The Equally Distributed Equivalent Income as the Upper Limit of Poverty Lines

Stanislaw Maciej Kot and Piotr Paradowski ()

No 885, LIS Working papers from LIS Cross-National Data Center in Luxembourg

Abstract: This paper argues that Atkinson's concept of Equally Distributed Equivalent Income (EDEI) is a robust approach for determining the lowest income limit for the non-poor. It argues that using poverty lines higher than EDEI leads to an equity-poverty trap, where eradicating economic inequality results in widespread poverty. It also asserts that mean income is an inappropriate poverty line for inequality-averse societies, as EDEI equates to mean income only in inequality-neutral contexts. The paper challenges various notions of poverty lines based on physiological survival requirements and relative poverty lines set as a fraction of mean or median income, highlighting the arbitrariness in their selection. Using the Luxembourg Income Study (LIS) database, the study confirms that national poverty lines are inherently specific to each country and year. For international comparisons, the paper proposes using the lowest national poverty line (EDEImin) from the analyzed countries as a standard, hence ensuring the avoidance of the equity-poverty trap across countries.

JEL-codes: C10 D30 D60 I32 O15 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2024-06
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Persistent link: https://EconPapers.repec.org/RePEc:lis:liswps:885

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