A New Approach to Unidimensional Poverty Analysis: Application to the Tunisian Case

Fuzzy conceptualization of privation has been a step closer to more realistic handling of poverty. However, fuzzy approaches to poverty are still grounded on parametric axioms. Moreover, construction of poverty lines within these approaches still relies on ad‐hoc methods. In this paper, we advance instead a fuzzy procedure based on the non‐parametric bootstrap method, allowing us to depict fuzzy unidimensional privation states with boundaries drawn spontaneously from data. Fuzzy non‐parametric measures of privation within each state as well as a collective fuzzy non‐parametric index of poverty are derived, along with their corresponding confidence intervals. The new approach is applied to the analysis of poverty in Tunisia in 2005.     

TESTING POVERTY LINES

In theory, a poverty line can be defined as the cost of a common (inter‐personally comparable) utility level across a population. But how can one know if this holds in practice? For groups sharing common consumption needs but facing different prices, the theory of revealed preference can be used to derive testable implications of utility consistency knowing only the “poverty bundles” and their prices. Heterogeneity in needs calls for extra information. We argue that subjective welfare data offer a credible means of testing utility consistency across different needs groups. A case study of Russia's official poverty lines shows how revealed preference tests can be used in conjunction with qualitative information on needs heterogeneity. The results lead us to question the utility consistency of Russia's official poverty lines.     

Robust Poverty and Inequality Measurement in Egypt: Correcting for Spatial-price Variation and Sample Design Effects

The paper estimates inequality and absolute poverty in Egypt for 1997 with measures that are robust to sample design effects and corrected for spatial variation in price levels. Standard errors for inequality indices are calculated using a bootstrap approach which replicates the sample design. Standard errors for poverty indices are corrected for the design effects resulting from sample stratification and clustering. The authors use data from the Egypt Integrated Household Survey and follow the cost‐of‐basic‐needs methodology to construct region‐specific poverty lines. It is found that 15.7 million people were poor in Egypt in 1997, or 26.5% of the population. The estimates indicate a sharp sectoral difference with rural areas being significantly poorer, but significant differences in poverty were not found between Upper and Lower Egypt. This finding differs substantially from the conventional wisdom that Upper Egypt is poorer than Lower Egypt and results from the correction for spatial‐price variation.     

A NON‐PARAMETRIC MEASURE OF POVERTY ELASTICITY

We estimate the growth elasticity of poverty (GEP) using recently developed non‐parametric panel methods and the most up‐to‐date and extensive poverty data from the World Bank, which exceeds 500 observations in size and represents more than 96 percent of the developing world's population. Unlike previous studies which rely on parametric models, we employ a non‐parametric approach which captures the non‐linearity in the relationship between growth, inequality, and poverty. We find that the growth elasticity of poverty is higher for countries with fairly equal income distributions, and declines in nations with greater income disparities. Moreover, when controlling for differences in estimation technique, we find that the reported values of the GEP in the literature (based on the World Bank's now‐defunct 1993‐PPP based poverty data) are systematically larger in magnitude than estimates based on the latest 2005‐PPP based data.     

Testing Prediction Performance of Poverty Models: Empirical Evidence from Uganda

This paper examines the performance of a method of predicting poverty rates. Because most developing countries cannot justify the expense of frequent household budget surveys, additional low‐cost methods have been developed and used. The prediction method is based on a model linking the proportion of poor households to suitable explanatory variables (consumption proxies). These consumption proxies are variables that can be collected at much lower cost through smaller annual surveys. Several applications have shown that such models can produce poverty estimates with confidence intervals of a similar magnitude to the poverty estimates from the household budget surveys. There is, however, limited evidence of how well the methods perform out‐of‐sample. A series of seven household budget surveys conducted in Uganda in the period 1993–2005 allows us to test the prediction performance of the model. We test the poverty models by using data from one survey to predict the proportion of poor households in other surveys, and vice versa. The results are encouraging, as all models predict similar poverty trends. Although in most cases the predictions are precise, sometimes they differ significantly from the poverty level estimated from the survey directly.     

