Measuring poverty through a
generalised budget approach
An empirical test in 11 countries
Cok Vrooman
www.scp.nl
Outline
1.
Some general notions on measuring poverty
2.
Poverty according to the generalised budget approach:
the instrument as developed for the Netherlands
3.
Application of the GBA in comparative analysis
of poverty (11 countries)
4.
Merits of the instrument
Source:
J.C. Vrooman (2009). Rules of relief;
Institutions of social security, and their impact
The Hague: SCP (Chapter 6: Poverty)
Reference Budgets for Social Inclusion
ecdn/EU Progress Project, Vienna, 20-22 October 2009
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Criteria for assessing poverty lines
1.
Validityy
2.
Reliability
3.
Ease of application in empirical research
4.
Social policy relevance/credibility
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ecdn/EU Progress Project, Vienna, 20-22 October 2009
Typology of poverty lines
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Relative poverty and income inequality
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Generalised budget approach in NL (I)
Basic methodology
1.
Initial budget: reference household in starting year
 detailed budget for single person (Nibud)
 two levels: ‘basic needs’
‘modest but adequate’
2.
Generalisation over population: equivalence scale
 Statistics Netherlands Scale (nAdult + 0.8n Child)0.5
3.
Generalisation over time: indexation mechanism
 3-year moving average of median expenditure on
food and non-alcoholic drinks, clothing and housing (HES)
 theoretically quasi-relative:
inflation < index < median income
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Generalised budget approach in NL (II)
Reference budgets and poverty lines
Monthly amounts,
in euro
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ecdn/EU Progress Project, Vienna, 20-22 October 2009
Generalised budget approach in NL (III)
Poverty lines and poverty rates 1985-2005
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Generalised budget approach in NL (IV)
Conclusions
Valid:
Good coverage of the theoretical concept of poverty,
due to explicit link to expenditure people cannot avoid
or which is perceived as socially necessary
Reliable:
Plausible results in terms of trends and risk groups
Applicable: Only one reference budget, no need for annual
update
Normatively credible:
In line with public opinion on perception of poverty
and with consensual budgets constructed in focus
groups*
* S. Hoff, C. van Gaalen, A. Soede, A. Luten, C. Vrooman & S. Lamers (2009).
Genoeg om van te leven [Sufficient to live on]. The Hague: SCP/Nibud
Reference Budgets for Social Inclusion
ecdn/EU Progress Project, Vienna, 20-22 October 2009
Comparative analysis (I):
Background and hypotheses
Categoral principal component analysis (CatPCA)
on 54 ttraits
aits of social security
sec it in 11 co
countries
nt ies
2 dimensions
- scope of social security
- degree of universalism/particularism
3 country clusters and 1 hybrid
- liberal: US, AU, UK, CA
- social-democratic: DK, SE, NO
- corporatist: BE, DE, FR
- hybrid: NL
Poverty hypothesis:
LIB > CRP > SD > HYB
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Comparative analysis (II)
Assessing the norm amounts in other countries
1.
Initial budget:
g person
p
2000,,
 Dutch norm amounts single
‘basic needs’ and ‘modest but adequate’
 Translated to other countries by PPP
2.
Generalisation over national populations:
 Uniform equivalence scale based on sensitivity analysis
 Slightly different from NL (nAdult + 0.75 nChild)0.6
3.
No generalisation over time: situation in around 2000
 Data: Luxembourg Income Study
Reference Budgets for Social Inclusion
ecdn/EU Progress Project, Vienna, 20-22 October 2009
Comparative analysis (III)
Poverty threshold values in 11 countries
(single person, 2000)
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Comparative analysis (IV)
‘The 3 I’s of poverty’ and composite measures
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Comparative analysis (V)
multilevel models
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The generalised budget approach to poverty
Merits of the instrument
1.
2.
2
3.
GBA does not suffer from many of the drawbacks of
popular poverty lines (60% median, expert budget)
Valid reliable,
Valid,
reliable easy to apply,
apply normatively credible
Both in historical analysis of poverty in NL, and in
comparative analysis in around 2000
However:
Use of PPP is rather crude  preferably national
reference budgets with common methodology
More work required on:
 comparability of equivalence scales
 indexation mechanism/data in different countries
Reference Budgets for Social Inclusion
ecdn/EU Progress Project, Vienna, 20-22 October 2009
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