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Do we know how much poverty there is?

  • Miguel Szekely
  • Nora Lustig
  • Martin Cumpa
  • Jose Antonio Mejia

This paper tests the sensitivity of poverty indexes to the choice of adult equivalence scales, assumptions about the existence of economies of scale in consumption, methods for treating missing and zero incomes, and different adjustments to handle income misreporting. The sensitivity analysis is applied to household survey data from 17 Latin American countries, which include 92% of the population in the region. By varying these parameters within reasonable boundaries we found that the proportion of poor could be said to be either 20% or 66%. Furthermore, the ranking of countries with respect to poverty is highly sensitive to the underlying choices for poverty measurement. We also perform sensitivity analysis to the use of different poverty lines and poverty indexes, which are issues that have been explored much more in the literature. Even after considering these elements, the most sensitive choice appears to be the method used to adjust for misreporting. These findings point, first, to the need to be explicit about the underlying assumptions behind poverty statistics, second, to the need to perform sensitivity analysis when estimating levels and trends in poverty, and third, to the importance of establishing a set of conventions that would be accepted as “best practices” in estimating poverty indexes.

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Article provided by Taylor & Francis Journals in its journal Oxford Development Studies.

Volume (Year): 32 (2004)
Issue (Month): 4 ()
Pages: 523-558

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Handle: RePEc:taf:oxdevs:v:32:y:2004:i:4:p:523-558
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  1. Ravallion, Martin, 1994. "Poverty rankings using noisy data on living standards," Economics Letters, Elsevier, vol. 45(4), pages 481-485, August.
  2. Szekely, Miguel, 1995. "Poverty in Mexico during Adjustment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(3), pages 331-48, September.
  3. Blackburn, McKinley L, 1998. "The Sensitivity of International Poverty Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 449-72, December.
  4. Duclos, Jean-Yves & Mercarder-Prats, Magda, 1996. "Household Needs and Poverty: with Application to Spain and the UK," Cahiers de recherche 9614, Université Laval - Département d'économique.
  5. Lanjouw, Peter & Ravallion, Martin & DEC, 1994. "Poverty and household size," Policy Research Working Paper Series 1332, The World Bank.
  6. Woden, Q.T. & Ayres, W. & Barenstein, M. & Hicks, N. & Lee, K. & Maloney, W. & Peeters, P. & Siaens, C. & Yitzjaki, S., 2000. "Poverty and Policy in Latin America and Caribeean," Papers 467, World Bank - Technical Papers.
  7. Chaudhuri, Shubham & Ravallion, Martin, 1994. "How well do static indicators identify the chronically poor?," Journal of Public Economics, Elsevier, vol. 53(3), pages 367-394, March.
  8. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-82, September.
  9. Juan Luis Londoño & Miguel Székely, 2000. "Persistent Poverty and Excess Inequality: Latin America, 1970-1995," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 93-134, May.
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  11. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975, March.
  12. Psacharopoulos, G. & Morley, S. & Fiszbein, A. & Lee, H. & Wood, B., 1997. "Poverty and Income Distribution in Latin America: The Story of the 1980s," Papers 351, World Bank - Technical Papers.
  13. Foster, James E. & Shorrocks, Anthony F., 1988. "Inequality and poverty orderings," European Economic Review, Elsevier, vol. 32(2-3), pages 654-661, March.
  14. Lancaster, Geoffrey & Ray, Ranjan & Valenzuela, Maria Rebecca, 1999. "A Cross-Country Study of Equivalence Scales and Expenditure Inequality on Unit Record Household Budget Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(4), pages 455-82, December.
  15. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  16. Shorrocks, Anthony F, 1995. "Revisiting the Sen Poverty Index," Econometrica, Econometric Society, vol. 63(5), pages 1225-30, September.
  17. Atkinson, A B, 1992. "Measuring Poverty and Differences in Family Composition," Economica, London School of Economics and Political Science, vol. 59(233), pages 1-16, February.
  18. Little, Roderick J A, 1988. "Missing-Data Adjustments in Large Surveys," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 287-96, July.
  19. Michael Hurd & F. Thomas Juster & James P. Smith, 2004. "Enhancing the Quality of Data on Income: Recent Developments in Survey Methodology," Labor and Demography 0412001, EconWPA.
  20. Howes, Stephen & Lanjouw, Jean Olson, 1998. "Does Sample Design Matter for Poverty Rate Comparisons?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(1), pages 99-109, March.
  21. José Antonio Mejía-Guerra & Rob Vos, 1997. "Poverty in Latin America and the Caribbean: An Inventory: 1980-95," IDB Publications (Working Papers) 10878, Inter-American Development Bank.
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