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Region-specific versus country-specific poverty lines in analysis of poverty
Authors:Magne Mogstad  Audun Langørgen  Rolf Aaberge
Institution:(1) Child Youth Family and Social Development, Human Sciences Research Council, Cape Town Office, Private Bag X9182, Cape Town, 8000, South Africa;(2) Department of Economics, Stellenbosch University, Matieland, Stellenbosch, South Africa
Abstract:An analysis of poverty based on a country-specific income poverty line suffers from disregarding regional differences in prices and needs within a country and may, therefore, produce results that give a misleading picture of the extent of poverty as well as the geographic and demographic composition of the poor. To account for differences in prices and needs, this paper introduces an alternative method for identifying the poor based on a set of region-specific poverty lines. Applying Norwegian household register data for 2001 we find that the national level of poverty is only slightly affected by the change in definition of poverty line. However, the geographic as well as the demographic poverty profiles are shown to depend heavily on whether the method for identifying the poor relies on region- or country-specific thresholds. As expected, the results demonstrate that an analysis of poverty based on a country-specific threshold produces downward biased poverty rates in urban areas and upward biased poverty rates in rural areas. Moreover, when region-specific poverty thresholds form the basis of the poverty analysis, we find that the poverty rates among young singles and non-western immigrants are significantly higher than what is suggested by previous empirical evidence based on a joint country-specific poverty line.
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