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Measuring Richness and Poverty: A Micro Data Application to Europe and Germany

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Author Info

  • Peichl, Andreas

    ()
    (ZEW Mannheim)

  • Schaefer, Thilo

    ()
    (University of Cologne)

  • Scheicher, Christoph

    ()
    (University of Cologne)

Abstract

In this paper, we define a new class of richness measures. In contrast to the often used headcount, these new measures are sensitive to changes in rich persons' income and therefore allow for a more sophisticated analysis of richness. We demonstrate the application of these new measures to analyze the development of poverty and richness over time in Germany, to compare Germany to many other European countries and to investigate the impact of tax reforms on poverty and richness. Using these examples, we show the importance of taking into account the intensity of changes and not only the number of people beyond a given richness line (headcount). We propose to use the new measures in addition to the headcount index for a more comprehensive analysis of richness.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3790.

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Length: 32 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3790

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Keywords: flat tax; tax reform; poverty; affluence; richness;

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References

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  1. Emmanuel Saez, 2005. "Top Incomes in the United States and Canada Over the Twentieth Century," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 402-411, 04/05.
  2. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland Over the Twentieth Century," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 412-421, 04/05.
  3. Emmanuel Saez & Michael R. Veall, 2005. "The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence," American Economic Review, American Economic Association, vol. 95(3), pages 831-849, June.
  4. Schaefer, Thilo & Peichl, Andreas, 2007. "Documentation FiFoSiM: Integrated tax benefit microsimulation," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 06-10 [rev.], University of Cologne, FiFo Institute for Public Economics.
  5. Marcelo Medeiros, 2006. "The Rich and the Poor: The Construction of an Affluence Line from the Poverty Line," Social Indicators Research, Springer, vol. 78(1), pages 1-18, 08.
  6. Atkinson, A. B., 1997. "Measurement of Trends in Poverty and the Income Distribution," Cambridge Working Papers in Economics 9712, Faculty of Economics, University of Cambridge.
  7. Thomas Piketty & Emmanuel Saez, 2006. "The Evolution of Top Incomes: A Historical and International Perspective," American Economic Review, American Economic Association, vol. 96(2), pages 200-205, May.
  8. Schaefer, Thilo & Peichl, Andreas, 2006. "Documentation FiFoSiM: integrated tax benefit microsimulation and CGE model," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 06-10, University of Cologne, FiFo Institute for Public Economics.
  9. Anthony B. Atkinson, 2005. "Comparing the Distribution of Top Incomes Across Countries," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 393-401, 04/05.
  10. Thomas Piketty, 2005. "Top Income Shares in the Long Run: An Overview," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 382-392, 04/05.
  11. Ricardo Varsano & Kevin Kim & Michael Keen, 2006. "The "Flat Tax(es)"," IMF Working Papers 06/218, International Monetary Fund.
  12. Chakravarty, Satya R., 1983. "A new index of poverty," Mathematical Social Sciences, Elsevier, vol. 6(3), pages 307-313, December.
  13. Atkinson, Tony, et al, 2002. "Microsimulation of Social Policy in the European Union: Case Study of a European Minimum Pension," Economica, London School of Economics and Political Science, vol. 69(274), pages 229-43, May.
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Citations

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Cited by:
  1. Andreas Peichl & Nico Pestel, 2011. "Multidimensional Well-Being at the Top: Evidence for Germany," SOEPpapers on Multidisciplinary Panel Data Research 425, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Eisenhauer, Joseph G., 2011. "The rich, the poor, and the middle class: Thresholds and intensity indices," Research in Economics, Elsevier, vol. 65(4), pages 294-304, December.
  3. Rolf Aaberge & A B Atkinson, 2013. "The median as watershed," Discussion Papers 749, Research Department of Statistics Norway.
  4. Chameni Nembua, Célestin & Biloa Essimi, Jean Aristide, 2013. "Who is Rich in Cameroun?
    [Who is Rich in Cameroon?]
    ," MPRA Paper 48024, University Library of Munich, Germany.
  5. Peichl, Andreas & Pestel, Nico, 2011. "Multidimensional Affluence: Theory and Applications to Germany and the US," IZA Discussion Papers 5926, Institute for the Study of Labor (IZA).
  6. Somnath Chattopadhyay, 2011. "Earnings efficiency and poverty dominance analysis: a spatial approach," Economics Bulletin, AccessEcon, vol. 31(3), pages 2298-2318.
  7. Chakravarty, Satya R. & D'Ambrosio, Conchita, 2013. "An axiomatic approach to the measurement of poverty reduction failure," Economic Modelling, Elsevier, vol. 35(C), pages 874-880.
  8. Nuno Crespo & Sandrina Berthault Moreira & Nádia Simões, 2011. "An integrated approach for the measurement of inequality, poverty, and richness," Working Papers 205, ECINEQ, Society for the Study of Economic Inequality.
  9. Alessandra Michelangeli & Eugenio Peluso & Alain Trannoy, 2011. "Detecting a change in wealth concentration without the knowledge of the wealth distribution," Journal of Economic Inequality, Springer, vol. 9(3), pages 373-391, September.
  10. BILOA ESSIMI, Jean Aristide & CHAMENI NEMBUA, Celestin, 2013. "Estimation D’Une Ligne D’Affluence : Cas Du Cameroun
    [Affluence Line Estimation: Case Of Cameroon]
    ," MPRA Paper 48095, University Library of Munich, Germany.
  11. S. Subramanian, 2009. "Revisiting the Normalization Axiom in Poverty Measurement," Finnish Economic Papers, Finnish Economic Association, vol. 22(2), pages 89-98, Autumn.
  12. Durr-e-Nayab, 2011. "Estimating the Middle Class in Pakistan," PIDE-Working Papers 2011:77, Pakistan Institute of Development Economics.
  13. Michał Brzeziński, 2013. "Variance estimation for richness measures," Working Papers 2013-03, Faculty of Economic Sciences, University of Warsaw.
  14. Céline BONNEFOND & Matthieu CLEMENT & François COMBARNOUS, 2013. "In search of the elusive Chinese urban middle class: An exploratory analysis," Cahiers du GREThA 2013-19, Groupe de Recherche en Economie Théorique et Appliquée.
  15. Guillermo Cruces & Luis Felipe López Calva & Diego Battistón, 2011. "Down and Out or Up and In? Polarization-Based Measures of the Middle Class for Latin America," CEDLAS, Working Papers 0113, CEDLAS, Universidad Nacional de La Plata.

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