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On the Choice of a Policy-oriented Poverty Measure: The Case of Israel 1997-2002

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  • Gottlieb, Daniel
  • Manor, Roy

Abstract

Poverty is easily recognized when encountered "face to face," but when measured for a society as a whole it becomes evasive and ambiguous, raising fundamental and practical issues. In this paper we examine several poverty measures from the aspect of how well they can serve as policy targets and to what extent they can be used to monitor the effect of social and economic policy on poverty. A rational poverty-reduction policy requires a quantifiable poverty target which has a sufficiently long time horizon and which enables shorter term policy monitoring. The measure should also reflect poverty intensity, as does the distribution-sensitive Sen poverty measure. Definitions of poverty often reflect a lack of basic needs. The vital food component can be objectively determined by physicians, but other components of the essential basket of goods and services, such as clothing, shelter, health services and education require a public consensus. We suggest a policy-oriented choice based on various poverty definitions. We argue that the measure should be based on basic needs rather than the relative approach. The poverty threshold should be based on an absolute gender- and age-determined food component, derived from an objective, medically-determined dietary reference intake (DRI) that fosters sustained health, thus resembling the Canadian Market Basket Measure (MBM). In the other components our proposal follows the methodology of a relative-needs-based approach recommended by the American National Research Council (NRC). We follow NRC methodology concerning the treatment of income resources by taking into account the relatively widespread incidence of owner occupancy in Israel, even among the poor. Unlike the NRC we deduct only interest payments on mortgages and housing loans. However, we deviate from that approach with respect to health and education: We reflect health services twice in our poverty measure: (1) we include average out-of-pocket health expenditure in the threshold, and (2) we deduct health expenditure in excess of this average in our calculation of income resources. While the suggested measure is a significant improvement on the official half-median poverty measure, there remain important shortcomings that need to be addressed in the future: these include the need for improved knowledge about geographic differences in the quality and quantity of essential public services such as health, education, social services, housing, infrastructure. It is important to include such information in a policy-oriented poverty measure in order to get a full account of the poverty situation and of the effect of the government's and other institutions' policies on poverty. Nevertheless, we believe that the proposed measure provides a basis for immediate implementation of anti-poverty policy.

Suggested Citation

  • Gottlieb, Daniel & Manor, Roy, 2005. "On the Choice of a Policy-oriented Poverty Measure: The Case of Israel 1997-2002," MPRA Paper 3842, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3842
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    File URL: https://mpra.ub.uni-muenchen.de/3842/1/MPRA_paper_3842.pdf
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    References listed on IDEAS

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    1. Sen, Amartya, 1997. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198292975.
    2. Trudi J. Renwick & Barbara R. Bergmann, 1993. "A Budget-Based Definition of Poverty: With an Application to Single-Parent Families," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 1-24.
    3. Hentschel, Jesko & Lanjouw, Jean Olson & Lanjouw, Peter & Poggi, Javier, 1998. "Combining census and survey data to study spatial dimensions of poverty," Policy Research Working Paper Series 1928, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Daniel Gottlieb & Leonid Kushnir, 2006. "An Optimal Method Of Binary Information Transfer (Bit) Between Surveys Of An Identical Population," Working Papers 0606, Ben-Gurion University of the Negev, Department of Economics.
    2. Suleiman Abu-Bader & Daniel Gottlieb, 2009. "Poverty, education and employment in the Arab-Bedouin society: A comparative view," Working Papers 137, ECINEQ, Society for the Study of Economic Inequality.
    3. Ojimba, Thankgod Peter, 1. "Socio-Demographic Factors As Determinants Of Poverty In Crude Oil Polluted Crop Farms In Rivers State, Nigeria," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 1.
    4. סלימאן אבו-בדר ודר' דניאל גוטליב, 2009. "עוני, חינוך ותעסוקה בחברה הערבית-בדואית: מבט השוואתי (באנגלית)," Working Papers 357, National Insurance Institute of Israel.
    5. Daniel Gottlieb & Alexander Fruman, 2011. "A quality-index of poverty measures," Working Papers 239, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

    Poverty definition; Basic Needs; MBM; Israel; Poverty reduction;

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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