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Premature mortality and poverty measurement in an OLG economy

Author

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  • LEFEBVRE Mathieu

    (Université de Strasbourg)

  • PESTIEAU Pierre

    () (Université de Liège and CORE)

  • PONTHIERE Gregory

    () (Université Paris Est)

Abstract

Following Kanbur and Mukherjee (2007), a solution to the “missing poor” problem (i.e. selection bias in poverty measures due to income-differentiated mortality) consists in computing hypothetical poverty rates while assigning a fictitious income to the prematurely dead. However, in a dynamic general equilibrium economy, doing “as if” the prematurely dead were still alive is likely to affect wages, output and capital accumulation, with an uncertain effect on poverty. We develop a 3-period OLG model with income-differentiated mortality, and compare actual poverty rates with hypothetical poverty rates that would have prevailed if everyone faced the survival conditions of the top income class. Including the prematurely dead has an ambiguous impact on poverty, since it affects income distribution through capital dilution, composition effets and horizon effects. Our results are illustrated by quantifying the impact of income-differentiated mortality on poverty measures for France (1820-2010).

Suggested Citation

  • LEFEBVRE Mathieu & PESTIEAU Pierre & PONTHIERE Gregory, 2017. "Premature mortality and poverty measurement in an OLG economy," CORE Discussion Papers 2017016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2017016
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    More about this item

    Keywords

    income-differentiated mortality; poverty measures; missing poor; OLG models; capital accumulation;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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