A comparative evaluation of poverty measures in the Italian Survey of Household Income and Wealth

This paper makes a comparative study of some variants of the most frequently used poverty indices, obtained by modifying the welfare indicator (income, consumption, or income/assets), the equivalence scale (OECD or square root of the number of components), the local price adjustment index and the statistic used for identifying the poverty threshold (average or median). The ISEE, an indicator used to access to social benefits in Italy, that has a specific combination of income and assets and its own equivalence scale, is also evaluated. The performance of poverty indicators is evaluated using microdata collected by the Bank of Italy Survey of Household Income and Wealth (SHIW) from 2004 to 2016. The paper first analyses how the incidence of poverty varies according to different definitions; it also analyses how the different variants are associated with an indicator of inability to make ends meet, which is a direct expression of household�s bad economic conditions. The study shows a wide variety of results in terms of the poverty rate and the composition of the poor. The highest association with subjectively poor economic conditions is found for indicators combining income and wealth, while consumption provides more modest results.