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The policy relevance of absolute and relative poverty headcounts: What's in a number?

Author

Listed:
  • Notten, Geranda
  • de Neubourg, Chris

Abstract

Financial poverty indicators still play an important role in policymaking and evaluation. Countries such as the USA and the EU member states use one or several ‘official’ poverty indicators on which success of poverty reduction policy is regularly monitored. Whereas the US poverty indicator is based on an absolute concept of poverty, the EU Laeken indicator is based on a relative concept. But the consequences of such a decision are considerable. As absolute and relative poverty indicators reflect related but conceptually distinct approaches to determining insufficient levels of well-being; they can yield very different poverty statistics, particularly over time. In this paper, we use the official EU and US poverty indicators to study the policy relevance of using either an absolute or a relative indicator. We find significant differences between the poverty estimates in poverty rates as well as in the poverty profiles. Benefit incidence- and adequacy rates are equally estimated and compared. The paper concludes that the differences between the two poverty concepts is more than important enough to support monitoring poverty and the related social and economic policies, using both relative and absolute poverty indicators.

Suggested Citation

  • Notten, Geranda & de Neubourg, Chris, 2007. "The policy relevance of absolute and relative poverty headcounts: What's in a number?," MPRA Paper 4668, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4668
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    File URL: https://mpra.ub.uni-muenchen.de/4668/1/MPRA_paper_4668.pdf
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    References listed on IDEAS

    as
    1. de Neubourg, Chris & Castonguay, Julie & Roelen, Keetie, 2007. "Social safety nets and targeted social assistance : lessons from the European experience," Social Protection and Labor Policy and Technical Notes 41529, The World Bank.
    2. Notten, Geranda & Neubourg, Chris de, 2007. "Relative or absolute poverty in the US and EU? The battle of the rates," MPRA Paper 5313, University Library of Munich, Germany, revised 15 May 2007.
    3. Atkinson, Tony & Cantillon, Bea & Marlier, Eric & Nolan, Brian, 2002. "Social Indicators: The EU and Social Inclusion," OUP Catalogue, Oxford University Press, number 9780199253494.
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    Cited by:

    1. Notten, Geranda & Neubourg, Chris de, 2007. "Poverty in Europe and the USA: Exchanging official measurement methods," MPRA Paper 4669, University Library of Munich, Germany.
    2. Geranda Notten & Keetie Roelen, 2010. "Cross-national comparison of monetary and multidimensional child poverty in the European Union: puzzling with the few pieces that the EUSILC provides," Global Development Institute Working Paper Series 13510, GDI, The University of Manchester.

    More about this item

    Keywords

    poverty; absolute; relative; social policy; United States; European Union;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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