Spatial differences in poverty: The case of Peru

This paper examines the implications of spatial differences in living costs for measures of poverty. Taking Peru as a case study, spatial price indices are used to calculate location-specific poverty lines, based on the local cost of a basket of basic needs. Applied to income distribution data, these poverty lines yield measures of the extent and location of poverty. The paper shows that these measures are significantly different from, and much more accurate than those obtained using a single countrywide poverty line; the latter can give a misleading picture of poverty by over- stating spatial differences, in general overestimating rural and underestimating urban poverty.     

Budget Standards and the Poverty Line

This article reports some of the results from a recent study which, among other things, developed and costed low cost budgets for a range of Australian households. A budget standard represents what is needed, in terms of goods, services and activities, to achieve a particular standard of living and what that costs in a particular place and time. A low cost budget standard is one designed to meet basic needs at a frugal level while still allowing social and economic participation consistent with community expectations. The low cost budget standard estimates for households living in Sydney in February 1997 are somewhat higher than the Henderson poverty line, partly a reflection of the high cost of housing in Sydney, but also a consequence of the low cost standard itself being above a poverty standard. In spite of this, the budget standard relativities for different households provide an estimate of the relative needs of Australian households in the 1990s which could replace the current much-criticised equivalence scale.     

Testing for poverty dominance: an application to Canada

Abstract The paper proposes and applies statistical tests for poverty dominance that check for whether poverty comparisons can be made robustly over ranges of poverty lines and classes of poverty indices. This helps provide both normative and statistical confidence in establishing poverty rankings across distributions. The tests, which can take into account the complex sampling procedures that are typically used by statistical agencies to generate household‐level surveys, are implemented using the Canadian Survey of Labour and Income Dynamics (SLID) for 1996, 1999, and 2002. Although the yearly cumulative distribution functions cross at the lower tails of the distributions, the more recent years tend to dominate earlier years for a relatively wide range of poverty lines. Failing to take into account SLID’s sampling variability (as is sometimes done) can inflate significantly one’s confidence in ranking poverty. Taking into account SLID’s complex sampling design (as has not been done before) can also decrease substantially the range of poverty lines over which a poverty ranking can be inferred.     

Decomposing poverty changes into vertical and horizontal components

Variations in aggregate poverty indices can be due to differences in average poverty intensity, to changes in the welfare distances between those poor of initially unequal welfare status and/or to emerging disparities in welfare among those poor of initially similar welfare status. This note uses a general cost‐of‐inequality approach that decomposes the total change in poverty into a sum of indices of each of these three components. This decomposition can serve inter alia to integrate horizontal and vertical equity criteria in the poverty alleviation assessment of social and economic programmes. The use of these measures is briefly illustrated using Tunisian data.     

Challenges in Measuring Poverty and Understanding its Dynamics: A South Asian Perspective

South Asia’s success at reducing poverty does not imply that the topic has become passé. Poverty rates are by now low, but this is because poverty lines are low as well. And the assessment of living standards and their dynamics are blurred by measurement and interpretation challenges. This paper relies mostly on South Asian examples to highlight four tensions: poorer versus richer households, rural versus urban locations, monetary versus non‐monetary dimensions of wellbeing, and household characteristics versus context. The discussion is conducted against the backdrop of the two analytical approaches with South Asian roots that have shaped the debate for decades. This review leads to three main recommendations: household survey data has to be exploited in a more thorough manner, data that is increasingly available from other sources needs to be incorporated more systematically in the analysis, and the multiple dimensions of wellbeing should be better integrated in a common framework.     

