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On the Measurement of Poverty Dynamics

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  • Hojman, Daniel

    (Harvard University)

  • Kast, Felipe

    (Universidad Catolica de Chile)

Abstract

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.

Suggested Citation

  • Hojman, Daniel & Kast, Felipe, 2009. "On the Measurement of Poverty Dynamics," Working Paper Series rwp09-035, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp09-035
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    References listed on IDEAS

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    1. Peter Gottschalk & Enrico Spolaore, 2002. "On the Evaluation of Economic Mobility," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 191-208.
    2. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 121(4), pages 1133-1165.
    3. Shalev, Jonathan, 1997. "Loss aversion in a multi-period model," Mathematical Social Sciences, Elsevier, vol. 33(3), pages 203-226, June.
    4. Daniel Kahneman & Robert Sugden, 2005. "Experienced Utility as a Standard of Policy Evaluation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 161-181, September.
    5. Kareen Rozen, 2010. "Foundations of Intrinsic Habit Formation," Econometrica, Econometric Society, vol. 78(4), pages 1341-1373, July.
    6. 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.
    7. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
    8. 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.
    9. Thorbecke, Erik, 2004. "Conceptual and Measurement Issues in Poverty Analysis," WIDER Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    10. 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.
    11. Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, vol. 46(5), pages 1013-1024, September.
    12. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June.
    13. Kakwani, Nanak, 1980. "On a Class of Poverty Measures," Econometrica, Econometric Society, vol. 48(2), pages 437-446, March.
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    Cited by:

    1. BOSSERT, Walter & CERIANI, Lidia & CHAKRAVARTY, Satya R. & D'AMBROSIO, Conchita, 2012. "Intertemporal Material Deprivation," Cahiers de recherche 2012-06, Universite de Montreal, Departement de sciences economiques.
    2. Carlos Gradín & Coral Del Río & Olga Cantó, 2012. "Measuring Poverty Accounting For Time," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(2), pages 330-354, June.
    3. repec:bla:revinw:v:63:y:2017:i:4:p:633-660 is not listed on IDEAS
    4. Tony Addison & Yukka Pirttilä & Finn Tarp & Hai-Anh H. Dang & Peter F. Lanjouw, 2017. "Welfare Dynamics Measurement: Two Definitions of a Vulnerability Line and Their Empirical Application," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(4), pages 633-660, December.
    5. Isabel Günther & Johannes K. Maier, 2014. "Poverty, Vulnerability, and Reference-Dependent Utility," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(1), pages 155-181, March.
    6. Dang, Hai-Anh & Lanjouw, Peter & Luoto, Jill & McKenzie, David, 2014. "Using repeated cross-sections to explore movements into and out of poverty," Journal of Development Economics, Elsevier, vol. 107(C), pages 112-128.

    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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