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Do we know how much poverty there is?

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  • Miguel Szekely
  • Nora Lustig
  • Martin Cumpa
  • Jose Antonio Mejia

Abstract

This paper tests the sensitivity of poverty indexes to the choice of adult equivalence scales, assumptions about the existence of economies of scale in consumption, methods for treating missing and zero incomes, and different adjustments to handle income misreporting. The sensitivity analysis is applied to household survey data from 17 Latin American countries, which include 92% of the population in the region. By varying these parameters within reasonable boundaries we found that the proportion of poor could be said to be either 20% or 66%. Furthermore, the ranking of countries with respect to poverty is highly sensitive to the underlying choices for poverty measurement. We also perform sensitivity analysis to the use of different poverty lines and poverty indexes, which are issues that have been explored much more in the literature. Even after considering these elements, the most sensitive choice appears to be the method used to adjust for misreporting. These findings point, first, to the need to be explicit about the underlying assumptions behind poverty statistics, second, to the need to perform sensitivity analysis when estimating levels and trends in poverty, and third, to the importance of establishing a set of conventions that would be accepted as “best practices” in estimating poverty indexes.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Oxford Development Studies.

Volume (Year): 32 (2004)
Issue (Month): 4 ()
Pages: 523-558

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Handle: RePEc:taf:oxdevs:v:32:y:2004:i:4:p:523-558

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References

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  1. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  2. Foster, James E. & Shorrocks, Anthony F., 1988. "Inequality and poverty orderings," European Economic Review, Elsevier, vol. 32(2-3), pages 654-661, March.
  3. Michael Hurd & F. Thomas Juster & James P. Smith, 2004. "Enhancing the Quality of Data on Income: Recent Developments in Survey Methodology," Labor and Demography 0412001, EconWPA.
  4. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-82, September.
  5. José Antonio Mejía-Guerra & Rob Vos, 1997. "Poverty in Latin America and the Caribbean: An Inventory: 1980-95," IDB Publications 10878, Inter-American Development Bank.
  6. Duclos, Jean-Yves & Mercader-Prats, Magda, 1999. "Household Needs and Poverty: With Application to Spain and the U.K," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 77-98, March.
  7. Woden, Q.T. & Ayres, W. & Barenstein, M. & Hicks, N. & Lee, K. & Maloney, W. & Peeters, P. & Siaens, C. & Yitzjaki, S., 2000. "Poverty and Policy in Latin America and Caribeean," Papers 467, World Bank - Technical Papers.
  8. Chaudhuri, Shubham & Ravallion, Martin, 1994. "How well do static indicators identify the chronically poor?," Journal of Public Economics, Elsevier, vol. 53(3), pages 367-394, March.
  9. Psacharopoulos, G. & Morley, S. & Fiszbein, A. & Lee, H. & Wood, B., 1997. "Poverty and Income Distribution in Latin America: The Story of the 1980s," Papers 351, World Bank - Technical Papers.
  10. Atkinson, A B, 1992. "Measuring Poverty and Differences in Family Composition," Economica, London School of Economics and Political Science, vol. 59(233), pages 1-16, February.
  11. Lancaster, Geoffrey & Ray, Ranjan & Valenzuela, Maria Rebecca, 1999. "A Cross-Country Study of Equivalence Scales and Expenditure Inequality on Unit Record Household Budget Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(4), pages 455-82, December.
  12. Shorrocks, Anthony F, 1995. "Revisiting the Sen Poverty Index," Econometrica, Econometric Society, vol. 63(5), pages 1225-30, September.
  13. Lanjouw, Peter & Ravallion, Martin & DEC, 1994. "Poverty and household size," Policy Research Working Paper Series 1332, The World Bank.
  14. Blackburn, McKinley L, 1998. "The Sensitivity of International Poverty Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 449-72, December.
  15. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, vol. 56(1), pages 173-77, January.
  16. Howes, Stephen & Lanjouw, Jean Olson, 1998. "Does Sample Design Matter for Poverty Rate Comparisons?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(1), pages 99-109, March.
  17. Ravallion, Martin, 1994. "Poverty rankings using noisy data on living standards," Economics Letters, Elsevier, vol. 45(4), pages 481-485, August.
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Citations

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Cited by:
  1. Sandrine Mesplé-Somps & Charlotte Guénard, 2006. "Measuring Inequalities: Do The Surveys Give The Real Picture? Study Of Two Surveys In Cote D’Ivoire And Madagascar," Working Papers 18, ECINEQ, Society for the Study of Economic Inequality.
  2. Sebastian Levine, 2012. "Exploring Differences in National and International Poverty Estimates: Is Uganda on Track to Halve Poverty by 2015?," Social Indicators Research, Springer, vol. 107(2), pages 331-349, June.
  3. Leonardo Gasparini & Federico Gutiérrez & Leopoldo Tornarolli, 2007. "Growth And Income Poverty In Latin America And The Caribbean: Evidence From Household Surveys," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(2), pages 209-245, 06.
  4. Guénard, Charlotte & Mesplé-Somps, Sandrine, 2004. "Mesurer les inégalités : que captent réellement les enquêtes ? Analyse de deux enquêtes ivoirienne et malgache," Economics Papers from University Paris Dauphine 123456789/4459, Paris Dauphine University.
  5. Caterina Ruggeri Laderchi & Ruhi Saith & Frances Stewart, 2003. "Does it Matter that we do not Agree on the Definition of Poverty? A Comparison of Four Approaches," Oxford Development Studies, Taylor & Francis Journals, vol. 31(3), pages 243-274.
  6. Panizza, Ugo & Qiang, Christine Zhen-Wei, 2005. "Public-private wage differential and gender gap in Latin America: Spoiled bureaucrats and exploited women?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(6), pages 810-833, December.
  7. Julia Johannsen & Manfred Zeller & Stephan Klasen, 2007. "The capability dilemma in operational poverty assessment," Ibero America Institute for Econ. Research (IAI) Discussion Papers 159, Ibero-America Institute for Economic Research.
  8. Camelia Minoiu & Shatakshee Dhongde, 2011. "Global Poverty Estimates," IMF Working Papers 11/234, International Monetary Fund.
  9. Isidro Soloaga, 2004. "Growth and Poverty. The case of México," Econometric Society 2004 Latin American Meetings 93, Econometric Society.
  10. Spatz, Julius & Klasen, Stephan & Grosse, Melanie, 2006. "Creating National Poverty Profiles and Growth Incidence Curves with Incomplete Income or Consumption Expenditure Data: An Application to Bolivia," Proceedings of the German Development Economics Conference, Berlin 2006 26, Verein für Socialpolitik, Research Committee Development Economics.
  11. Quentin Wodon & Rodrigo Castro & Kihoon Lee, 2001. "Poverty in Latin America: Trends (1986-1998) and Determinants," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 38(114), pages 127-153.
  12. Bane, Mary Jo & Zenteno, Rene, 2005. "Poverty and Place in North America," Working Paper Series rwp05-035, Harvard University, John F. Kennedy School of Government.

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