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Poverty in Europe and the USA: Exchanging Official Measurement Methods

Maastricht Graduate School of Governance Working Paper No. MGSoG/2007/WP005

52 Pages Posted: 21 Feb 2008  

Geranda Notten

Maastricht University

Chris de Neubourg

Maastricht University

Date Written: August 1, 2007

Abstract

Official poverty methodologies differ from other poverty measurement methods in the sense that the official ones are more often used as a benchmark to develop new policies as well as to evaluate the performance of existing programs. Europe has the tradition and the practice to use relative poverty as "official" poverty estimates (Common Laeken indicators); the USA use an objective method to estimate official poverty (Orshansky indicator). Although related, each approach portrays different dimensions of poverty. In this study we compare the official poverty methodologies of the USA and EU by applying them on datasets of both countries. Using the harmonized European Community Household Panel (ECHP) for the EU and the Panel Study on Income Dynamics (PSID) for the USA, we compare poverty trends in the USA and EU in relative and absolute terms on a national level as well as for various subgroups of the populations. Additionally, we use the panel dimension of the data to analyze individual poverty dynamics. We find considerable differences between the estimates based on Laeken indicators and the estimates based on an Orshansky type of technology. It was expected that in general Orshansky generates lower poverty estimates than the Laeken indicators. However, it is puzzling to find that a.) these differences are less systematic than expected and b.) these differences are not constant over time and in some cases even have the reverse sign. These findings point to the desirability of involving both poverty concepts into (official) poverty assessments.

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

JEL Classification: H53, H55, I3

Suggested Citation

Notten, Geranda and Neubourg, Chris de, Poverty in Europe and the USA: Exchanging Official Measurement Methods (August 1, 2007). Maastricht Graduate School of Governance Working Paper No. MGSoG/2007/WP005. Available at SSRN: https://ssrn.com/abstract=1095742 or http://dx.doi.org/10.2139/ssrn.1095742

Geranda Notten (Contact Author)

Maastricht University ( email )

Keizer Karelplein 19
PO Box 616
Maastricht, 6200MD
Netherlands

HOME PAGE: http://www.governance.unimaas.nl

Chris De Neubourg

Maastricht University ( email )

Keizer Karelplein 19
PO Box 616
Maastricht, 6200MD
Netherlands

HOME PAGE: http://www.governance.unimaas.nl

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