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The OECD approach to MEASURE and monitoR INCOME poverty ACROsS COUNTRIES

UNITED NATIONS ECONOMIC COMMISSION FOR EUROPE Seminar “The way forward in poverty measurement” (Geneva, 2‑4 December 2013). The OECD approach to MEASURE and monitoR INCOME poverty ACROsS COUNTRIES. Horacio Levy OECD Social Policy Division and Nicolas Ruiz

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The OECD approach to MEASURE and monitoR INCOME poverty ACROsS COUNTRIES

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  1. UNITED NATIONS ECONOMIC COMMISSION FOR EUROPE Seminar “The way forward in poverty measurement” (Geneva, 2‑4 December 2013) The OECD approach to MEASURE and monitoR INCOME poverty ACROsSCOUNTRIES Horacio Levy OECD Social Policy Division and Nicolas Ruiz OECD, Household Statistics and Progress Measurement Division

  2. Outline Approaches to poverty measurement OECD Income Distribution Database (IDD) Poverty monitoring: recent results Current and upcoming challenges

  3. General (and traditional) approach to poverty measurement Variable: single dimensionalindicator (Income) Identification : Povertyline Aggregation: FGT (Econometrica, 1984) ExampleIncomes= (7,1,4,8) Povertyline z = 5 Deprivationvector g0 = (0,1,1,0) Headcountratio P0(y;z) = µ(g0) = 2/4 Normalized gap vector g1 = (0, 4/5, 1/5, 0) Povertygap = P1(y;z) = µ(g1) = 5/20 Squaredgap vector g2 = (0, 16/25, 1/25, 0) FGT Measure= P2(y;z) = µ(g2) = 17/100

  4. Which poverty line? Absolute (WB, developing countries) Relative (NSOs, OECD, developed countries) Anchored (OECD) Subjective (Developed countries) Weakly relative (WB), Hybrid All lines are essentially set at the national level… …but they have a strong economic gradient: richer countries tend to have higher poverty lines)

  5. OECD Income Distribution Database (IDD, http://oe.cd/idd) • Data collection • Income distribution indicators based on micro-data • Network of national consultants • Harmonization • Questionnaire and TOR (http://www.oecd.org/els/soc/IDD-ToR.pdf) • Consistent and comparable definitions • DI = E + KI + SEI + (TRRSS + TRRER + TRROT – (TA + TRPER + TRPOT) • MI = DI – TRRSS + TA + TRPER • Unit of analysis and equivalisation • Poverty indicators • Headcount ration, poverty gap ratio • Relative and anchored poverty line (50%, 60% median)

  6. Poverty monitoring: in first phase of the crisis, relative market income poverty rose widely Percentage point changes in relative income poverty of household market and disposable income, 2007 - 2010 Source: OECD Income Distribution Database, www.oecd.org/social/income-distribution-database.htm

  7. Poverty monitoring: similar, but slightly sharper, picture using anchored poverty line Percentage point changes in anchored income poverty of household market and disposable income, 2007 - 2010 Source: OECD Income Distribution Database, www.oecd.org/social/income-distribution-database.htm

  8. Current and upcoming challenges Timeliness Regional breakdown of poverty figure Wealth beyond income: Multidimensional poverty:

  9. Thank you for your attention ! • Contacts: • Nicolas.ruiz@oecd.org • horacio.levy@oecd.org Policy Brief: Crisis squeezes income and puts pressure on inequality and poverty: http://www.oecd.org/els/soc/OECD2013-Inequality-and-Poverty-8p.pdf OECD work on income distribution and poverty, via: www.oecd.org/social/inequality.htm www.oecd.org/social/income-distribution-database.htm http://oe.cd/idd

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