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The Analysis of Poverty Data with Endogenous Transitions

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  • Simon Burgess
  • Carol Propper
  • Matt Dickson

Abstract

This paper argues that much interpretation of standard poverty data is flawed. It is common to analyse poverty data broken down by household or economic status. Implicitly it is assumed that people move between different states (for example, single, married, children, no children, etc.) for exogenous reasons. If we allow some economic behaviour into the problem, then such transitions become endogenous and this has implications for modelling. The data are then insufficient to identify the claims made from them. Given that transitions between such states depend on individual characteristics and the parameters of the processes, then the distribution of the characteristics of the individuals in the states will be endogenous. The state average poverty rate will depend on the composition of the individuals in the state as well as the economic impact of being in that state per se. In this paper we (i) illustrate that this analysis is wide-spread among academic work and policy-makers; (ii) set out a simple model with endogenous transitions to make our point, (iii) provide some simulations to show the way this works, and (iv) apply this to FES data for Britain. We show that our argument has empirical content for Britain.

Suggested Citation

  • Simon Burgess & Carol Propper & Matt Dickson, 2003. "The Analysis of Poverty Data with Endogenous Transitions," Bristol Economics Discussion Papers 03/543, School of Economics, University of Bristol, UK.
  • Handle: RePEc:bri:uobdis:03/543
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    File URL: http://www.efm.bris.ac.uk/ecsb/papers/final_oct08.pdf
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    References listed on IDEAS

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    1. Burgess, Simon & Propper, Carol, 1998. "An Economic Model of Household Income Dynamics, with an Application to Poverty Dynamics among American Women," CEPR Discussion Papers 1830, C.E.P.R. Discussion Papers.
    2. Burgess, Simon & Propper, Carol, 1998. "An Economic Model of Household Income Dynamics, with an Application to Poverty Dynamics among American Women," CEPR Discussion Papers 1830, C.E.P.R. Discussion Papers.
    3. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-433, June.
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    Cited by:

    1. Martin Biewen, 2009. "Measuring state dependence in individual poverty histories when there is feedback to employment status and household composition," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(7), pages 1095-1116, November.
    2. Martin Biewen, 2004. "Measuring State Dependence in Individual Poverty Status: Are there Feedback Effects to Employment Decisions and Household Composition?," Discussion Papers of DIW Berlin 429, DIW Berlin, German Institute for Economic Research.
    3. Arnstein Aassve & Simon Burgess & Matt Dickson & Carol Propper, 2005. "Modelling Poverty by not Modelling Poverty: An Application of a Simultaneous Hazards Approach to the UK," The Centre for Market and Public Organisation 05/134, The Centre for Market and Public Organisation, University of Bristol, UK.
    4. FUSCO Alessio & ISLAM Nizamul, 2012. "Understanding the drivers of low income transitions in Luxembourg," LISER Working Paper Series 2012-31, LISER.
    5. Zimmer David M., 2010. "State Dependence among the Uninsured: Accounting for Feedback to Health and Employment," Forum for Health Economics & Policy, De Gruyter, vol. 13(2), pages 1-33, May.

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    More about this item

    Keywords

    poverty; endogenous transitions;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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