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Region-Specific versus Country-specific Poverty Lines in Analysis of Poverty

The standard practice in most OECD countries is to measure and evaluate poverty on the basis of a poverty line defined as a specific proportion of the median equivalent income within a country. However, this approach disregards regional differences in prices and needs within a country and may, therefore, provide an incomplete and even an incorrect picture of the extent as well as the geographical and demographical composition of the poor. To account for differences in prices and needs, this paper introduces an alternative method of measuring poverty based on a set of region-specific poverty lines. Applying Norwegian household register data for 2001 we find that the overall extent of poverty is only slightly affected by the change in definition of poverty line. However, the geographical as well as the demographical composition of poverty are shown to depend heavily on whether the method of measuring poverty relies on region-specific or country-specific thresholds. As expected, the results demonstrate that the analysis of poverty based on country-specific thresholds produces downward biased poverty rates in urban areas and upward biased poverty rates in rural areas. Moreover, when region-specific poverty thresholds form the basis of the poverty analysis, we find that the poverty rates among young singles and non-western immigrants are significantly higher than what is suggested by previous empirical evidence based on a joint country-specific poverty line.

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Paper provided by Statistics Norway, Research Department in its series Discussion Papers with number 408.

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Date of creation: Feb 2005
Date of revision:
Handle: RePEc:ssb:dispap:408
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  1. van Praag, Bernard M S & Hagenaars, Aldi J M & van Weeren, Hans, 1982. "Poverty in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 28(3), pages 345-59, September.
  2. Taryn Ann Galloway & Rolf Aaberge, 2005. "Assimilation effects on poverty among immigrants in Norway," Journal of Population Economics, Springer, vol. 18(4), pages 691-718, November.
  3. Ravallion, M., 1998. "Poverty Lines in Theory and Practice," Papers 133, World Bank - Living Standards Measurement.
  4. Roemer, J.E., 1992. "A Pragmatic Theory of Responsibility for the Egalitarian Planner," Papers 391, California Davis - Institute of Governmental Affairs.
  5. Magne Mogstad & Audun Langørgen & Rolf Aaberge, 2005. "Region-Specific versus Country-specific Poverty Lines in Analysis of Poverty," Discussion Papers 408, Statistics Norway, Research Department.
  6. Smeeding, Timothy M, et al, 1993. "Poverty, Inequality, and Family Living Standards Impacts across Seven Nations: The Effect of Noncash Subsidies for Health, Education and Housing," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(3), pages 229-56, September.
  7. John E. Roemer, 2002. "Equality of opportunity: A progress report," Social Choice and Welfare, Springer, vol. 19(2), pages 455-471, April.
  8. Sen, Amartya, 1979. " Issues in the Measurement of Poverty," Scandinavian Journal of Economics, Wiley Blackwell, vol. 81(2), pages 285-307.
  9. 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, vol. 34(2), pages 115-42, June.
  10. Quentin Wodon, 1999. "Regional poverty lines, poverty profiles, and targeting," Applied Economics Letters, Taylor & Francis Journals, vol. 6(12), pages 809-812.
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