PRICES AND PRICE ANALYSIS IN THE FRAMEWORK OF THE NATIONAL ACCOUNTS

The paper discusses the role of prices in the framework of the new System of National Accounts (SNA) in terms of three major uses: (1) deflation, (2) price indicators, and (3) price analysis. Following a brief review of the price and quantity measures required by the new SNA with its emphasis on deflation of commodity flows and input-output accounts, in addition to the more conventional deflation of final demand categories, the paper discusses some of the conceptual, methodological and data problems involved in implementing the various uses of prices in the new SNA. Implementing the use of prices as deflators depends, in part, on the concept of output selected (national versus domestic; gross versus net), and which of six concepts of valuation, ranging from purchasers'value to true factor cost, is used. Some of the difficulties in deflating nonmarket flows (e.g., interplant transfers) and industry value added, based on the double deflation method, are discussed. In concept price deflators, which have shifting weights, cannot be used as price indicators, which should have fixed weights. In practice, this is often disregarded and the deflators are used as price indicators. The paper support the SNA recommendation for the development of price indexes with fixed weights to be used as price indicators, in addition to the implicit price deflators. Research in the United States indicates that differences in weights can result in different price measures for various subperiods, components of demand and sector output. Periodic revisions in weights to provide more current fixed weights for price and quantity indexes in each subperiod may minimize the problem but it introduces a new problem—lack of comparability with the constant price tables in the SNA which have fixed weights for the entire period. The new SNA provides a comprehensive and integrated framework for price analysis including the analysis of the structure of aggregate price changes, the industrial origin of final demand prices, and the impact of price change in one sector of the economy on the rest of the economy. Some major gaps which need to be overcome in order to implement the use of the new SNA for price analysis include the development of industry capital stock estimates, separate estimates of proprietors’income, reconciliation of value added and distribution share estimates, and the development of a wide variety of information to supplement the conventional input-output tables in the SNA. Implementing the various objectives of price measures within the framework of the accounts will require a number of improvements in existing price measures and expanding the scope of coverage. “List” prices should be superseded by “transactions” prices and better techniques and data need to be developed to provide for quality adjustment of prices. Coverage will need to be expanded to include services, freight rates, trade margins, government expenditures, and also fill in gaps for many manufactured products. Finally, where possible, use of unit values as price indexes or deflators, e.g., imports and exports, should be replaced by direct price measures.     

Social insurance and social justice—Another look at the antipoverty effects of social insurance programs

This paper analyzes social insurance programs in the United States to determine if they support the principles of social justice, with special emphasis on the principle of preferential treatment of the poor. The paper also examines the antipoverty effects of social insurance programs. The major conclusions are the following: (1) social insurance programs generally are consistent with the principles of social justice, but parts of certain programs clearly violate the norms of social justice; (2) social insurance programs are especially powerful in reducing the poverty rate and poverty gap for the elderly, but are generally ineffective in reducing the poverty rate for single-parent families with related children under age 18; (3) social insurance programs have only a minor impact in reducing the poverty rate among married-couple families with related children under age 18; and (4) although the Social Security payroll results in a small increase in the poverty rate, social insurance programs are especially effective in reducing income inequality.     

Disentangling the Poverty Effects of Sectoral Output,Prices, and Policies in India

This paper attempts to disentangle the poverty effects of key policy variables that directly affect the poor (namely the government‐led channel of development spending and financing) in both agricultural and non‐agricultural sectors after accounting for the effect of respective sectoral per capita income and prices, using data from India over five decades. The paper emphasizes the sectoral composition of income and prices as mechanisms influencing the level of poverty and establishes empirically that it is the rise in non‐agricultural per capita income that reduces rural poverty via the channel of internal migration, after having controlled for the variation in key components of fiscal spending and monetary/financial policy via the availability of credit. Uneven sectoral growth pattern explains why urban poverty becomes a spill‐over of persistent rural poverty when the agricultural sector shrinks. While checking for robustness, there is evidence that the rise in non‐agricultural income alone may not reduce rural poverty, when measured in terms of rural infant mortality rate as a non‐income indicator of well‐being.     

A social economist’s search for justice: Comment

This paper analyzes social insurance programs in the United States to determine if they support the principles of social justice, with special emphasis on the principle of preferential treatment of the poor. The paper also examines the antipoverty effects of social insurance programs. The major conclusions are the following: (1) social insurance programs generally are consistent with the principles of social justice, but parts of certain programs clearly violate the norms of social justice; (2) social insurance programs are especially powerful in reducing the poverty rate and poverty gap for the elderly, but are generally ineffective in reducing the poverty rate for single-parent families with related children under age 18; (3) social insurance programs have only a minor impact in reducing the poverty rate among married-couple families with related children under age 18; and (4) although the Social Security payroll results in a small increase in the poverty rate, social insurance programs are especially effective in reducing income inequality.     

