Although a large academic literature has discussed why the poverty rate is a poor summary index of trends in poverty, it is still used in much applied policy analysis. This paper begins by summarizing briefly why poverty intensity is a better measure of poverty. Using Luxembourg Income Study data on trends in poverty since the 1970s in Sweden, Canada, the USA and UK, it demonstrates that in about 40% of year to year comparisons, the conclusion one would draw about trends in relative poverty differs qualitatively if one uses the poverty rate or poverty intensity as the measure. For absolute poverty in the UK, the poverty rate and poverty intensity change in opposite directions every time. Since the choice of index of poverty matters, both for measurement and for analysis, the paper concludes by demonstrating that poverty intensity can be represented graphically by the "Poverty Box", and showing that trends over time, international comparisons and analysis of the impact of changes in the proportion of workless households can all be easily communicated using this tool. As well, poverty trends are extremely sensitive to the distribution of the gains from growth - if only 10% of the income gains of the top decile of the UK and the USA had been transferred to the bottom decile, poverty in both countries in 1994/95 would have been substantially lower than in 1979, instead of substantially higher.
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Publisher Info
Paper provided by Institute for Social and Economic Research in its series ISER working papers with number
2002-10.
Length: 42 Date of creation: 29 May 2002 Date of revision: Publication status: published Handle: RePEc:ese:iserwp:2002-10
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