a value judgement, but this paper suggests an approach which has some empirical basis. Borrowing from the life-style and deprivation approach to poverty, various dimensions of poverty and deprivation are identified and the income elasticity of these items is used as the income elasticity of the poverty line. Data from the 1987 and 1994 Irish Household Budget Surveys suggest an upper bound of 0.7 for this parameter. Poverty measures using a number of values of the income elasticity of the poverty line are presented and test statistics are presented to determine whether observed differences in poverty measures are statistically significant. Copyright 2000 by The International Association for Research in Income and Wealth.

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Bibliographic Info

Article provided by International Association for Research in Income and Wealth in its journal Review of Income & Wealth.

Volume (Year): 46 (2000)
Issue (Month): 2 (June)
Pages: 181-99

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Handle: RePEc:bla:revinw:v:46:y:2000:i:2:p:181-99

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References

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  1. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, Econometric Society, vol. 44(2), pages 219-31, March.
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  6. Foster, James E, 1998. "Absolute versus Relative Poverty," American Economic Review, American Economic Association, American Economic Association, vol. 88(2), pages 335-41, May.
  7. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  8. Richard Blundell & Ian Preston, 1997. "Consumption, inequality and income uncertainty," IFS Working Papers, Institute for Fiscal Studies W97/15, Institute for Fiscal Studies.
  9. Callan, Tim & Nolan, Brian & Walsh, John R., 1998. "Income Tax and Social Welfare Policies," Papers, Economic and Social Research Institute (ESRI) BP1999/2, Economic and Social Research Institute (ESRI).
  10. Kay, J. A. & Keen, M. J. & Morris, C. N., 1984. "Estimating consumption from expenditure data," Journal of Public Economics, Elsevier, Elsevier, vol. 23(1-2), pages 169-181.
  11. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, Econometric Society, vol. 52(3), pages 761-66, May.
  12. repec:esr:chaptr:jacb199808 is not listed on IDEAS
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Cited by:
  1. Coudouel, Aline & Hentschel, Jesko & Wodon, Quentin, 2002. "Mesure et analyse de la pauvreté
    [Poverty Measurement and Analysis]
    ," MPRA Paper 10490, University Library of Munich, Germany.
  2. Christophe Muller, 2005. "Defining Poverty Lines As A Fraction Of Central Tendency," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 2005-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. Madden, D.;, 2013. "The Poverty Effects of a "Fat-Tax" in Ireland," Health, Econometrics and Data Group (HEDG) Working Papers, HEDG, c/o Department of Economics, University of York 13/07, HEDG, c/o Department of Economics, University of York.
  4. Coudouel, Aline & Hentschel, Jesko & Wodon, Quentin, 2002. "Измерение И Анализ Бедности
    [Poverty Measurement and Analysis]
    ," MPRA Paper 10492, University Library of Munich, Germany.
  5. Madden, D, 2008. "Health and Income Poverty in Ireland, 2003-2006," Health, Econometrics and Data Group (HEDG) Working Papers, HEDG, c/o Department of Economics, University of York 08/14, HEDG, c/o Department of Economics, University of York.
  6. Chiappero-Martinetti, Enrica & Civardi, Marisa, 2006. "Measuring poverty within and between population subgroups," IRISS Working Paper Series, IRISS at CEPS/INSTEAD 2006-06, IRISS at CEPS/INSTEAD.
  7. Coudouel, Aline & Hentschel, Jesko & Wodon, Quentin, 2002. "Medición y análisis de la pobreza
    [Poverty Measurement and Analysis]
    ," MPRA Paper 10491, University Library of Munich, Germany.
  8. Corak, Miles, 2005. "Principles and Practicalities for Measuring Child Poverty in the Rich Countries," IZA Discussion Papers 1579, Institute for the Study of Labor (IZA).
  9. Madden, D. & Smith, F., 2000. "Poverty in Ireland, 1987-1994: a Stochastic Dominance Approach," Papers, College Dublin, Department of Political Economy- 00/13, College Dublin, Department of Political Economy-.
  10. Michael Huberman & Frank Lewis, 2007. "Bend it like Beckham: Hours and Wages across Forty-Eight Countries in 1900," Working Papers, Queen's University, Department of Economics 1229, Queen's University, Department of Economics.
  11. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Poverty Measurement and Analysis," MPRA Paper 45362, University Library of Munich, Germany.
  12. Disney, Richard & Whitehouse, Edward, 2001. "Cross-country comparisons of pensioners’ incomes," MPRA Paper 16345, University Library of Munich, Germany.
  13. Duangkamon Chotikapanich, William Griffiths, Wasana Karunarathne, D.S. Prasada Rao, 2012. "Calculating Poverty Measures from the Generalized Beta Income Distribution," Department of Economics - Working Papers Series, The University of Melbourne 1154, The University of Melbourne.
  14. David Madden, 2002. "A Review of Recent Research into Poverty in Ireland," Working Papers, School Of Economics, University College Dublin 200232, School Of Economics, University College Dublin.
  15. Marcelo Arbex & Enlinson Mattos, 2010. "Poverty and the Optimal General Income Tax-cum-Audit Policy," Working Papers, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto 02-2010, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
  16. Donal O'Neill, 2000. "Evaluating Labour Market Interventions," Economics, Finance and Accounting Department Working Paper Series, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n990300, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

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