Polarization of the Poor: Multivariate Relative Poverty Measurement Sans Frontiers

A major impediment to poverty evaluation in multivariate environments are the difficulties associated with formulating poverty frontiers. This paper proposes a new multivariate polarization measure which, in appropriate circumstances, works as a multivariate poverty measure which does not require computation of a poverty frontier. As a poverty measure it has the intuitive appeal of reflecting the degree to which societies poor and non-poor are polarized. (The measure would also have considerable application in studying multivariate convergence issues in economic growth models). The measure is exemplified in a poor-non poor country study over the period 1990-2005 based upon the joint distribution of per capita GNP and Life Expectancy. The results suggest that as a group the world’s poor are experiencing diminished poverty polarization, however within the world’s poor the African Nations are experiencing increased poverty polarization.Multivariate Poverty Measurement, Polarization

Boats and Tides and Trickle Down Theories: What Stochastic Process Theory Has To Say About Modeling Poverty, Inequality, Mobility and Polarization

Aphorisms that “Rising tides raise all boats” or that material advances of the rich eventually “Trickle Down” to the poor are really maxims regarding the nature of stochastic processes that underlay the income paths of groups of individuals. This paper looks at the implications of conventional assumptions made by economists concerning such processes for the empirical analysis of wellbeing in terms of poverty, inequality, mobility and polarization. The implications of attributing different processes to different groups in society following the club convergence literature are also discussed. Various forms of poverty, inequality and income mobility structures are considered and much of the conventional wisdom afforded us by such aphorisms is questioned. To exemplify these ideas the results are applied to the distribution of GDP per capita in the continent of Africa.Stochastic Processes, Poverty, Inequality, Mobility, Polarization

Polarization Measurement and Inference in Many Dimensions: A Note

This note extends the Duclos Esteban Ray Polarization Measure to situations in which agents are characterized in many dimensions where the characteristics are both discrete and continuous. It provides a formula for its asymptotic variance and illustrates its use in an application to a sample of Chinese Urban Households where household income, living space and educational status of the household head are the agent characteristics.Polarization Multidimensional estimation Inference

Institutions and Economic Outcomes: A Dominance Based Analysis of Causality and Multivariate Welfare With Discrete and Continuous Variables

One of the central issues in welfare economics is the measurement of overall wellbeing and, to this end, the interaction between institutions (polity) and growth is paramount. Individual welfare depends on both economic and political factors but the continuous nature of economic variables combined with the discrete nature of political ones renders conventional multivariate techniques problematic. In this paper, we propose a multivariate dominance test based on the comparison of mixtures of continuous and discrete distributions to examine changes in welfare. Our results suggest that, while economic growth exerted a positive impact from 1960 to 2000, declines in polity over the earlier part of this period were sufficient to produce a decline in overall wellbeing until the mid-1970s. Subsequent increases in polity then reversed the trend and, ultimately, wellbeing in 2000 was higher than that in 1960. To be sure, economic and political variables are correlated and, based on the dominance of polity in our multivariate results, we conjecture that this correlation is predominantly due to a causal link from polity to growth. While the development literature is rife with debates over whether it is institutions that cause growth or growth that causes institutions, we argue that the relevant question is not which hypothesis is correct but, rather, which hypothesis dominates. Since standard regression techniques have difficulty capturing non-linear dependence, especially when one of the variables is an index with limited variation, we propose a causality dominance test to examine this aspect of the growth-institutions nexus and indeed find evidence that the causal effects of polity on growth dominate those of growth on polity, particularly when the data are population weighted.Growth, Polity, Causality, Multivariate Wellbeing

The One Child Policy and Family Formation in Urban China

The Chinese government implemented the One Child Policy (OCP) in an attempt to ameliorate the population explosion and its potential negative economic consequences on their infant economy in 1979. Here the consequences of this policy for marital matching and family size decisions are examined. A simple General Equilibrium model demonstrates how constraints on marital output on the quantity of children dimension raises the marginal benefit of increased positive assortative matching, and greater investment in children. These theoretical predictions are examined empirically in a variety of ways. The prediction of intensified positive assortative matching was examined using Distributional Overlap and Stochastic Dominance Tests and provided support for intensified assortative matching amongst the urban population. To support this positive finding, we next examined if the policy was indeed binding. The extent to which parental family size decisions were bound by the OCP were examined using Poisson regression techniques and the results suggest that the OCP principally affected the quantity of children decision by suppressing parental preference for male heirs and they suggest that after the OCP was implemented births beyond the first child are purely accidental among younger mothers. In addition, we also found some evidence of increased educational attainment among children reflecting increased parental investments in children post OCP further supporting the view that the One Child Policy altered significantly familial decisions in urban China.Family Formation, Rationing, Matching

Welfare Rankings From Multivariate Data, A Non-Parametric Approach

Economic and Social Welfare is inherently multidimensional. However choosing a measure which combines several indicators is difficult and may have unintended and undesireable effects on the incentives for policymakers. We develope a nonparametric empirical method for deriving welfare rankings based on data envelopment which avoids the need to specify a weighting scheme. The results are valid for all possible social welfare functions which share certain cannonical properties. We apply this method to data on human development.Welfare Rankings, Data Envelopment, Human development

Nonparametric Estimation of a Polarization Measure

This paper develops methodology for nonparametric estimation of apolarization measure due to Anderson (2004) and Anderson, Ge, and Leo(2006) based on kernel estimation techniques. We give the asymptoticdistribution theory of our estimator, which in some cases is nonstandard dueto a boundary value problem. We also propose a method for conductinginference based on estimation of unknown quantities in the limitingdistribution and show that our method yields consistent inference in allcases we consider. We investigate the finite sample properties of ourmethods by simulation methods. We give an application to the study ofpolarization within China in recent years.Kernel Estimation, Inequality, Overlap coefficient,Poissonization

Income Inequality, Cohesiveness and Commonality in the Euro Area: A Semi-Parametric Boundary-Free Analysis

The cohesiveness of constituent nations in a confederation such as the Eurozone depends on their equally shared experiences. In terms of household incomes, commonality of distribution across those constituent nations with that of the Eurozone as an entity in itself is of the essence. Generally, income classification has proceeded by employing “hard”, somewhat arbitrary and contentious boundaries. Here, in an analysis of Eurozone household income distributions over the period 2006–2015, mixture distribution techniques are used to determine the number and size of groups or classes endogenously without resort to such hard boundaries. In so doing, some new indices of polarization, segmentation and commonality of distribution are developed in the context of a decomposition of the Gini coefficient and the roles of, and relationships between, these groups in societal income inequality, poverty, polarization and societal segmentation are examined. What emerges for the Eurozone as an entity is a four-class, increasingly unequal polarizing structure with income growth in all four classes. With regard to individual constituent nation class membership, some advanced, some fell back, with most exhibiting significant polarizing behaviour. However, in the face of increasing overall Eurozone inequality, constituent nations were becoming increasingly similar in distribution, which can be construed as characteristic of a more cohesive society