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Testing for Stochastic Dominance up to a Common Relative Poverty Line

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  • Tahsin Mehdi

    (Department of Economics, Ryerson University, Toronto, ON M5B 2K3, Canada)

Abstract

Although a wide array of stochastic dominance tests exist for poverty measurement and identification, they assume the income distributions have independent poverty lines or a common absolute (fixed) poverty line. We propose a stochastic dominance test for comparing income distributions up to a common relative poverty line (i.e., some fraction of the pooled median). A Monte Carlo study demonstrates its superior performance over existing methods in terms of power. The test is then applied to some Canadian household survey data for illustration.

Suggested Citation

  • Tahsin Mehdi, 2020. "Testing for Stochastic Dominance up to a Common Relative Poverty Line," Econometrics, MDPI, vol. 8(1), pages 1-9, February.
  • Handle: RePEc:gam:jecnmx:v:8:y:2020:i:1:p:5-:d:319035
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    References listed on IDEAS

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