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Relative or Absolute Poverty Lines: A New Approach

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  • Madden, David

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. Copyright 2000 by The International Association for Research in Income and Wealth.

Suggested Citation

  • Madden, David, 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:181-99
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    References listed on IDEAS

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    Cited by:

    1. Decerf, B., 2015. "A new index combining the absolute and relative aspects of income poverty: Theory and application," CORE Discussion Papers 2015050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Miles Corak, 2005. "Principles and Practicalities for Measuring Child Poverty in Rich Countries," LIS Working papers 406, LIS Cross-National Data Center in Luxembourg.
    3. 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.
    4. 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.
    5. 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.
    6. Hikaru Hasegawa & Kazuhiro Ueda & Kunie Mori, 2008. "Estimation of Engel Curves from Survey Data with Zero Expenditures," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 70(4), pages 535-558, August.
    7. 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).
    8. 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.
    9. 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.
    10. Disney, Richard & Whitehouse, Edward, 2001. "Cross-country comparisons of pensioners’ incomes," MPRA Paper 16345, University Library of Munich, Germany.
    11. Adam Szulc, 2016. "Changing Mortality Distribution In Developed Countries From 1970 To 2010: Looking At Averages And Beyond Them," Statistics in Transition New Series, Polish Statistical Association, vol. 17(3), pages 467-496, September.
    12. Marchand, J. & Smeeding, T., 2016. "Poverty and Aging," Handbook of the Economics of Population Aging, Elsevier.
      • Marchand, Joseph & Smeeding, Timothy, 2016. "Poverty and Aging," Working Papers 2016-11, University of Alberta, Department of Economics, revised 20 Nov 2016.
    13. 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.
    14. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Poverty Measurement and Analysis," MPRA Paper 45362, University Library of Munich, Germany.
    15. 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.
    16. Christophe Muller, 2006. "Defining Poverty Lines As a Fraction of Central Tendency," Southern Economic Journal, Southern Economic Association, vol. 72(3), pages 720-729, January.
    17. Bronfman, Javier, 2007. "Poverty Lines, What are they telling us?," MPRA Paper 63263, University Library of Munich, Germany, revised 15 Apr 2009.
    18. David (David Patrick) Madden, 2002. "A review of recent research into poverty in Ireland," Working Papers 200232, School of Economics, University College Dublin.
    19. Chiappero-Martinetti, Enrica & Civardi, Marisa, 2006. "Measuring poverty within and between population subgroups," IRISS Working Paper Series 2006-06, IRISS at CEPS/INSTEAD.
    20. 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.
    21. 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.
    22. Coudouel, Aline & Hentschel, Jesko & Wodon, Quentin, 2002. "Измерение И Анализ Бедности
      [Poverty Measurement and Analysis]
      ," MPRA Paper 10492, University Library of Munich, Germany.
    23. 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.
    24. David Brady, 2002. "Rethinking the Sociological Measurement of Poverty," LIS Working papers 264, LIS Cross-National Data Center in Luxembourg.
    25. 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.

    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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