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Annualizing labor market, inequality, and poverty indicators

Author

Listed:
  • Eduardo Lora

    (Harvard University, and Fedesarrollo)

  • Miguel Benítez

    (Inter-American Development Bank)

  • Diego Gutiérrez

    (Inter-American Development Bank)

Abstract

Widely, 12-month or 4-quarter average indicators, such as monetary poverty rates, are computed from repeated cross sections of household surveys and interpreted as annual. This is a valid interpretation only when individuals do not change their status within the year; for instance, those observed as poor in the month they are interviewed stay poor the other 11 months. First, we demonstrate that such misinterpretation affects the calculation of several labor market, inequality, and monetary poverty measures. Then, we propose several methods to accurately annualize sub-annual data. Some methods rely on ancillary questions often included in household surveys while others require econometric techniques such as predictive mean matching. Using data for Colombia, we apply the methods to compute annual measures of labor participation, occupation, per capita labor income, average per capita household income, the Gini coefficients of labor income and per-capita household income, and moderate and extreme monetary poverty indices (headcount, gap, and severity). We show that differences with respect to the usual calculations based on monthly averages can be substantial.

Suggested Citation

  • Eduardo Lora & Miguel Benítez & Diego Gutiérrez, 2024. "Annualizing labor market, inequality, and poverty indicators," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 22(1), pages 131-164, March.
    • Handle: RePEc:spr:joecin:v:22:y:2024:i:1:d:10.1007_s10888-023-09583-9
    DOI: 10.1007/s10888-023-09583-9
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    References listed on IDEAS

    as
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    6. Angus Deaton & Margaret Grosh, 1998. "Designing Household Survey Questionnaires for Developing Countries Lessons from Ten Years of LSMS Experience, Chapter 17: Consumption," Working Papers 218, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
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    More about this item

    Keywords

    Annualization; Labor participation; Occupation; Unemployment; Labor income; Income distribution; Gini coefficient; Monetary poverty; Poverty gap; Poverty severity;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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