The policy relevance of absolute and relative poverty headcounts: What's in a number?

Geranda Notten and Chris de Neubourg

MPRA Paper from University Library of Munich, Germany

Abstract: Financial poverty indicators still play an important role in policymaking and evaluation. Countries such as the USA and the EU member states use one or several ‘official’ poverty indicators on which success of poverty reduction policy is regularly monitored. Whereas the US poverty indicator is based on an absolute concept of poverty, the EU Laeken indicator is based on a relative concept. But the consequences of such a decision are considerable. As absolute and relative poverty indicators reflect related but conceptually distinct approaches to determining insufficient levels of well-being; they can yield very different poverty statistics, particularly over time. In this paper, we use the official EU and US poverty indicators to study the policy relevance of using either an absolute or a relative indicator. We find significant differences between the poverty estimates in poverty rates as well as in the poverty profiles. Benefit incidence- and adequacy rates are equally estimated and compared. The paper concludes that the differences between the two poverty concepts is more than important enough to support monitoring poverty and the related social and economic policies, using both relative and absolute poverty indicators.

Keywords: poverty; absolute; relative; social policy; United States; European Union (search for similar items in EconPapers)
JEL-codes: H53 H55 I30 (search for similar items in EconPapers)
Date: 2007-08
New Economics Papers: this item is included in nep-hap
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/4668/1/MPRA_paper_4668.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:4668

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().