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Poverty and Permanent Income : A Methodology for Cross-Section Data

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  • Ramses H. ABUL NAGA
  • Enrico BOLZANI

Abstract

If the set of households which are income poor does not fully overlap with the set of the consumption poor, it could well be that income and consumption expenditure convey different information regarding an unobserved variable on the basis of which families allocate their resources intertemporally. This paper presents a methodology for predicting the unobserved permanent incomes of households using multiple welfare indicators typically available in cross-section data. The methods are illustrated using data from the Swiss Consumption Survey of 1990.

Suggested Citation

  • Ramses H. ABUL NAGA & Enrico BOLZANI, 2000. "Poverty and Permanent Income : A Methodology for Cross-Section Data," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.26, Université de Lausanne, Faculté des HEC, DEEP.
  • Handle: RePEc:lau:crdeep:00.26
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    References listed on IDEAS

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    1. Zellner, Arnold, 1970. "Estimation of Regression Relationships Containing Unobservable Independent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(3), pages 441-454, October.
    2. Chaudhuri, Shubham & Ravallion, Martin, 1994. "How well do static indicators identify the chronically poor?," Journal of Public Economics, Elsevier, pages 367-394.
    3. Ramses H. Abul Naga & Robin Burgess, 1997. "Prediction and Determination of Household Permanent Income," STICERD - Distributional Analysis Research Programme Papers 32, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    4. Glewwe, Paul & van der Gaag, Jacques, 1990. "Identifying the poor in developing countries: Do different definitions matter?," World Development, Elsevier, pages 803-814.
    5. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, pages 603-640.
    6. Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, pages 461-481.
    7. Daniel T. Slesnick, 1998. "Empirical Approaches to the Measurement of Welfare," Journal of Economic Literature, American Economic Association, pages 2108-2165.
    8. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, December.
    9. Richard Blundell & Ian Preston, 1997. "Consumption, inequality and income uncertainty," IFS Working Papers W97/15, Institute for Fiscal Studies.
    10. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1.
    11. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-277, October.
    12. Ramses H. Abul Naga, 1994. "Identifying the Poor: A Multiple Indicator Approach," STICERD - Distributional Analysis Research Programme Papers 09, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    13. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, pages 115-142.
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    Cited by:

    1. Ramses H. Abul Naga, 2005. "Social Welfare Orderings: A Life-Cycle Perspective," Economica, London School of Economics and Political Science, vol. 72(3), pages 497-514, August.
    2. Gabriella Berloffa & Francesca Modena, 2009. "Income Shocks, Coping Strategies, and Consumption Smoothing. An Application to Indonesian Data," Department of Economics Working Papers 0901, Department of Economics, University of Trento, Italia.
    3. Riccardo Massari, 2005. "A Measure of Welfare Based on Permanent Income Hypothesis: An Application on Italian Households Budgets," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, pages 55-92.
    4. Céline Antonin, 2009. "Age, revenu et comportements d'épargne des ménages : une analyse théorique et empirique sur la période 1978-2006," Sciences Po publications info:hdl:2441/5l6uh8ogmqi, Sciences Po.

    More about this item

    Keywords

    poverty; permanent income; latent variables; prediction; Switzerland;

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • D6 - Microeconomics - - Welfare Economics
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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