The Impact of Transfers and Taxes on Alternative Poverty Indexes |
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Authors: | Robert H Defina Kishor Thanawala |
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Institution: | 1. School of Economics and Finance, Victoria University of Wellington , Wellington, New Zealand;2. Department of Economics , University of Saskatchewan , Saskatoon, Canada |
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Abstract: | Changes in the headcount rate are the standard metric for gauging how public transfers and taxes affect US poverty. An alternative strategy, one theoretically more appealing and complete, is to rely on distribution-sensitive indexes (Sen 1976, 1981). How would policy's measured impacts change if such an approach were to be used? This study provides empirical evidence using three selected poverty indexes from the class developed by Foster et al . (1984). Pre- and post-policy values of each index are estimated for the total population and for twenty-three demographic sub-groups using data from March Current Population Surveys covering the period 1992 to 1998. The results indicate that the alternative indexes produce consistent ordinal rankings of policy's impact. (In contrast, the measured cardinal effects of policy differ substantially across indexes.) The empirical evidence has a clear implication for anti-poverty policy: government transfers and taxes are effective in lowering poverty headcount rates, in reducing the depth of poverty and in lessening the relative deprivation among the poor. |
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Keywords: | Poverty Measurement Distribution-Sensitive Poverty Indexes Anti-POVERTY Policy |
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