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Decomposing the changes in poverty: Poverty line and distributional effects

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  • Oihana Aristondo
  • Conchita D'Ambrosio
  • Casilda Lasso de la Vega

Abstract

When measuring poverty in developed countries, the poverty line used to identify the poor is usually relative and set as a percentage of the median (or of the mean) of the total income. In consequence, when poverty is analyzed over a period of time, changes in the poverty level depend on the impact of evolving standards. To eliminate this effect, sometimes, an anchored poverty line is used. Furthermore, changes in the mean of the distribution and in the inequality among the poor may also affect the poverty levels. This note proposes a decomposition of the changes in poverty as the sum of four terms. The first two reflect the impact in poverty of changes in living standards and the other two measure the effect of the distributional growth and redistribution. This decomposition will help policymakers in the implementation of a more specific antipoverty agenda. An application with data from the European Union Survey on Income and Living Conditions shows the potential of the decomposition proposed.

Suggested Citation

  • Oihana Aristondo & Conchita D'Ambrosio & Casilda Lasso de la Vega, 2023. "Decomposing the changes in poverty: Poverty line and distributional effects," Bulletin of Economic Research, Wiley Blackwell, vol. 75(4), pages 1048-1063, October.
    • Handle: RePEc:bla:buecrs:v:75:y:2023:i:4:p:1048-1063
    DOI: 10.1111/boer.12394
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    References listed on IDEAS

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