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Relative or absolute poverty lines : a new approach

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  • David (David Patrick) Madden

Abstract

When measuring poverty over time analysts must choose the value of the income elasticity of the poverty line, which essentially determines whether an absolute or relative poverty line is being used. The choice of this parameter is ultimately a value judgement but this paper suggests an approach which has some empirical basis. Borrowing from the life-style and deprivation approach to poverty various dimensions of poverty and deprivation are identified and the income elasticity of these items is used as the income elasticity of the poverty line. Data from the 1987 and 1994 Irish Household Budget Surveys suggest an upper bound of 0.7 for this parameter. Poverty measures using a number of values of the income elasticity of the poverty line are presented and test statistics are presented to determine whether observed differences in poverty measures are statistically significant.

Suggested Citation

  • David (David Patrick) Madden, 1999. "Relative or absolute poverty lines : a new approach," Working Papers 199909, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:199909
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    File URL: http://hdl.handle.net/10197/763
    File Function: First version, 1999
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    References listed on IDEAS

    as
    1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    2. Desai, Meghnad & Shah, Anup, 1988. "An Econometric Approach to the Measurement of Poverty," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 505-522, September.
    3. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    4. Kay, J. A. & Keen, M. J. & Morris, C. N., 1984. "Estimating consumption from expenditure data," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 169-181.
    5. Foster, James E, 1998. "Absolute versus Relative Poverty," American Economic Review, American Economic Association, vol. 88(2), pages 335-341, May.
    6. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 603-640.
    7. Blundell, Richard & Meghir, Costas, 1987. "Bivariate alternatives to the Tobit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 179-200.
    8. Deaton, Angus & Irish, Margaret, 1984. "Statistical models for zero expenditures in household budgets," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 59-80.
    9. Callan, Tim & Nolan, Brian & Walsh, John R., 1998. "Income Tax and Social Welfare Policies," Papers BP1999/2, Economic and Social Research Institute (ESRI).
    10. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    11. repec:esr:chaptr:jacb199808 is not listed on IDEAS
    12. Sen, Amartya K, 1976. "Poverty: An Ordinal Approach to Measurement," Econometrica, Econometric Society, vol. 44(2), pages 219-231, March.
    13. Donal O'Neill & Olive Sweetman, 1999. "Poverty and Inequality in Ireland: A Comparison using Measures of Income and Consumption," Economics, Finance and Accounting Department Working Paper Series n860399, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Poverty; Deprivation; Poverty--Statistical Methods; Social indicators;

    JEL classification:

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

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