The Impact of Local Public Services and Geographical Cost of Living Differences on Poverty Estimates

40 Pages Posted: 14 Sep 2008

See all articles by Rolf Aaberge

Rolf Aaberge

Statistics Norway; Institute for the Study of Labor (IZA); Deaprtment of Economics

Audun Langørgen

Statistics Norway

Magne Mogstad

Statistics Norway; IZA Institute of Labor Economics

Marit Østensen

Statistics Norway

Abstract

Despite a broad consensus on the need to take into account the value of public services and geographical cost of living differences when measuring poverty, there is little reliable evidence on how these factors actually affect poverty estimates. Unlike the standard approach in studies of the distribution of public services, this paper employs a method for valuing sector-specific local public services that allows for differences between municipalities in unit costs for providing public services. Furthermore, recipient frequencies in various demographic groups are used as the basis for determining the allocation of the value of these services on citizens of the municipalities. Geographical differences in living costs are taken into account by using municipal housing price indices or by replacing the country-specific poverty line with municipal-specific poverty lines. Applying Norwegian register data for the period 1993-2001, we find that disregarding the value of local public services and geographical cost of living differences yields a misleading picture of poverty.

Keywords: geographical cost of living differences, in-kind transfers, public services, poverty, housing price indices, municipal-specific poverty lines

JEL Classification: D31, H72, I30

Suggested Citation

Aaberge, Rolf and Langørgen, Audun and Mogstad, Magne and Østensen, Marit, The Impact of Local Public Services and Geographical Cost of Living Differences on Poverty Estimates. IZA Discussion Paper No. 3686, Available at SSRN: https://ssrn.com/abstract=1267827 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Rolf Aaberge (Contact Author)

Statistics Norway ( email )

N-0033 Oslo
Norway

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Deaprtment of Economics ( email )

Norway

Audun Langørgen

Statistics Norway ( email )

N-0033 Oslo
Norway

Magne Mogstad

Statistics Norway ( email )

N-0033 Oslo
Norway

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Marit Østensen

Statistics Norway ( email )

N-0033 Oslo
Norway

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