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

• In Event: 127 - Section on Inequality, Poverty and Mobility Roundtable Session (one-hour).
  In Paper Session: Table 16. Poverty I

Abstract

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 "social exclusion" 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. If households experienced problems (such as the non-possession of necessities) at random, the incidence of such problems would follow a Poisson distribution. In fact, problems are not experienced at random and the empirical distribution of problems has a heavy right tail. We define the poverty threshold k as the number of problems at which this heavy tail begins. We use data from the 2011 Swiss Household Panel to illustrate this approach for three poverty concepts: conventional social exclusion based on non-affordability of items ("afford-deprivation"), simplified social exclusion based on non-possession of items ("possess-deprivation"), and a novel approach based on Michael Marmot's status syndrome concept ("high life burden"). Our analyses suggest thresholds of k ≥ 2 for conventional possess-deprivation, k ≥ 5 for afford-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 real poverty rates in which the accidentally miscategorized non-poor have been subtracted from the nominal rate.

Authors

• Salvatore J. Babones, University of Sydney

• Jehane Moussa, Université de Neuchâtel

• Christian Suter, University of Neuchatel