Estimation of Joint Income-Wealth Poverty: A Sensitivity Analysis

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Most poverty studies build on measures that take account of recurring incomes from sources such as labour or social transfers. However, other financial resources such as savings and assets also affect living standards, often in very significant ways. Previous studies that have sought to incorporate assets into poverty measures suggest that (1) poverty estimates including wealth are considerably lower than income-based measures; (2) poverty rates of the elderly are more affected than those of the nonelderly and (3) poverty rates are especially affected by the household's main residence. This paper assesses the sensitivity of these conclusions to various plausible alternative assumptions, such as the poverty line calculation, the types of assets included in the wealth concept and choices with respect to the equivalence scale. Moreover, we check whether the impact of alternative assumptions is consistent across age and institutional settings. To that effect we compare Belgium and Germany, two countries with similar living standards and income poverty rates, but very different levels and distributions of wealth. Using data from the HFCS we show that accounting for wealth affects the incidence and age structure of poverty in a very substantial way. Country comparisons are also affected in very substantial ways. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E S Estimation of JointJEL Classification: I32

Comparison of survey data on wealth in Switzerland

“…Purchase price and insurance price might be considered equal because in case of accidents, insurance companies reimbursed the replacement value of the insured object, which is often an adjustment of its purchasing price excluding the value of the land. 10 ( Figure 1 about here)…”

“…For this reason, primary home wealth is often considered as a separate component in empirical analyses on wealth (e.g. in the estimation of poverty based on income and wealth, see (10)). Financial wealth is a rather classical component of wealth and it is often present in surveys in a reduced form of savings.…”

“…In CH-SILC, we know whether people have other real estate than the first residence, but we do not know the wealth associated with each housing component 10. The conditions for the estimation of the replacement value depend on the insurance policy.…”

Being a poor farmer in a wealthy country: A Swiss case study

“…However, conventional poverty research largely neglects financial resources beyond income (Kuypers and Marx 2018). Studies taking wealth into account show for example that life chances depend more on wealth than on income (OECD 2018b) or that wealth is as important to subjective wellbeing as income (Headey and Wooden 2004).…”

Redistribution in a joint income–wealth perspective: A cross-country comparison

“…Despite these developments in private wealth accumulation, living standards have traditionally been defined and measured through monthly or yearly income streams. However, other financial resources such as savings and assets also impact living standards in a significant way (Kuypers & Marx, 2016). Savings and assets can serve as a buffer to smooth out consumption during low income periods or to face unexpected costs, but they also provide their owners with a form of economic power because they entail independence and can be used as collateral to further accumulate wealth (Cowell & Van Kerm, 2015;Azpitarte, 2012).…”