Improving the measurement of child welfare in the context of intra-household inequality

This study aims to illustrate how to improve the evaluation of child economic well-being and child poverty using the collective approach. International organisations such as the World Bank, OECD and UNICEF have made important efforts in recent years to produce reliable data and to measure poverty according to the most relevant items of household consumption baskets. However, when measuring poverty, it is common practice to assume either that resources are distributed equally within the household or that there are fixed equivalence scales (for example, a child can be counted as 0.5 adults). The methodology based on collective models of consumption overcomes this rigidity by allowing inequality within each household to be taken into account. The method assumes that each household devotes a fraction of resources to children, which can be estimated using the observed expenditure on child-exclusive goods. An example of how child poverty measures can be inaccurately estimated is illustrated through the case of young children in Albania.     

Collective consumption: an application to the passive drinking effect

This study introduces a new collective complete demand system with individual Engel effects that is easy to estimate and permits undertaking policy analysis at the individual rather than household level. Previous estimations of collective demand were limited to single equations. The empirical application investigates the passive drinking effect, that is, whether consumption of alcohol affects the distribution of resources among household members and their level of wellbeing. The results show that a high level of alcohol consumption of one household member significantly affects the allocation of household resources and suggest thought-provoking policy implications.     

The economies of scale of living together and how they are shared: estimates based on a collective household model

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales which assume equal sharing of resources within the household. Recent evidence based on collective household models rejects this equal sharing assumption. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economies of scale in a collective household model. The estimates indicate substantial scale economies of living together. Furthermore, wives receive on average almost 50 % of household resources, but the estimated shares vary between 30 and 60 %. Female resource shares increase with the ratio of female to male wages. Consumption inequality is underestimated by 16 % if unequal sharing is ignored.     

Poverty, income distribution and CGE micro-simulation modeling: Does the functional form of distribution matter?

This paper explores income distribution modeling approaches for poverty analysis in a CGE micro-simulation context. Income distribution functional forms such as the lognormal, Pareto, beta distribution and empirical methods are currently used in CGE models in parallel with the estimation of FGT poverty indices. The particular methods or functional forms used in this context are not always clearly defined and justified. In this paper, we investigate and provide better criteria for selecting a functional distribution for poverty analysis. To achieve this, we apply parametric estimation to seven functional forms and compare the results to a purely “empirical” method. The results showed that no single form is more appropriate in all instances or for all household subgroups. The choice of a modeling approach should be motivated by a search for best fit and should be based on appropriate statistical tests. Selecting inappropriate distributional forms can lead to biased results in terms of poverty analysis. Introducing functional forms in the empirical approach can also provide greater confidence in the results obtained.

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An erratum to this article can be found at     

Kernel density estimation on grouped data: the case of poverty assessment

Grouped data have been widely used to analyze the global income distribution because individual records from nationally representative household surveys are often unavailable. In this paper we evaluate the performance of nonparametric density smoothing techniques, in particular kernel density estimation, in estimating poverty from grouped data. Using Monte Carlo simulations, we show that kernel density estimation gives rise to nontrivial biases in estimated poverty levels that depend on the bandwidth, kernel, poverty indicator, size of the dataset, and data generating process. Furthermore, the empirical bias in the poverty headcount ratio critically depends on the poverty line. We also undertake a sensitivity analysis of global poverty estimates to changes in the bandwidth and show that they vary widely with it. A comparison of kernel density estimation with parametric estimation of the Lorenz curve, also applied to grouped data, suggests that the latter fares better and should be the preferred approach.     

A model based approach for predicting annual poverty rates without expenditure data

The primus inter pares of the UN-approved Millennium Development Goals is to reduce poverty. The only internationally accepted method of estimating poverty requires a measurement of total consumption based on a time-consuming and resource-demanding measure of household expenditure in an integrated survey over 12 months. Rather than measuring poverty, say, only every fifth year, a model is presented to predict poverty based on a small set of household variables to be collected annually between two 12-monthly household surveys. Information obtained from these “light” surveys might then be used to predict poverty rates. The key question is whether the inaccuracy in these predictions is acceptable. It is recommended that these models be tested at a country level and if the test results are similar to those found here, that this approach be adopted.      

A note on separability and intra-household resource allocation in a collective household model

This paper shows that it is possible to track the changes in the distribution of power within a couple by focusing on the changes in the pattern of private consumption when the consumption decisions are efficient and private consumption is separable from public consumption in individual preferences. We first show that the separability of private consumption from public consumption at the individual level carries over to the household level. Hence, changes in public consumption only matters through a change in the residual budget available for private consumption. When the consumption decisions within the household is efficient, private consumption decisions can be modeled as the solution of a problem consisting in maximizing a weighted sum of the private-consumption sub-utility functions of the spouses under the residual budget, the weights being unique and representing the distribution of power over the allocation of private consumption. The model presented in this paper can be used to analyze the changes in the household resource allocation due to, for example, childbirth.     

