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A Dual-Regime Utility Model for Poverty Analysis

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Author Info
Claudia Biancotti () (Bank of Italy)

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Abstract

This paper offers a micro-founded general definition of poverty set in the context of utility theory. Poverty and non-poverty are described as two structurally different types of local non-satiation: the former entails a strong need for further consumption and social marginalization, the latter is characterized by a weak need for further consumption and satisfactory adjustment to social expectations. Each of the states can be fully described by a separate technology of utility production. The model is tested on data from the Bank of ItalyÂ’s Survey of Household Income and Wealth; an indicator of self-reported economic satisfaction is regressed on yearly consumption of food and non-food commodities. The predictions of the model are confirmed in the case of food consumption, signalling the existence of physiological minima that are uniformly perceived by individuals. For non-food commodities, no significant change of regimes is found: welfare appears to be connected with needs that are less exposed to structural variation, possibly because they are not as urgent or objective as food-related ones.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 603.

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Date of creation: Sep 2006
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Handle: RePEc:bdi:wptemi:td_603_06

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Related research
Keywords: Poverty;

Find related papers by JEL classification:
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare
I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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  17. Stutzer, Alois, 2004. "The role of income aspirations in individual happiness," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 89-109, May. [Downloadable!] (restricted)
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  18. Claudia Biancotti & Giovanni D'Alessio & Andrea Neri, 2008. "Measurement Error In The Bank Of Italy'S Survey Of Household Income And Wealth," Review of Income and Wealth, Blackwell Publishing, vol. 54(3), pages 466-493, 09. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Giuseppe Ferrero & Andrea Nobili & Patrizia Passiglia, 2007. "The sectoral distribution of money supply in the Euro area," Temi di discussione (Economic working papers) 627, Bank of Italy, Economic Research Department. [Downloadable!]
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