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International Comparisons of Poverty Intensity: Index Decomposition and Bootstrap Inference

By Lars Osberg and Kuan Xu

Abstract

This paper proposes an alternative formulation for the Sen-Shorrocks-Thon (SST) index of poverty intensity that is appropriate for survey data with sampling weights. It also decomposes the SST index into the poverty rate, the average poverty gap ratio among the poor, and the overall Gini index of poverty gap ratios. To account for sampling variation in estimates of poverty intensity, this paper uses the bootstrap method to compute confidence intervals and presents international comparisons using Luxembourg Income Study (LIS) data from the 1970s to the 1990s. Cross-sectional and longitudinal analyses indicate that the percentage change in poverty intensity can be approximated by the sum of percentage changes in the poverty rate and average poverty gap ratio, since changes in the overall Gini index of poverty gap ratios are negligible. In the early 1970s poverty intensity in Canada and the United States was almost indistinguishable, but in the 1970s Canadian poverty intensity decreased. Large increases in poverty intensity occurred in the 1980s in the United States, the United Kingdom, and Sweden.

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