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The paper develops a concept and a measure of the monetary capacity of a country to reduce its own poverty and shows how these tools can be used to guide budget allocations or the allocation of aid. The authors call this concept the income lever. Making use of tax and distributive theory, the paper shows how different redistributive criteria correspond to the different normative criteria of the income lever. It then constructs various income lever indexes based on these criteria and uses such indexes to rank countries according to their own capacity to reduce poverty. As shown in the empirical application, this methodology can provide an equitable tool to rank countries or regions when it comes to budget or aid allocations, whether it is the allocation of social funds within the European Union (North-North transfers) or the allocation of aid from rich to poor countries (North-South transfers). The findings indicate that the allocation of social funds in the European Union follows closely the rank that results from the income lever indexes proposed while the allocation of aid to Sub-Saharan African countries does not.
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The paper defines the Gini index as the sum of individual contributions where individual contributions are interpreted as the degree of diversity of each individual from all other members of society. Among various possible forms of individual contributions to the Gini found in the literature, the paper shows that only one form satisfies a set of desirable properties. This form can be used for decomposing the Gini into population subgroups. An empirical illustration shows the use of this approach.
Decomposition --- Gini --- Health Systems Development & Reform --- Health, Nutrition and Population --- Inequality --- Population Policies --- Poverty Impact Evaluation --- Poverty Reduction --- Services & Transfers to Poor
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Despite the growing numbers of forcibly displaced persons worldwide, many people living under conflict choose not to flee. Individuals face two lotteries-staying or leaving-characterized by two distributions of potential outcomes. This paper proposes to model the choice between these two lotteries using quantile maximization as opposed to expected utility theory. The paper posits that risk-averse individuals aim at minimizing losses by choosing the lottery with the best outcome at the lower end of the distribution, whereas risk-tolerant individuals aim at maximizing gains by choosing the lottery with the best outcome at the higher end of the distribution. Using a rich set of household and conflict panel data from Nigeria, the paper finds that risk-tolerant individuals have a significant preference for staying and risk-averse individuals have a significant preference for fleeing, in line with the predictions of the quantile maximization model. These findings are contrary to findings on economic migrants, and call for separate policies toward economic and forced migrants.
Conflict --- Conflict and Development --- Conflict and Fragile States --- Expected Utility --- Forced Displacement --- Migration --- Poverty Reduction --- Quantile Maximization --- Social Protections and Labor
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The paper develops a concept and a measure of the monetary capacity of a country to reduce its own poverty and shows how these tools can be used to guide budget allocations or the allocation of aid. The authors call this concept the income lever. Making use of tax and distributive theory, the paper shows how different redistributive criteria correspond to the different normative criteria of the income lever. It then constructs various income lever indexes based on these criteria and uses such indexes to rank countries according to their own capacity to reduce poverty. As shown in the empirical application, this methodology can provide an equitable tool to rank countries or regions when it comes to budget or aid allocations, whether it is the allocation of social funds within the European Union (North-North transfers) or the allocation of aid from rich to poor countries (North-South transfers). The findings indicate that the allocation of social funds in the European Union follows closely the rank that results from the income lever indexes proposed while the allocation of aid to Sub-Saharan African countries does not.
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This paper quantifies the contributions to poverty reduction observed in Sri Lanka between 2002 and 2012/13. The methods adopted for the analysis generate entire counterfactual distributions to account for the contributions of demographics, labor, and non-labor incomes in explaining poverty reduction. The findings show that the most important contributor to poverty reduction was growth in labor income, stemming from an increase in the returns to salaried nonfarm workers and higher returns to self-employed farm workers. Although some of this increase in earnings may point to improvements in productivity, defined as higher units of output per worker, some of it may simply reflect increases in food and commodity prices, which have increased the marginal revenue product of labor. To the extent that there have been no increases in the volumes being produced, the observed changes in poverty are vulnerable to reversals if commodity prices were to decline significantly. Finally, although private transfers (domestic and foreign) helped to reduce poverty over the period, public transfers were not as effective. In particular, the reduction in the real value of transfers of the Samurdhi program during 2002 to 2012/13 slowed down poverty reduction.
Economic theory & research --- Macroeconomics and economic growth --- Micro-decompositions --- Micro-simulations --- Poverty --- Poverty reduction --- Rural poverty reduction --- Services & transfers to poor
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Housing is the largest durable good consumed by households. As such, any consumption-based measure of welfare, to be comprehensive, must include the value of the flow of services households derive from their dwellings, the so-called imputed rent. However, estimating imputed rents is a daunting task, which researchers and practitioners tend to overlook. This paper is the first attempt to assess the distributional impact of including housing in the welfare aggregate; the paper tests two estimation methods and analyzes four developing countries. The distributional impact cannot be predicted a priori, and evidence suggests it is context and method specific. Although changes in poverty and inequality are always statistically significant, they are only occasionally larger than one percentage point. By contrast, shared prosperity exhibits sizable changes, which might also determine international re-rankings. Albeit the inclusion of imputed rents reshuffles the set of poor households, observed changes in the socioeconomic profiling of the poor are unlikely to affect pro-poor policy design.
