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Relative or Absolute Poverty Lines - A New Approach

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  • David Madden

    (University College Dublin)

Abstract

When measuring poverty over time analysts must choose the value of the income elasticity of the poverty line, which essentially determines whether an absolute or relative poverty line is being used. The choice of this parameter is ultimately a value judgement but this paper suggests an approach which has some empirical basis. Borrowing from the life-style and deprivation approach to poverty various dimensions of poverty and deprivation are identified and the income elasticity of these items is used as the income elasticity of the poverty line. Data from the 1987 and 1994 Irish Household Budget Surveys suggest an upper bound of 0.7 for this parameter. Poverty measures using a number of values of the income elasticity of the poverty line are presented and test statistics are presented to determine whether observed differences in poverty measures are statistically significant.

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File URL: http://www.ucd.ie/economics/research/papers/1999/WP99.09.pdf
File Function: First version, 1999
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 199909.

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Length: 34 pages
Date of creation: 08 Oct 1999
Date of revision:
Handle: RePEc:ucn:wpaper:199909

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Keywords: Poverty; Deprivation;

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References

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  1. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  2. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  3. Kay, J. A. & Keen, M. J. & Morris, C. N., 1984. "Estimating consumption from expenditure data," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 169-181.
  4. Deaton, Angus & Irish, Margaret, 1984. "Statistical models for zero expenditures in household budgets," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 59-80.
  5. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
  6. Blundell, Richard & Meghir, Costas, 1987. "Bivariate alternatives to the Tobit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 179-200.
  7. Foster, James E, 1998. "Absolute versus Relative Poverty," American Economic Review, American Economic Association, vol. 88(2), pages 335-41, May.
  8. Callan, Tim & Nolan, Brian & Walsh, John R. & Nestor, Richard, 1999. "Income Tax and Social Welfare Policies," Papers BP2000/2, Economic and Social Research Institute (ESRI).
  9. repec:esr:chaptr:jacb199808 is not listed on IDEAS
  10. Richard Blundell & Ian Preston, 1998. "Consumption Inequality And Income Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 603-640, May.
  11. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-31, March.
  12. Desai, Meghnad & Shah, Anup, 1988. "An Econometric Approach to the Measurement of Poverty," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 505-22, September.
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Citations

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Cited by:
  1. David Madden, 2008. "Health and Income Poverty in Ireland, 2003-2006," Working Papers 200815, School Of Economics, University College Dublin.
  2. Duangkamon Chotikapanich, William Griffiths, Wasana Karunarathne, D.S. Prasada Rao, 2012. "Calculating Poverty Measures from the Generalized Beta Income Distribution," Department of Economics - Working Papers Series 1154, The University of Melbourne.
  3. David Madden, 2013. "The Poverty Effects of a “Fat-Tax” in Ireland," Working Papers 201303, School Of Economics, University College Dublin.
  4. Disney, Richard & Whitehouse, Edward, 2001. "Cross-country comparisons of pensioners’ incomes," MPRA Paper 16345, University Library of Munich, Germany.
  5. Madden, D. & Smith, F., 2000. "Poverty in Ireland, 1987-1994: a Stochastic Dominance Approach," Papers 00/13, College Dublin, Department of Political Economy-.
  6. Christophe Muller, 2005. "Defining Poverty Lines As A Fraction Of Central Tendency," Working Papers. Serie AD 2005-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Donal O'Neill, 2000. "Evaluating Labour Market Interventions," Economics, Finance and Accounting Department Working Paper Series n990300, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  8. David Madden, 2002. "A Review of Recent Research into Poverty in Ireland," Working Papers 200232, School Of Economics, University College Dublin.
  9. Chiappero-Martinetti, Enrica & Civardi, Marisa, 2006. "Measuring poverty within and between population subgroups," IRISS Working Paper Series 2006-06, IRISS at CEPS/INSTEAD.
  10. Corak, Miles, 2005. "Principles and Practicalities for Measuring Child Poverty in the Rich Countries," IZA Discussion Papers 1579, Institute for the Study of Labor (IZA).
  11. Coudouel, Aline & Hentschel, Jesko & Wodon, Quentin, 2002. "Mesure et analyse de la pauvreté
    [Poverty Measurement and Analysis]
    ," MPRA Paper 10490, University Library of Munich, Germany.
  12. 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.
  13. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Poverty Measurement and Analysis," MPRA Paper 45362, University Library of Munich, Germany.
  14. Coudouel, Aline & Hentschel, Jesko & Wodon, Quentin, 2002. "Измерение И Анализ Бедности
    [Poverty Measurement and Analysis]
    ," MPRA Paper 10492, University Library of Munich, Germany.
  15. Coudouel, Aline & Hentschel, Jesko & Wodon, Quentin, 2002. "Medición y análisis de la pobreza
    [Poverty Measurement and Analysis]
    ," MPRA Paper 10491, University Library of Munich, Germany.
  16. Michael Huberman & Frank Lewis, 2007. "Bend it like Beckham: Hours and Wages across Forty-Eight Countries in 1900," Working Papers 1229, Queen's University, Department of Economics.

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