The ISO-Prop Index: An Approach to the Determination of Differential Poverty Income Thresholds

The problem addressed in this article is that of finding levels of income which typify equivalent levels of poverty for families in different circumstances. An index is constructed which has, as components, descriptions of family circumstances-such as number of persons and geographical location. This index can be used to deflate family income so that it is comparable for all families. It can also be used to provide appropriately differentiated threshold values or "poverty lines" from an initial undifferentiated value, such as the often-cited $3,000 per family used by the Council of Economic Advisers. The solution tentatively proposed uses the share of income devoted to particular categories of consumption as the basis for defining equivalence; e.g., families that, on average, spend an equal fraction on necessities are taken to be equally poor. Given this proposition, one can derive the index from estimated Engel curves. The properties and suitability of alternative forms of the Engel curves are investigated, and the method is applied to data from the 1960 Survey of Consumer Expenditures.