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Defining Poverty Lines As A Fraction Of Central Tendency

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  • Christophe Muller

    ()
    (Universidad de Alicante)

Abstract

We show under lognormality that, when the Gini coefficient is stable over time, defining the poverty line as a fraction of a central tendency of the living standard distribution restricts the evolution of the poverty measures to be stable. That is, poverty does not change if the Gini coefficient does not change. Moreover, when the Gini coefficient slightly changes, most of the poverty change can be considered a change in inequality. Then, the consequences of using different poverty lines are analysed. Thus, important features in studies of poverty change based on these lines may result from methodological choices rather than from economic mechanisms.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-13.

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Length: 17 pages
Date of creation: Mar 2005
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2005-13

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Keywords: Measurement and Analysis of Poverty; Income Distribution; Personal Income Distribution;

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References

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  1. Pradhan, Menno & Ravallion, Martin, 1998. "Measuring poverty using qualitative perceptions of welfare," Policy Research Working Paper Series 2011, The World Bank.
  2. Hagenaars, Aldi J M & van Praag, Bernard M S, 1985. "A Synthesis of Poverty Line Definitions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(2), pages 139-54, June.
  3. Madden, David, 2000. "Relative or Absolute Poverty Lines: A New Approach," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 181-99, June.
  4. McDonald, James B & Ransom, Michael R, 1979. "Functional Forms, Estimation Techniques and the Distribution of Income," Econometrica, Econometric Society, vol. 47(6), pages 1513-25, November.
  5. Mercedes Prieto Alaiz & Maria-Pia Victoria-Feser, 1996. "Modelling Income Distribution in Spain: A Robust Parametric Approach," STICERD - Distributional Analysis Research Programme Papers 20, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. van Praag, Bernard & Goedhart, Theo & Kapteyn, Arie, 1980. "The Poverty Line-A Pilot Survey in Europe," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 461-65, August.
  7. Tim Callan & Brian Nolan, 1987. "Concepts of Poverty and the Poverty Line," Papers WP002, Economic and Social Research Institute (ESRI).
  8. Sen, Amartya, 1983. "Poor, Relatively Speaking," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 153-69, July.
  9. Chambaz, Christine & Maurin, Eric, 1998. "Atkinson and Bourguignon's Dominance Criteria: Extended and Applied to the Measurement of Poverty in France," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 497-513, December.
  10. Musgrave, R.A., 1985. "A brief history of fiscal doctrine," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 1, pages 1-59 Elsevier.
  11. Zheng, Buhong, 2001. "Statistical inference for poverty measures with relative poverty lines," Journal of Econometrics, Elsevier, vol. 101(2), pages 337-356, April.
  12. Ravallion, M. & Datt, G., 1991. "Growth and Redistribution Components of Changes in Poverty Measures," Papers 83, World Bank - Living Standards Measurement.
  13. James E. Foster & Efe A. Ok, 1999. "Lorenz Dominance and the Variance of Logarithms," Econometrica, Econometric Society, vol. 67(4), pages 901-908, July.
  14. Ravallion, M., 1998. "Poverty Lines in Theory and Practice," Papers 133, World Bank - Living Standards Measurement.
  15. van Praag, Bernard M S & Hagenaars, Aldi J M & van Eck, Wim, 1983. "The Influence of Classification and Observation Errors on the Measurement of Income Inequality," Econometrica, Econometric Society, vol. 51(4), pages 1093-108, July.
  16. Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 1-38, February.
  17. Christophe Muller, 2001. "The Properties of the Watts Poverty Index under Lognormality," Economics Bulletin, AccessEcon, vol. 9(1), pages 1-9.
  18. Foster, James E, 1998. "Absolute versus Relative Poverty," American Economic Review, American Economic Association, vol. 88(2), pages 335-41, May.
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Cited by:
  1. Marcelo Arbex & Enlinson Mattos, 2010. "Poverty and the Optimal General Income Tax-cum-Audit Policy," Working Papers 02-2010, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
  2. Ansoms, An & McKay, Andrew, 2010. "A quantitative analysis of poverty and livelihood profiles: The case of rural Rwanda," Food Policy, Elsevier, vol. 35(6), pages 584-598, December.

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