A Poisson-Based Framework for Setting Poverty Thresholds Using Indicator Lists

Poverty is one of the most important concepts in the social sciences, yet commonly-used thresholds for the operationalization of poverty have little or no conceptual basis. This is especially true of the “relative deprivation” poverty concept, where the arbitrary threshold of missing k ≥ 3 items from a list of socially defined necessities is the accepted operationalization. This paper presents a conceptual framework for meaningfully setting k based on the properties of the Poisson distribution. Data from the 2011 Swiss Household Panel are used to illustrate this approach for three poverty concepts: conventional relative deprivation based on non-affordability of items (“afford-deprivation”), simplified relative deprivation based on non-possession of items (“possess-deprivation”), and a novel approach based on the status syndrome concept (“high life burden”). Proof-of-concept analyses suggest thresholds of k ≥ 2 for conventional afford-deprivation, k ≥ 5 for possess-deprivation, and k ≥ 6 for high life burden. In addition to providing a rationale for k, the Poisson-based approach allows for the systematic variation of k in different empirical contexts. It also supports the estimation of “adjusted” poverty rates that account for the chance probability that non-poverty households are accidentally miscategorized as being in poverty. Copyright Springer Science+Business Media Dordrecht 2016