Notten, Geranda and Neubourg, Chris de (2007): Poverty in Europe and the USA: Exchanging official measurement methods.
Download (175Kb) | Preview
Official poverty methodologies differ from other poverty measurement methods in the sense that the official ones are more often used as a benchmark to develop new policies as well as to evaluate the performance of existing programs. Europe has the tradition and the practice to use relative poverty as “official” poverty estimates (Common Laeken indicators); the USA use an objective method to estimate official poverty (Orshansky indicator). Although related, each approach portrays different dimensions of poverty. In this study we compare the official poverty methodologies of the USA and EU by applying them on datasets of both countries. Using the harmonized European Community Household Panel (ECHP) for the EU and the Panel Study on Income Dynamics (PSID) for the USA, we compare poverty trends in the USA and EU in relative and absolute terms on a national level as well as for various subgroups of the populations. Additionally, we use the panel dimension of the data to analyze individual poverty dynamics. We find considerable differences between the estimates based on Laeken indicators and the estimates based on an Orshansky type of technology. It was expected that in general Orshansky generates lower poverty estimates than the Laeken indicators. However, it is puzzling to find that a.) these differences are less systematic than expected and b.) these differences are not constant over time and in some cases even have the reverse sign. These findings point to the desirability of involving both poverty concepts into (official) poverty assessments.
|Item Type:||MPRA Paper|
|Institution:||Maastricht Graduate School of Governance, Maastricht University|
|Original Title:||Poverty in Europe and the USA: Exchanging official measurement methods|
|Keywords:||poverty; absolute; relative; social policy; United States; European Union|
|Subjects:||I - Health, Education, and Welfare > I3 - Welfare and Poverty
H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions
H - Public Economics > H5 - National Government Expenditures and Related Policies > H53 - Government Expenditures and Welfare Programs
|Depositing User:||Geranda Notten|
|Date Deposited:||31. Aug 2007|
|Last Modified:||19. Feb 2013 02:44|
Atkinson, A. B., Cantillon, B., Marlier, E., & Nolan, B. (2002). Social indicators: the EU and social inclusion. Oxford; New York: Oxford University Press. Butrica, B. A., & Burkhauser, R. V. (1997). Estimating federal income tax burdens for Panel Study of Income Dynamics (PSID) using the National Bureau of Economic Research TAXSIM model. Maxwell Center for Demography and Economics of Aging, Syracuse University, New York. Euro Panel Users Network. (July 2004). ECHP user Guide [Electronic Version]. Institute for Social and Economic Research, University of Essex. Retrieved August 2005 from http://epunet.essex.ac.uk/ECHP_USER_GUIDE_06-07-2004b.pdf. Eurostat. (2002). Imputation of income in the ECHP [Electronic Version], DOC. PAN 164/2002-12. Retrieved August 2005 from http://forum.europa.eu.int/Public/irc/dsis/echpanel/library?l=/user_db&vm=detailed&sb=Title. Eurostat. (2003a). ECHP UDB description of variables [Electronic Version], DOC. PAN 166/2003-12 Retrieved August 2005 from http://forum.europa.eu.int/Public/irc/dsis/echpanel/library?l=/user_db&vm=detailed&sb=Title Eurostat. (2003b). Laeken indicators; Detailed calculation methodology [Electronic Version]. Working Group Statistics on Income, Poverty and Social Exclusion, DOC. E2/ISPE/2003. Retrieved August 2005 from http://forum.europa.eu.int/Members/irc/dsis/soipase/home. Fischer, G. M. (1992). The development of the Orshansky poverty thresholds and their subsequent history as the official U.S. poverty measure [Electronic Version]. Retrieved August 2005 from http://www.census.gov/hhes/www/povmeas/papers/orshansky.html Förster, M., & d’Ercole, M. M. (2005). Selection of figures: Income distribution and poverty in OECD countries in the second half of the 1990s [Electronic Version]. OECD Social, Employment and Migration, Working Paper 22. Retrieved August 2005 from www.oecd.org/els/workingpapers. Foster, J., Greer, J., & Thorbecke, E. (1984). A class of decomposable poverty measures. Econometrica, 52(3), pp. 761-766. Gouskova, E., & Schoeni, R. (2002). Comparing estimates of family income in the Panel Study of Income Dynamics and the March Current Population Survey, 1968-1999. Institute for Social Research, University of Michigan. Hill, M. S. (1992). The Panel Study of Income Dynamics; a user's guide: Sage Publications. Internal Revenue Service. (2002). Participation in the Earned Income Tax Credit Program for Tax Year 1996 [Electronic Version], performed by SBSE Research, Research Project 12.26, Greensboro (NC) Retrieved February 2007 from http://www.taxpolicycenter.org/taxfacts/papers/irs_eitc.pdf. Notten, G., & Neubourg de, C. (2007a). The policy relevance of absolute and relative poverty headcounts: What’s in a number? MGSoG Working Paper, 2007/006, Maastricht Graduate School of Governance, Maastricht University, Maastricht. Notten, G., & Neubourg de, C. (2007b). Relative or absolute poverty in the US and EU? The battle of the rates. MGSoG Working Paper, 2007/001, Maastricht Graduate School of Governance, Maastricht University, Maastricht. Rendtel, U., Nordberg, L., Jäntti, M., Hanisch, J., & Basic, E. (January 2004). Report on quality of income data, the change from input harmonization to ex-post harmonization in the national samples of the European Community Household Panel – Implications on data quality. Chintex working paper, 21, Moscow. Smeeding, T. M. (2005). Poor people in rich nations: The United States in a comparative perspective. Working Paper 419, Luxembourg Income Studies Smeeding, T. M., Rainwater, L., & Burtless, G. (2000). United States poverty in a cross-national context. Working Paper 244, Luxembourg Income Studies. Smeeding, T. M., & Ross, K. (1997). Financial poverty in developed countries: The evidence from LIS. Working Paper 155, Luxembourg Income Studies.