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On the Measurement of Poverty Dynamics

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  • Hojman, Daniel Andres
  • Kast, Felipe

Abstract

This paper introduces a family of multi-period poverty measures derived from commonly used static poverty measures. Our measures trade-off poverty levels and changes (gains and losses) over time, and are consistent with loss aversion. We characterize the partial ranking over income dynamics induced by these measures and use it in two empirical applications with longitudinal household level data. Comparing two decades of income dynamics in the United States, we find that the income dynamics of the 1990s-post Welfare reform dominates the income dynamics of the 1980s-pre Welfare reform. Next, we compare the contemporary income dynamics of three industrialized countries and conclude that United Kingdom dominates Germany and United States, and Germany dominates the United States if poverty stocks are given more importance than poverty flows. The differences between our ranking and those obtained using other welfare criteria such as social mobility suggest that our measures capture critical in formation about the evolution of poverty.

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Bibliographic Info

Paper provided by Harvard Kennedy School of Government in its series Scholarly Articles with number 4449107.

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Date of creation: 2009
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Publication status: Published in HKS Faculty Research Working Paper Series
Handle: RePEc:hrv:hksfac:4449107

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  1. Kakwani, Nanak, 1980. "On a Class of Poverty Measures," Econometrica, Econometric Society, Econometric Society, vol. 48(2), pages 437-46, March.
  2. Kareen Rozen, 2008. "Foundations of Intrinsic Habit Formation," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1642, Cowles Foundation for Research in Economics, Yale University.
  3. Botond Koszegi & Matthew Rabin, 2004. "A Model of Reference-Dependent Preferences," Method and Hist of Econ Thought, EconWPA 0407001, EconWPA.
  4. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, 09.
  5. Peter Gottschalk & Enrico Spolaore, 2002. "On the Evaluation of Economic Mobility," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 191-208.
  6. Shalev, Jonathan, 1997. "Loss aversion in a multi-period model," Mathematical Social Sciences, Elsevier, Elsevier, vol. 33(3), pages 203-226, June.
  7. Bruce D. Meyer & James X. Sullivan, 2006. "Three Decades of Consumption and Income Poverty," Working Papers, Harris School of Public Policy Studies, University of Chicago 0416, Harris School of Public Policy Studies, University of Chicago.
  8. Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, Econometric Society, vol. 46(5), pages 1013-24, September.
  9. Thorbecke, Erik, 2004. "Conceptual and Measurement Issues in Poverty Analysis," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  10. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June.
  11. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 20(1), pages 3-24, Winter.
  12. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, Econometric Society, vol. 44(2), pages 219-31, March.
  13. Read, Daniel & Read, N. L., 2004. "Time discounting over the lifespan," Organizational Behavior and Human Decision Processes, Elsevier, Elsevier, vol. 94(1), pages 22-32, May.
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Cited by:
  1. Dang, Hai-Anh & Lanjouw, Peter & Luoto, Jill & McKenzie, David, 2011. "Using repeated cross-sections to explore movements in and out of poverty," Policy Research Working Paper Series 5550, The World Bank.
  2. Carlos Gradín & Coral del Río & Olga Cantó, 2010. "Measuring poverty accounting for time," Working Papers, Universidade de Vigo, Departamento de Economía Aplicada 1005, Universidade de Vigo, Departamento de Economía Aplicada.
  3. BOSSERT, Walter & CERIANI, Lidia & CHAKRAVARTY, Satya R. & D'AMBROSIO, Conchita, 2012. "Intertemporal Material Deprivation," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 2012-06, Universite de Montreal, Departement de sciences economiques.
  4. Aaron Nicholas & Ranjan Ray & Kompal Sinha, 2013. "Duration and Multidimensionality in Poverty Measurement," Economics Series 2013_9, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.

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