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International Evidence on the Impact of Transfers and Taxes on Alternative Poverty Indexes

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  • Kishor Thanawala
  • Robert DeFina

Abstract

Changes in the headcount rate are the standard metric for gauging how public transfers and taxes affect poverty. An alternative strategy, one theoretically more appealing and complete, is to rely on distribution-sensitive indexes [Sen (1976, 1981)]. How would policies measured impacts change if such an approach were to be used? This study provides new empirical evidence based on Luxembourg Income Study data for seventeen countries covering various years between 1969 and 1997. Poverty is measured using three indexes from the class developed by Foster, Greer, and Thorbecke (1984), one of which is the headcount rate. Estimates of the policy impacts are obtained by computing index values with before- and after-policy income. Evidence is also provided on the determinants of cross-country differences in index values and policy effectiveness, and on the extent to which variations in the different indexes are correlated with those in the United Nations Human Development Index.

Suggested Citation

  • Kishor Thanawala & Robert DeFina, 2002. "International Evidence on the Impact of Transfers and Taxes on Alternative Poverty Indexes," LIS Working papers 325, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:325
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    Cited by:

    1. Lane Kenworthy, 2004. "Welfare States, Real Income and Poverty," LIS Working papers 370, LIS Cross-National Data Center in Luxembourg.
    2. Heikki Hiilamo & Reijo Sund & Seppo Sallila, 2004. "Rethinking the Measures of Poverty," LIS Working papers 368, LIS Cross-National Data Center in Luxembourg.
    3. Hamid Abrishami & Mohsen Mehrara & Ali Sadeghein, 2010. "Assessment of the Role of Inequality and Income Distribution Factors in the Third Economic Development Plan (with Emphasis on Direct Taxes)," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 15(2), pages 105-123, spring.

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