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Poverty Orderings when Welfare Comparisons are Uncertain

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  • Stefan Dercon

Abstract

In applied welfare economics, equivalence scales for household composition and size corrections, and appropriate price deflators are minimum requirements to perform interhousehold comparisons of welfare, measured via household income or consumption information. In practice, the information available is insufficient and only approximate price or household composition corrections are available. Poverty comparisons between groups or over time are then problematic. In this paper, Atkinson`s standard results on first order stochastic (welfare) dominance are extended to allow for pairwise comparisons of poverty of groups with different needs or facing different prices, when there is uncertainty on the true cost-of-living deflators and equivalence scales. The approach is illustrated using household surveys from Ethiopia and Burkina Faso.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 79.

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Date of creation: 01 Oct 2001
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Handle: RePEc:oxf:wpaper:79

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Keywords: poverty orderings; welfare dominance; equivalence scales; price deflators.;

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  1. Bradbury, Bruce, 1997. "Measuring Poverty Changes with Bounded Equivalence Scales: Australia in the 1980s," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(254), pages 245-64, May.
  2. Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(1), pages 1-38, February.
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