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Do We Know How Much Poverty There Is?

  • Miguel Székely
  • Nora Lustig
  • Martin Cumpa
  • José Antonio Mejía-Guerra

    ()

This paper tests the sensitivity of poverty indexes to the choice of adult equivalence scales, assumptions about the existence of economies of scale in consumption, methods for treating missing and zero incomes, and different adjustments to handle income misreporting. We also perform sensitivity analysis to the use of different poverty lines and poverty indexes, which are issues that have been much more explored in the literature. The sensitivity analysis is applied to household survey data from 17 Latin American countries, which include 92% of the population in the region. By varying these parameters within reasonable boundaries, we find that the proportion of poor could be said to be either 12. 7 percent or 65. 8 percent of the total population. Additionally, the ranking of countries with respect to poverty is also highly sensitive. This points to the need of justifying and being explicit about the underlying choices and definitions behind poverty statistics, and to the need of performing sensitivity analysis illustrating the menu of options that can answer the question of how much poverty there is.

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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4239.

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Date of creation: Dec 2000
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Handle: RePEc:idb:wpaper:4239
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  1. Psacharopoulos, G. & Morley, S. & Fiszbein, A. & Lee, H. & Wood, B., 1997. "Poverty and Income Distribution in Latin America: The Story of the 1980s," Papers 351, World Bank - Technical Papers.
  2. Duclos, Jean-Yves & Mercarder-Prats, Magda, 1996. "Household Needs and Poverty: with Application to Spain and the UK," Cahiers de recherche 9614, Université Laval - Département d'économique.
  3. Shorrocks, Anthony F, 1995. "Revisiting the Sen Poverty Index," Econometrica, Econometric Society, vol. 63(5), pages 1225-30, September.
  4. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, vol. 56(1), pages 173-77, January.
  5. Howes, Stephen & Lanjouw, Jean Olson, 1998. "Does Sample Design Matter for Poverty Rate Comparisons?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(1), pages 99-109, March.
  6. Woden, Q.T. & Ayres, W. & Barenstein, M. & Hicks, N. & Lee, K. & Maloney, W. & Peeters, P. & Siaens, C. & Yitzjaki, S., 2000. "Poverty and Policy in Latin America and Caribeean," Papers 467, World Bank - Technical Papers.
  7. Blackburn, McKinley L, 1998. "The Sensitivity of International Poverty Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 44(4), pages 449-72, December.
  8. Ravallion, Martin, 1994. "Poverty rankings using noisy data on living standards," Economics Letters, Elsevier, vol. 45(4), pages 481-485, August.
  9. Lancaster, Geoffrey & Ray, Ranjan & Valenzuela, Maria Rebecca, 1999. "A Cross-Country Study of Equivalence Scales and Expenditure Inequality on Unit Record Household Budget Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(4), pages 455-82, December.
  10. Foster, James E. & Shorrocks, Anthony F., 1988. "Inequality and poverty orderings," European Economic Review, Elsevier, vol. 32(2-3), pages 654-661, March.
  11. Juan Luis Londoño & Miguel Székely, 2000. "Persistent Poverty and Excess Inequality: Latin America, 1970-1995," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 93-134, May.
  12. Lanjouw, Peter & Ravallion, Martin, 1995. "Poverty and Household Size," Economic Journal, Royal Economic Society, vol. 105(433), pages 1415-34, November.
  13. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July.
  14. Szekely, Miguel, 1995. "Poverty in Mexico during Adjustment," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(3), pages 331-48, September.
  15. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975, March.
  16. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-82, September.
  17. José Antonio Mejía-Guerra & Rob Vos, 1997. "Poverty in Latin America and the Caribbean: An Inventory: 1980-95," IDB Publications (Working Papers) 10878, Inter-American Development Bank.
  18. Little, Roderick J A, 1988. "Missing-Data Adjustments in Large Surveys," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 287-96, July.
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  20. Michael Hurd & F. Thomas Juster & James P. Smith, 2004. "Enhancing the Quality of Data on Income: Recent Developments in Survey Methodology," Labor and Demography 0412001, EconWPA.
  21. Chaudhuri, Shubham & Ravallion, Martin, 1994. "How well do static indicators identify the chronically poor?," Journal of Public Economics, Elsevier, vol. 53(3), pages 367-394, March.
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