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Relative Or Absolute Poverty Lines: A New Approach

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  • David Madden

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.

Suggested Citation

  • David Madden, 2000. "Relative Or Absolute Poverty Lines: A New Approach," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(2), pages 181-199, June.
    • Handle: RePEc:bla:revinw:v:46:y:2000:i:2:p:181-199
    DOI: 10.1111/j.1475-4991.2000.tb00954.x
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    Cited by:

    1. Hu, Yaning & Lu, Haiyan & Chai, Hao & Gao, Xinyang, 2025. "Can the opening of high-speed rail promote household multidimensional relative poverty alleviation?," Journal of Transport Geography, Elsevier, vol. 128(C).
    2. Decerf, B., 2015. "A new index combining the absolute and relative aspects of income poverty: Theory and application," LIDAM Discussion Papers CORE 2015050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Corak, Miles, 2005. "Principles and Practicalities for Measuring Child Poverty in the Rich Countries," IZA Discussion Papers 1579, IZA Network @ LISER.
    4. Di Gennaro, Valentina & Ferrini, Silvia & Turner, Robert Kerry, 2025. "Extending the Genuine Savings estimates with natural capital and poverty at the regional and national level in Italy," Ecological Economics, Elsevier, vol. 228(C).
    5. J. Muñoz & E. Álvarez-Verdejo & R. García-Fernández & L. Barroso, 2015. "Efficient Estimation of the Headcount Index," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 123(3), pages 713-732, September.
    6. David Madden, 2011. "Health and income poverty in Ireland, 2003–2006," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 9(1), pages 23-33, March.
    7. Salvatore Babones & Jehane Simona Moussa & Christian Suter, 2016. "A Poisson-Based Framework for Setting Poverty Thresholds Using Indicator Lists," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(2), pages 711-726, March.
    8. David Madden, 2015. "The Poverty Effects Of A ‘Fat‐Tax’ In Ireland," Health Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 104-121, January.
    9. David Madden & Fiona Smith, 2000. "Poverty in Ireland, 1987-1994 - A Stochastic Dominance Approach," The Economic and Social Review, Economic and Social Studies, vol. 31(3), pages 187-214.
    10. Duangkamon Chotikapanich & William Griffiths & Wasana Karunarathne & D.S. Prasada Rao, 2013. "Calculating Poverty Measures from the Generalised Beta Income Distribution," The Economic Record, The Economic Society of Australia, vol. 89, pages 48-66, June.
    11. Simona Ballabio & Marianna Filandri & Lia Pacelli & Flavio Verrecchia, 2022. "Poverty of Young People: Context and Household Effects in North-Western Italy," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 161(2), pages 819-842, June.
    12. Adam Szulc, 2016. "Changing Mortality Distribution in Developed Countries from 1970 to 2010: Looking at Averages and Beyond Them," Statistics in Transition new series, Główny Urząd Statystyczny (Polska), vol. 17(3), pages 467-496, September.
    13. Peiying Dang & Linjing Ren & Jie Li, 2024. "Does rural tourism reduce relative poverty? Evidence from household surveys in western China," Tourism Economics, , vol. 30(2), pages 498-521, March.
    14. Marchand, J. & Smeeding, T., 2016. "Poverty and Aging," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 905-950, Elsevier.
    15. Safari, Muhammad Aslam Mohd & Masseran, Nurulkamal & Ibrahim, Kamarulzaman & AL-Dhurafi, Nasr Ahmed, 2020. "The power-law distribution for the income of poor households," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 557(C).
    16. Christophe Muller, 2006. "Defining Poverty Lines As a Fraction of Central Tendency," Southern Economic Journal, John Wiley & Sons, vol. 72(3), pages 720-729, January.
    17. David (David Patrick) Madden, 2002. "A review of recent research into poverty in Ireland," Working Papers 200232, School of Economics, University College Dublin.
    18. Massimo Civardi & Enrica Chiappero-Martinetti, 2008. "Measuring poverty within and between population subgroups," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 116(3), pages 305-320.
    19. Huberman, Michael & Lewis, Frank, 2007. "Bend it like Beckham: Hours and Wages across Forty-Eight Countries in 1900," Queen's Economics Department Working Papers 273725, Queen's University - Department of Economics.
    20. Francisco J. Ciocchini & Gabriel Molteni, 2008. "Medidas alternativas de la pobreza en el Gran Buenos Aires, 1995-2006," Ensayos de Política Económica, Departamento de Investigación Francisco Valsecchi, Facultad de Ciencias Económicas, Pontificia Universidad Católica Argentina., vol. 1(2), pages 46-82, Octubre.
    21. Miles Corak & *UNICEF, 2005. "Principles and Practicalities in Measuring Child Poverty for the Rich Countries," Papers inwopa05/27, Innocenti Working Papers.
    22. Donal O'Neill, 2000. "Evaluating Labour Market Interventions," Economics Department Working Paper Series n990300, Department of Economics, National University of Ireland - Maynooth.
    23. David Brady, 2002. "Rethinking the Sociological Measurement of Poverty," LIS Working papers 264, LIS Cross-National Data Center in Luxembourg.

    More about this item

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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