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On the Measurement of Poverty Dynamics

  • Hojman, Daniel

    (Harvard University)

  • Kast, Felipe

    (Universidad Catolica de Chile)

This paper introduces a family of multi-period poverty measures derived from commonly used static poverty measures. Our measures trade-off poverty levels and changes (gains and losses) over time, and are consistent with loss aversion. We characterize the partial ranking over income dynamics induced by these measures and use it in two empirical applications with longitudinal household level data. Comparing two decades of income dynamics in the United States we find that the income dynamics of the 1990s -post Welfare reform- dominates the income dynamics of the 1980s -pre Welfare reform. Next, we compare the contemporary income dynamics of three industrialized countries and conclude that United Kingdom dominates Germany and United States, and Germany dominates the United States if poverty stocks are given more importance than poverty flows. The differences between our ranking and those obtained using other welfare criteria such as social mobility suggest that our measures capture critical information about the evolution of poverty.

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File URL: https://research.hks.harvard.edu/publications/workingpapers/citation.aspx?PubId=6882&type=WPN
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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp09-035.

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Date of creation: Oct 2009
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Handle: RePEc:ecl:harjfk:rwp09-035
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  1. Peter Gottschalk & Enrico Spolare, 2001. "On the Evaluation of Economic Mobility," Working Papers 2001-25, Brown University, Department of Economics.
  2. Kareen Rozen, 2008. "Foundations of Intrinsic Habit Formation," Cowles Foundation Discussion Papers 1642R, Cowles Foundation for Research in Economics, Yale University, revised Mar 2009.
  3. Read, Daniel & Read, N. L., 2004. "Time discounting over the lifespan," Organizational Behavior and Human Decision Processes, Elsevier, vol. 94(1), pages 22-32, May.
  4. Botond Koszegi & Matthew Rabin, 2005. "A Model of Reference-Dependent Preferences," Levine's Bibliography 784828000000000341, UCLA Department of Economics.
  5. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June.
  6. Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, vol. 46(5), pages 1013-24, September.
  7. Shalev, Jonathan, 1997. "Loss aversion in a multi-period model," Mathematical Social Sciences, Elsevier, vol. 33(3), pages 203-226, June.
  8. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-31, March.
  9. Kakwani, Nanak, 1980. "On a Class of Poverty Measures," Econometrica, Econometric Society, vol. 48(2), pages 437-46, March.
  10. Bruce D. Meyer & James X. Sullivan, 2006. "Three Decades of Consumption and Income Poverty," Working Papers 0416, Harris School of Public Policy Studies, University of Chicago.
  11. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, 09.
  12. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
  13. Thorbecke, Erik, 2004. "Conceptual and Measurement Issues in Poverty Analysis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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