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Testing for poverty dominance: an application to Canada

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  • Wen-Hao Chen
  • Jean-Yves Duclos

Abstract

The paper proposes and applies statistical tests for poverty dominance that check for whether poverty comparisons can be made robustly over ranges of poverty lines and classes of poverty indices. This helps provide both normative and statistical confidence in establishing poverty rankings across distributions. The tests, which can take into account the complex sampling procedures that are typically used by statistical agencies to generate household-level surveys, are implemented using the Canadian Survey of Labour and Income Dynamics (SLID) for 1996, 1999 and 2002. Although the yearly cumulative distribution functions cross at the lower tails of the distributions, the more recent years tend to dominate earlier years for a relatively wide range of poverty lines. Failing to take into account SLIDs sampling variability (as is sometimes done) can inflate significantly ones confidence in ranking poverty. Taking into account SLIDs complex sampling design (as has not been done before) can also decrease substantially the range of poverty lines over which a poverty ranking can be inferred.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 379.

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Date of creation: Apr 2009
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Handle: RePEc:bge:wpaper:379

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Keywords: Stochastic dominance; empirical likelihood; Canada; income distribution;

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References

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  1. Russell Davidson & Jean-Yves Duclos, 2000. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," Econometrica, Econometric Society, Econometric Society, vol. 68(6), pages 1435-1464, November.
  2. 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, International Association for Research in Income and Wealth, vol. 44(1), pages 99-109, March.
  3. Oliver Linton & Esfandiar Maasoumi & Yoon-Jae Whang, 2002. "Consistent testing for stochastic dominance : a subsampling approach," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2207, London School of Economics and Political Science, LSE Library.
  4. Beach, Charles M & Davidson, Russell, 1983. "Distribution-Free Statistical Inference with Lorenz Curves and Income Shares," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 50(4), pages 723-35, October.
  5. Garry F. Barrett & Stephen G. Donald, 2003. "Consistent Tests for Stochastic Dominance," Econometrica, Econometric Society, Econometric Society, vol. 71(1), pages 71-104, January.
  6. Valentino Dardanoni & Antonio Forcina, 1999. "Inference for Lorenz curve orderings," Econometrics Journal, Royal Economic Society, Royal Economic Society, vol. 2(1), pages 49-75.
  7. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, Econometric Society, vol. 56(1), pages 173-77, January.
  8. Anderson, Gordon, 1996. "Nonparametric Tests of Stochastic Dominance in Income Distributions," Econometrica, Econometric Society, Econometric Society, vol. 64(5), pages 1183-93, September.
  9. 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.
  10. Kaur, Amarjot & Prakasa Rao, B.L.S. & Singh, Harshinder, 1994. "Testing for Second-Order Stochastic Dominance of Two Distributions," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 10(05), pages 849-866, December.
  11. Bishop, John A & Formby, John P & Thistle, Paul D, 1992. "Convergence of the South and Non-South Income Distributions, 1969-1979," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 262-72, March.
  12. Osberg, Lars, 2002. "Trends in poverty: the UK in international perspective: how rates mislead and intensity matters," ISER Working Paper Series 2002-10, Institute for Social and Economic Research.
  13. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, Econometric Society, vol. 55(4), pages 749-64, July.
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Cited by:
  1. Judith A. Clarke & Nilanjana Roy, 2010. "On Statistical Inference for Inequality Measures Calculated from Complex Survey Data," Econometrics Working Papers, Department of Economics, University of Victoria 1002, Department of Economics, University of Victoria.
  2. D. Van De Gaer & J. Vandenbossche & J. L. Figueroa, 2011. "Children’s health opportunities and project evaluation: Mexico’s Oportunidades program," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 11/749, Ghent University, Faculty of Economics and Business Administration.
  3. Șeker, Sirma Demir & Jenkins, Stephen P., 2013. "Poverty Trends in Turkey," IZA Discussion Papers 7823, Institute for the Study of Labor (IZA).
  4. Jenkins, Stephen P. & Sirma Demir Șeker, 2013. "Poverty trends in Turkey," ISER Working Paper Series 2013-29, Institute for Social and Economic Research.

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