Household Welfare --- Inequality --- Poverty Assessment --- Poverty Lines --- Poverty Measurement --- Poverty Reduction --- Rent Imputation --- Shared Prosperity --- Urban Development --- Urban Housing
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This paper quantifies the contributions to poverty reduction observed in Sri Lanka between 2002 and 2012/13. The methods adopted for the analysis generate entire counterfactual distributions to account for the contributions of demographics, labor, and non-labor incomes in explaining poverty reduction. The findings show that the most important contributor to poverty reduction was growth in labor income, stemming from an increase in the returns to salaried nonfarm workers and higher returns to self-employed farm workers. Although some of this increase in earnings may point to improvements in productivity, defined as higher units of output per worker, some of it may simply reflect increases in food and commodity prices, which have increased the marginal revenue product of labor. To the extent that there have been no increases in the volumes being produced, the observed changes in poverty are vulnerable to reversals if commodity prices were to decline significantly. Finally, although private transfers (domestic and foreign) helped to reduce poverty over the period, public transfers were not as effective. In particular, the reduction in the real value of transfers of the Samurdhi program during 2002 to 2012/13 slowed down poverty reduction.
Economic theory & research --- Macroeconomics and economic growth --- Micro-decompositions --- Micro-simulations --- Poverty --- Poverty reduction --- Rural poverty reduction --- Services & transfers to poor
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Attributing a rental value to homeowners' dwellings is essential in different contexts, including poverty and inequality analysis, the compilation of national accounts, consumer price indexes, and estimation of purchasing power parity indexes. The proposed solution is often to use homeowners' estimates of the market rent they would pay for their dwelling if they were renting it, which is usually referred to as homeowners' self-assessed rent. Lack of alternative surveys and up-to-date and complete administrative data about dwellings' market values typically bounds researchers to test the accuracy of homeowners' self-assessed rent using only information from household budget surveys. Using 13 years of the Peruvian household budget survey, this paper compares two methods to assess the accuracy of homeowners' self-assessed rent and finds that the average homeowner in Lima overestimates the market rent of her dwelling by between 8 and 15 percent. However, homeowners' self-assessment inaccuracy fades away in most years when homeowners are compared with their most observationally similar tenants.
Consumer Price Index --- Hedonic Model --- Imputed Rent --- Inflation --- Land and Real Estate Development --- Macroeconomics and Economic Growth --- Private Sector Development --- Purchasing Power Parity --- Rental Market --- Science and Technology Development --- Statistical and Mathematical Sciences --- Urban Economics --- Urban Housing
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The 2015 United Nations resolution on Financing for Development stresses the importance of effective resource mobilization and use of domestic resources to pursue sustainable development. The first Sustainable Development Goal is to eradicate extreme poverty for all people everywhere by 2030. This paper proposes an accounting exercise to assess whether it is feasible for countries to eliminate poverty using only domestic resources, in other words, by mere redistribution. Moreover, the paper argues that the concentration of resources in the hands of fewer individuals in the society may hinder the feasibility of implementing effective fiscal policies (from the revenue side and the social spending side) to reduce poverty. The paper provides a new tool to assess the capacity of countries to eliminate poverty through redistribution, and a new tool to approximate the concentration of political influence in a country. The new methodologies are applied to the most recent surveys available for more than 120 developing countries. The findings show that countries with the same fiscal capacity to mobilize resources for poverty eradication differ widely in the political feasibility of such redistribution policies.
Domestic Resource Mobilization --- Fiscal Capacity --- Political Influence --- Poverty Gap --- Taxation
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As well acknowledged in the literature, housing is often the dominant consumption good for most households. As such, it should be included in a comprehensive welfare aggregate to measure people' living standards accurately. However, assigning a value to the flow of the dwelling for homeowners and nonmarket tenants is problematic. Over the last decades several estimation techniques have been proposed and implemented by practitioners covering from very simple to sophisticated approaches. This paper provides an extensive review of different methods to impute rent, commonly used for welfare analysis. It also gives an overview of how this problem has been addressed by other economic domains, namely national accounts, price indices, purchasing power parities, and taxation. Finally, after setting up a theoretical framework, the paper summarizes the empirical findings about the distributional impact of including imputed rents in welfare aggregates.
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