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Testing for Stochastic Dominance up to a Common Relative Poverty Line

Tahsin Mehdi

Econometrics, 2020, vol. 8, issue 1, 1-9

Abstract: Although a wide array of stochastic dominance tests exist for poverty measurement and identification, they assume the income distributions have independent poverty lines or a common absolute (fixed) poverty line. We propose a stochastic dominance test for comparing income distributions up to a common relative poverty line (i.e., some fraction of the pooled median). A Monte Carlo study demonstrates its superior performance over existing methods in terms of power. The test is then applied to some Canadian household survey data for illustration.

Keywords: stochastic dominance; common poverty line; relative poverty line; pooled quantile; bootstrap inference (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2020
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