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The Impact of Local Public Services and Geographical Cost of Living Differences on Poverty Estimates

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Author Info
Rolf Aaberge, Audun Langørgen, Magne Mogstad and MaritØstensen () (Statistics Norway)

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Abstract

Despite a broad consensus on the need to account for the value of public services and geographical cost of living differences on the measurement of poverty, there is little reliable evidence on how these factors actually affect poverty estimates. Unlike the standard approach in studies of the distribution of public services, this paper employs a method for valuing sector-specific local public services that accounts for differences between municipalities in the costs and capacity to produce public services. Furthermore, recipient frequencies in various demographic groups are used as the basis for determining the allocation of the value of these services on citizens of the municipalities. Geographical differences in living costs are accounted for by using municipal housing price indices or by replacing the country-specific poverty line with municipal-specific poverty lines. Applying Norwegian register data for the period 1993-2001, we find that disregarding the value of local public services and geographic cost of living differences yields a misleading picture of poverty.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 551.

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Date of creation: Jul 2008
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Handle: RePEc:ssb:dispap:551

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Related research
Keywords: Poverty; public services; in-kind transfers; geographical cost of living differences; housing price indices; municipal-specific poverty lines;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
I30 - Health, Education, and Welfare - - Welfare and Poverty - - - General

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References listed on IDEAS
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  1. Hill, Robert J, 1997. "A Taxonomy of Multilateral Methods for Making International Comparisons of Prices and Quantities," Review of Income and Wealth, Blackwell Publishing, vol. 43(1), pages 49-69, March.
  2. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June. [Downloadable!] (restricted)
  3. Gemmell, Norman, 1985. "The Incidence of Government Expenditure and Redistribution in the United Kingdom," Economica, London School of Economics and Political Science, vol. 52(27), pages 335-44, August. [Downloadable!] (restricted)
  4. Erik Fjærli and Rolf Aaberge, 2000. "Tax Reforms, Dividend Policy and Trends in Income Inequality Empirical Evidence based on Norwegian Data," Discussion Papers 284, Research Department of Statistics Norway. [Downloadable!]
  5. Raj Chetty & Emmanuel Saez, 2005. "Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 791-833, August.
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  6. J. Peter Neary, 2004. "Rationalizing the Penn World Table: True Multilateral Indices for International Comparisons of Real Income," American Economic Review, American Economic Association, vol. 94(5), pages 1411-1428, December. [Downloadable!]
    Other versions:
  7. Magne Mogstad & Audun Langørgen & Rolf Aaberge, 2007. "Region-specific versus country-specific poverty lines in analysis of poverty," Journal of Economic Inequality, Springer, vol. 5(1), pages 115-122, April. [Downloadable!] (restricted)
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  8. Sen, Amartya, 1979. " Issues in the Measurement of Poverty," Scandinavian Journal of Economics, Blackwell Publishing, vol. 81(2), pages 285-307.
  9. Koo, Jahyeong & Phillips, Keith R & Sigalla, Fiona D, 2000. "Measuring Regional Cost of Living," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 127-36, January.
  10. Stephen Malpezzi & Richard K. Green, 1995. "What’s Happened to the Bottom of the Housing Market?," Wisconsin-Madison CULER working papers 95-16, University of Wisconsin Center for Urban Land Economic Research.
  11. Dean Jolliffe, 2006. "Poverty, Prices, and Place: How Sensitive is the Spatial Distribution of Poverty to Cost of Living Adjustments?," Economic Inquiry, Oxford University Press, vol. 44(2), pages 296-310, April. [Downloadable!] (restricted)
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