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Bottom incomes and the measurement of poverty and inequality

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  • Hlasny, Vladimir
  • Ceriani, Lidia
  • Verme, Paolo

Abstract

Incomes in surveys suffer from various measurement problems, most notably in the tails of their distributions. We study the prevalence of negative and zero incomes, and their implications for inequality and poverty measurement relying on 57 harmonized surveys covering 12 countries over the period 1995-2016. The paper explains the composition and sources of negative and zero incomes and assesses the distributional impacts of alternative correction methods on poverty and inequality measures. It finds that the main source of negative disposable incomes is negative self-employment income, and that high tax, social security withholdings and high self-paid social-security contributions account for negative incomes in some countries. Using detailed information on expenditure, we conclude that households with negative incomes are typically as well off as, or even better, than other households in terms of material wellbeing. By contrast, zero-income households are found to be materially deprived. Adjusting poverty and inequality measures for these findings can alter these measures significantly.

Suggested Citation

  • Hlasny, Vladimir & Ceriani, Lidia & Verme, Paolo, 2020. "Bottom incomes and the measurement of poverty and inequality," GLO Discussion Paper Series 519, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:519
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    Cited by:

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    3. Vladimir Hlasny, 2021. "Parametric representation of the top of income distributions: Options, historical evidence, and model selection," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1217-1256, September.
    4. Vladimir Hlasny & Shireen AlAzzawi, 2020. "Return Migration and Earnings Mobility in Egypt, Jordan and Tunisia," Working Papers 562, ECINEQ, Society for the Study of Economic Inequality.

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    More about this item

    Keywords

    bottom incomes; income inequality; poverty; self-employment; Mediterranean; Middle East; Pareto; random forest;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • N35 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Asia including Middle East

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