Female‐Headed Families and Poverty in Rural America*

Abstract Employing data from the 1980, 1990, and 2000 March supplements of the Current Population Surveys, this study examines changing household and family structure in metro and nonmetro areas and corresponding changes in poverty, emphasizing female‐headed families with children under age 18. We also pay particular attention to the structure and economic conditions of subfamilies with children during this period. Household and family structure in suburban metro and nonmetro areas were quite similar by 2000. In contrast, families and households in nonmetro and metro central city areas were similar in their high prevalence of poverty. Finally, the risk of female‐headed families and subfamilies with children living in poverty is highest for nonmetro residents, and their individual characteristics suppress rather than account for this disadvantage. This pattern persisted across the decades studied, despite economic growth during the 1990s.     

Household Composition and Poverty among Female‐Headed Households with Children: Differences by Race and Residence*

Abstract We examine race and residential variation in the prevalence of female‐headed households with children and how household composition is associated with several key economic well‐being outcomes using data from the 2000 5% Public Use Microdata Sample of the U.S. Census. Special attention is paid to cohabiting female‐headed households with children and those that are headed by a single grandmother caring for at least one grandchild, because these are becoming more common living arrangements among female‐headed households with children. We find that in 2000: (1) cohabiting and grandmother female‐headed households with children comprised over one‐fourth of all female‐headed households with children, (2) household poverty is highest for female‐headed households with children that do not have other adult household earners, (3) earned income from other household members lifts many cohabiting and grandparental female‐headed households out of poverty, as does retirement and Social Security income for grandmother headed households, and (4) poverty is highest among racial/ethnic minorities and for female‐headed households with children in nonmetro compared to central cities and suburban areas.     

Can Africa Reduce Poverty by Half by 2015?

This article uses simulations to explore the possibility of halving the number of people in Africa living in extreme poverty by 2015. It shows that initial levels of inequality and per capita consumption determine the cumulative growth and reductions in inequality required to achieve this target, and finds that on average Africa needs only a relatively modest annual rate of growth in per capita household consumption, if inequality remains unchanged. The trade‐off between the two varies greatly among countries, and their policy choices are thus quite different: in some cases small changes in income distribution can have a large effect on poverty, while in others a strong focus on growth is the only viable option.     

The future in anti-poverty strategies

The uneven distribution of income and assets in the United States continues to have negative effects on the personal, social, and economic well-being of adults and children. Poverty affects the entire family and is often associated with household instability, school dropouts, teen pregnancies, and intergenerational poverty. Although income-based anti-poverty policy initiatives have helped individuals with children meet their basic consumptive needs, they have done little to help families lay a foundation for their futures. The implementation of asset-building programs that provide Individual Development Accounts (IDAs) to both adults and children reflects an approach to reducing the incidence and impact of poverty in the United States. Current state and federal policy initiatives that are designed to help economically vulnerable individuals build assets are also described in this paper. Implications of asset-building program and policy initiatives on the well-being of low-income children and adults, households, and communities are discussed to demonstrate the impact that resources and opportunities have on the social and economic growth of the entire family.     

Measuring Differences in Living Standards Within Households

This article presents a quantitative approach used to investigate differences in living standards between spouses within households. Adopting a specially adapted, standard poverty measurement approach—nonmonetary indicators—it explores differences between spouses in terms of possessions and access to certain goods and services and the control and management of household resources. Using data from a unique module in the Living in Ireland Survey (N = 2,248 individuals) as an exemplar, the article focuses on 3 methodological issues: (a) the development of specially designed nonmonetary indicators to explore differences in living standards within households rather than between households (including the role played by qualitative findings in developing those indicators and how focus groups were used to assess and validate the method), (b) the use of multivariate analysis to assess the impact of a wife's independent income in ameliorating differences in living standards between spouses, and (c) the deployment of a mechanism for use in quantitative surveys to record spousal presence and allow measurement of any subsequent difference in individual responses.     

Minority Poverty in Nonmetropolitan Texas*

Abstract Despite a high prevalence of poverty among minorities in nonmetropolitan areas, research and policy concerns regarding poverty have continued focusing on metropolitan minorities. This study uses a model integrating individual, household, and structural factors to examine poverty among Latinos, blacks, and Anglos in nonmetropolitan and, for comparative purposes, metropolitan areas, using data from the 1985 Special Texas Census TDHS 1987. The findings show that minorities in nonmetropolitan areas tend to have the highest poverty rates. In addition, consistent as well as divergent patterns exist among the six ethnic-resident groups with respect to the relationships among the various individual, household, and structural factors and poverty.     

