Measuring Poverty Using Both Income and Wealth: A Cross‐Country Comparison between the U.S. and Spain

Abstract:     
We study the correspondence between a household's income and its vulnerability to income shocks in two developed countries: the U.S. and Spain. Vulnerability is measured by the availability of wealth to smooth consumption in a multidimensional approach to poverty, which allows us to identify three groups of households: the twice‐poor group, which includes income‐poor households who lack an adequate stock of wealth; the group of protected‐poor households, which are all those income‐poor families with a buffer stock of wealth they can rely on; and the vulnerable‐non‐poor group, including households above the income‐poverty line that do not hold any stock of wealth. Interestingly, the risk of belonging to these groups changes over the life‐cycle in both countries while the size of the groups differs significantly between Spain and the U.S., although this result is quite sensitive to whether the housing wealth component is included in the wealth measure or not.

Number of Pages in PDF File: 27

Keywords: income poverty, wealth, vulnerability

JEL Classification: D14, D31

Accepted Paper Series