Relative or Absolute Poverty in the US and EU? The Battle of the Rates

MGSoG Working Paper No. 001

52 Pages Posted: 20 Feb 2008

See all articles by Geranda Notten

Geranda Notten

affiliation not provided to SSRN

Chris de Neubourg

Maastricht University

Date Written: January 2007

Abstract

There are striking differences between relative and absolute poverty rates in the European Union and the United States. In this paper, we apply the official poverty measurement methods of the United States (absolute) and the European Union (relative) to both regions. Official poverty rates differ from other poverty statistics in the sense that they are more often used as a benchmark by policymaking and advocacy groups. In our analysis we use within and between country perspectives to explain differences in poverty levels and trends and show the impact of each of these aspects on poverty levels and over time while keeping other explanatory factors constant. Using annual data of the EU and the US from 1994 to 2000 we illustrate how some poverty differences are inherent to choosing either an absolute or a relative approach to poverty while other differences are related to more general aspects of poverty measurement. The results of our analysis suggest that governments should use both; an absolute approach that helps to identify those people who are not able to attain a minimum living standard and a relative approach to identify those whose living standard is low compared to the society they live in.

Keywords: poverty, absolute, relative, United States, European Union

Suggested Citation

Notten, Geranda and Neubourg, Chris de, Relative or Absolute Poverty in the US and EU? The Battle of the Rates (January 2007). MGSoG Working Paper No. 001, Available at SSRN: https://ssrn.com/abstract=1095712 or http://dx.doi.org/10.2139/ssrn.1095712

Geranda Notten (Contact Author)

affiliation not provided to SSRN ( email )

Chris de Neubourg

Maastricht University ( email )

Keizer Karelplein 19
PO Box 616
Maastricht, 6200MD
Netherlands

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