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Developing a New Poverty Line for the USA: Are There Lessons for India?

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  • Thesia I. Garner

    ()
    (U.S. Bureau of Labor Statistics)

  • Kathleen Short

    (U.S. Census Bureau)

Abstract

This paper reviews a procedure that is being followed in the United States of America (USA) to experimentally test and evaluate recommendations made for redefining poverty measurement in that country. The recommendations were made in 1995 by the US National Academy of Sciences (NAS) Panel on poverty measurement. In this paper these recommendations are reviewed and the impact of implementing the recommendations on measures of inequality and poverty are examined. In conclusion, a discussion concerning possible lessons for India is provided. The recommended poverty measure (based on new measures of thresholds and resources) is examined in terms of its impact on inequality statistics, as well as poverty statistics, and results are compared to similar statistics based on the official measure. The standard Gini index, and three generalized entropy inequality measures are used to examine inequality. For the poverty analysis simple head count ratios, poverty gaps, and Foster-Greer-Thorbecke poverty measures are computed. Data from the 1991 U.S. Consumer Expenditure Survey (CE) Interview are used to produce the thresholds, and data from the 1992 through 1997 Current Population Survey (CPS), and in some analyzes, the 1991 panel of the Survey of Income and Program Participation (SIPP), are used to define resources. The proposed measure produces a distribution of resources that is, in general, more equal than is the distribution of official income. The poverty analysis reveals that changes in the poverty rates based on the official and the experimental measures are similar over time. However, poverty as measured by the NAS measure is greater than official poverty. The experimental poverty measure yields a poverty population that looks slightly more like the total U.S. population in terms of various demographic and socioeconomic characteristics than does the current official measure. Geographically adjusting the thresholds results in greater equality and lower poverty rates than when non-adjusted thresholds are used. With regard to India, poverty measurement is likely not to be based on income and expenditures primarily. Alternative measures based on other needs and resources are reviewed. However, regardless of the measure used, systematic evaluations of the measure are necessary and the USA model may be one to consider in this evaluation process.

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Bibliographic Info

Paper provided by U.S. Bureau of Labor Statistics in its series Working Papers with number 378.

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Length: 32 pages
Date of creation: Mar 2005
Date of revision:
Publication status: Published in National Income Accounts and Data Systems, edited by B.S. Minhas, Oxford University Press, New Delhi, 2002
Handle: RePEc:bls:wpaper:ec050040

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Keywords: poverty; Consumer Expenditure Survey; India;

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  1. Cowell, Frank A. & Kuga, Kiyoshi, 1981. "Additivity and the entropy concept: An axiomatic approach to inequality measurement," Journal of Economic Theory, Elsevier, vol. 25(1), pages 131-143, August.
  2. Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
  3. 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.
  4. Cowell, Frank A & Victoria-Feser, Maria-Pia, 1996. "Robustness Properties of Inequality Measures," Econometrica, Econometric Society, vol. 64(1), pages 77-101, January.
  5. Jenkins, S., 1988. "The Measurement Of Economic Inequality," Papers 170, Australian National University - Department of Economics.
  6. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Wiley Blackwell, vol. 44(2), pages 77-124, April.
  7. Lancaster, Geoffrey & Ray, Ranjan & Valenzuela, Maria Rebecca, 1999. "A Cross-Country Study of Household Poverty and Inequality on Unit Record Household Budget Data," Economic Development and Cultural Change, University of Chicago Press, vol. 48(1), pages 177-208, October.
  8. Shelley A. Phipps, 1993. "Measuring Poverty among Canadian Households: Sensitivity to Choice of Measure and Scale," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 162-184.
  9. Short, Kathleen, et al, 1998. "Poverty-Measurement Research Using the Consumer Expenditure Survey and the Survey of Income and Program Participation," American Economic Review, American Economic Association, vol. 88(2), pages 352-56, May.
  10. Kakwani, Nanak, 1993. "Statistical Inference in the Measurement of Poverty," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 632-39, November.
  11. Kakwani, N., 1990. "Large Sample Distribution Of Several Inequality Measures; With Application To Cote D'Ivoire," Papers 61, World Bank - Living Standards Measurement.
  12. Kakwani, Nanak, 1980. "On a Class of Poverty Measures," Econometrica, Econometric Society, vol. 48(2), pages 437-46, March.
  13. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
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