Unpacking Within‐Household Gender Differences in Partners' Subjective Benefits From Household Income

The authors examine how contributions to household resources, indicated by employment status, influence satisfaction with household income (SWHI) for members of male/female couples. They take changes in SWHI, which may differ within couples, to indicate changes in perceived benefits from their common household income, benefits that can go beyond individual consumption. Using data from the British Household Panel Survey for 2,396 couples from 1996 to 2007, three gender effects are identified. First, men predominate in making the type of contribution that most positively influences SWHI, namely, full‐time employment. Second, the effect of contributions depends on the gender of the contributor, with men's employment being more influential than women's. Third, within couples, making the more influential contribution, as men tend to do, leads to relatively greater SWHI. The authors conclude that gender asymmetry in contributions made to household resources is one way in which gender inequalities invade and inhabit households.     

Subjective poverty equivalence scales for Euro Zone countries

We estimate subjective equivalence scales for the whole Euro Zone as well as its individual constituent countries using the European Income and Living Conditions (SILC) data. Importantly, by using minimum needs income question our approach does not require the specification of a complete social welfare function. Our subjective scales increase consistently with household size and countries with well-developed welfare states (Netherlands, Germany, France, and Belgium) show greater economies of scale than less developed welfare states (Spain, Portugal, and Greece). Our approach also allows us to estimate the marginal cost of a child; we find that for the Eurozone adding the first child is more costly than adding a third adult and that the marginal cost of children declines. Comparing modified OECD and our subjective poverty rates we find that the subjective scales ‘redistribute poverty’ away from larger to smaller households.     

Even the ‘Rich’ are Vulnerable: Multiple Shocks and Downward Mobility in Rural Uganda

Poverty data rarely capture processes of change, limiting our ability to understand poverty trajectories at the individual or household levels. This article uses a household survey, village‐level participatory studies and indepth life‐history interviews to examine people's poverty trajectories and to identify what drives and maintains chronic poverty. Composite shocks can propel previously non‐poor households into severe and long‐term poverty. Poverty is hard to escape, and people born into chronically poor households find few opportunities for accumulation and wealth creation. The analysis highlights the importance of poverty interrupters, including the end of conflict and the re‐integration of internally displaced people, and suggests that state‐led interventions would be needed to provide real opportunities to the chronically poor.     

Family Financial Management and Individual Deprivation

A core assumption in conventional poverty measurement is that household members share equally in total household income. This paper focuses on heterosexual couple households and asks to what extent male and female partners may derive different benefits from total couple resources. Drawing on the 2010 Irish Survey on Income and Living Conditions module, we examined the couple financial regime, by which we mean which partners received income, whether the income was from work, the extent to which income was contributed for the benefit of other household members and responsibility for decision-making. We explored whether the couple’s financial regime was associated with different living standard outcomes for the partners. Among the findings was the beneficial impact of having income from work and of shared responsibility for decision-making. The paper concludes by pointing to some implications for our understanding of power and bargaining in couples.     

Distributional Effects of FDI: How the Interaction of FDI and Economic Policy Affects Poor Households in Bolivia

This article provides a CGE analysis of the medium to long‐run impact of FDI inflows on poverty and income distribution in Bolivia. The simulation results suggest that FDI inflows enhance economic growth and reduce poverty. However, the income distribution typically becomes more unequal. In particular, FDI widens disparities between urban and rural areas. The Bolivian government may promote the growth‐enhancing and poverty‐alleviating effects by overcoming labour‐market segmentation and providing complementary public investment in infrastructure. But simulated policy reforms or alternative productivity scenarios are hardly effective in reducing the economic divide.     

Small area estimation-based prediction methods to track poverty: validation and applications

Tracking poverty is predicated on the availability of comparable consumption data and reliable price deflators. However, regular series of strictly comparable data are only rarely available. Price deflators are also often missing or disputed. In response, poverty prediction methods that track consumption correlates as opposed to consumption itself have been developed. These methods typically assume that the estimated relation between consumption and its predictors is stable over time??assumptions that cannot usually be tested directly. This study analyzes the performance of poverty prediction models based on small area estimation (SAE) techniques. Predicted poverty estimates are compared with directly observed levels in two country settings where data comparability over time is not a problem. Prediction models that employ either non-staple food or non-food expenditures or a full set of assets as predictors are found to yield poverty estimates that match observed poverty well. This offers some support to the use of such methods to approximate the evolution of poverty. Two further country examples illustrate how an application of the method employing models based on household assets can help to adjudicate between alternative price deflators.     

Poverty Reduction and Growth Interactions: What Can Be Learned from the Syrian Experience?

The aim of this article is to analyse in depth the interactions of growth and poverty in Syria, which undertook reforms to reduce the government's involvement in the economy. During the 1996–2004 period, growth was pro‐poor in ‘weak absolute’ terms but not in either relative or ‘strong absolute’ terms, owing to the increase in inequality. This can be explained partly by tax policies, but also by an unequal distribution of investment at the regional level. There was also a widening of the gap between urban and rural areas, mainly owing to a pattern of growth in which oil played an increasing role and agriculture a decreasing one. Agricultural and land‐policy reforms could have had a negative impact on poverty, despite their positive effect on productivity.