A new poverty indicator for Europe: the extended headcount ratio

Tim Goedemé, Benoît Decerf () and Karel Van den Bosch

INET Oxford Working Papers from Institute for New Economic Thinking at the Oxford Martin School, University of Oxford

Abstract: The methodology currently used to measure poverty in the European Union faces some important limitations. Importantly, capturing the major aspects of poverty is done using a dashboard of indicators, which often tell conflicting stories. We propose a new income-based measure of poverty for Europe that captures in a consistent way the level of relative poverty, the intensity of poverty, poverty with a threshold anchored in time and a pan-European perspective of poverty in a single indicator. To do so, we work with a recently developed poverty index, the Extended Headcount ratio (EHC), and derive the relevant poverty lines to apply the index to poverty in Europe. We show empirically that our measure consistently captures the aspects typically monitored using a variety of indicators, and yield rankings that seem more aligned with intuitions than those obtained by these individual indicators. According to our measure, Eastern Europe is much poorer than Southern Europe, which, in turn, is much poorer than North-Western Europe. The evolution of our measure over time correlates most strongly with the at-risk-of-poverty rate in North-Western Europe and correlates most strongly with at-risk-of-poverty with the threshold anchored in time in Southern and Eastern Europe.

Keywords: Poverty; Europe; at-risk-of-poverty; Europe 2020 poverty reduction target; extended headcount ratio; social indicators; EU-SILC (search for similar items in EconPapers)
Pages: 29 pages
Date: 2020-11
New Economics Papers: this item is included in nep-eur, nep-isf and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:amz:wpaper:2020-26

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