The Impact of Local Public Services and Geographical Cost of Living Differences on Poverty Estimates

Rolf Aaberge, Audun Langørgen, Magne Mogstad and Marit Østensen ()
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Marit Østensen: Statistics Norway

No 3686, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Despite a broad consensus on the need to take into account the value of public services and geographical cost of living differences when measuring poverty, there is little reliable evidence on how these factors actually affect poverty estimates. Unlike the standard approach in studies of the distribution of public services, this paper employs a method for valuing sector-specific local public services that allows for differences between municipalities in unit costs for providing public services. Furthermore, recipient frequencies in various demographic groups are used as the basis for determining the allocation of the value of these services on citizens of the municipalities. Geographical differences in living costs are taken into account by using municipal housing price indices or by replacing the country-specific poverty line with municipal-specific poverty lines. Applying Norwegian register data for the period 1993-2001, we find that disregarding the value of local public services and geographical cost of living differences yields a misleading picture of poverty.

Keywords: housing price indices; in-kind transfers; geographical cost of living differences; public services; poverty; municipal-specific poverty lines (search for similar items in EconPapers)
JEL-codes: D31 H72 I30 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2008-09
New Economics Papers: this item is included in nep-geo and nep-ure
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Citations: View citations in EconPapers (3)

Published - published as 'The Distributional Impact of Public Services When Needs Differ' in: Journal of Public Economics, 2010, 94 (9-10), 549 - 562

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Related works:
Working Paper: The Distributional Impact of Public Services When Needs Differ (2010)
Working Paper: The Impact of Local Public Services and Geographical Cost of Living Differences on Poverty Estimates (2008)
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