A Micro‐Econometric Analysis of the Antipoverty Effect of Social Cash Transfers in Italy

We analyze the anti‐poverty effect of social cash transfers using a micro‐econometric approach. Aggregate analyses, based on comparing average poverty indicators before and after public transfers, fail to address who receives the transfers and how the transfers are distributed among the poor. We consider three dichotomous outcome variables: (i) poverty status before the receipt of transfers; (ii) the receipt of transfers; and (iii) poverty status after the receipt of transfers. We use a trivariate probit model with sample selection, connecting the outcome variables to the characteristics of the household and its head. Our empirical results highlight that the Italian social transfers system overprotects certain household typologies at the expense of others, as social transfers are primarily awarded to employees with permanent positions and the elderly, while the system is not generous enough to large households with dependant children, the self‐employed, temporary contract workers, and the unemployed.     

The role of constitutions on poverty: A cross-national investigation

We construct and use a new historical data set on economics and social rights from the constitutions of 195 countries and an instrument variable strategy to answer two important questions. First, do economic and social rights provisions in constitutions reduce poverty, measured as headcount income and health outcomes? Second, does the strength of constitutional language of the economic and social rights matter? Constitutional provisions can be framed either more weakly as directive principles or more strongly as enforceable law. Our results suggest three findings. First, we do not find an association between constitutional rights generally framed and poverty. Second, we do not find an association between economic and social rights framed as directive principles and poverty. Third, we do find a strong negative association between economic and social rights framed as enforceable law and poverty when we use legal origins as our IV. These results persist for indices of constitutional rights and also when we restrict the sample to non-OECD countries. The policy implication is that constitutional provisions framed as enforceable law provide effective meta-rules with incentives for policymakers to initiate, fund, monitor and enforce poverty reduction policies.     

The reduction of the UK budget deficit: a human rights perspective

This paper contributes to new thinking in economics by employing a human rights perspective to examine the budget deficit reduction strategy of the UK coalition government, as set out in 2010 in the June budget and October Spending Review. Focusing on economic and social rights, the paper explains the human rights obligations of governments and key human rights principles. As examples of how they should be applied to examine the deficit reduction strategy, it examines the implications of the policy changes for child poverty and gender equality, and finds that in both cases there is evidence to suggest non-compliance with the human rights obligations of the UK government.     

TRIBAL CASINO IMPACTS ON AMERICAN INDIANS WELL‐BEING: EVIDENCE FROM RESERVATION‐LEVEL CENSUS DATA

After the passage of the Indian Gaming Regulatory Act in 1988, tribal gaming revenues increased dramatically. Using a differences‐in‐differences methodology with 1990 and 2000 census data, this study finds that American Indians (AI) on gaming reservations experience a 7.4% increase in per capita income and reductions in both family and child poverty rates relative to AI on non‐gaming reservations. Large and medium casinos are associated with changes in well‐being while smaller casinos are not. These results are sensitive to the inclusion of the Navajo reservation, a large non‐gaming reservation with increased income during the 1990s. (JEL I32, L83)     

TRENDS IN POVERTY IN THE UNITED STATES, 1967–84

The sensitivity of movements in poverty to the method used in measuring poverty is examined. The use of various poverty indices, and of various ways of setting the poverty lines, does not affect the conclusion that poverty followed a U-shaped pattern from 1967 to 1984. A model for a family's income/needs ratio is estimated and used to explore the factors that might lie behind this pattern. The results suggest that changes over time in the location of the income distribution are most relevant to the corresponding changes in poverty. Changes in the structure of families, and in labor supply within families, have also been relevant to recent movements in poverty.     

NEW BUDGET STANDARD POVERTY LINES FOR MALAYSIA

In this paper, shortcomings of the official poverty line are examined. A new set of budget standard poverty lines were derived for various years between 1959 and 1981, by first estimating the food budget for Malaysian households. Then, an allowance for non-food items was obtained on the basis of the estimated food budget, and the relationship between the proportion of income allocated on food and non-food items, together yielding the poverty line. The results suggest that the official and other estimates of the poverty line income were generally higher, and thus have overestimated the extent of poverty in Malaysia.