Consistent Tests for Poverty Dominance Relations

Garry Barrett, Stephen G. Donald () and Yu-Chin Hsu ()
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Stephen G. Donald: Department of Economics, University of Texas at Austin, http://www.utexas.edu/cola/depts/economics/
Yu-Chin Hsu: Institute of Economics, Academia Sinica, Taipei, Taiwan, https://www.econ.sinica.edu.tw/

No 15-A002, IEAS Working Paper : academic research from Institute of Economics, Academia Sinica, Taipei, Taiwan

Abstract: This paper considers methods for comparing poverty in two income distributions. We first discuss the concept and usefulness of the Poverty Gap Pro le (PGP) for comparing poverty in two populations. Dominance of one PGP over another suggests poverty dom- inance for a wide class of indices which may be expressed as functionals of the PGP. We then discuss hypotheses that can be used to test poverty dominance in terms of the PGP and introduce and justify a test statistic based on empirical PGP's where we allow for the poverty line to be estimated. A method for obtaining critical values by simulation is pro- posed that takes account of estimation of the poverty line. The fi nite sample properties of the methods are examined in the context of a Monte Carlo simulation study and the methods are illustrated in an assessment of relative consumption poverty in Australian over the period 1988/89-2009/10. JEL Classification: C01, C12, C21

Keywords: Poverty gap profi le; poverty gap profi le dominance; hypothesis testing; poverty line (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-04
New Economics Papers: this item is included in nep-ecm
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Journal Article: Consistent tests for poverty dominance relations (2016)
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