L3 Sept 8 - Alternative Measures of Poverty Click to edit Master subtitle style 11 Official Definition Resources = all cash income except EITC

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Click to edit Master subtitle style Alternative Measures of Poverty 11
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Official Definition Resources = all cash income, except EITC Threshold = cost of TFP * 3 l Poor = Resources < Threshold But, this is not the only way to measure poverty 22
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Alternative Measures of Poverty Relative Poverty Consumption poverty “Capabilities” poverty Asset poverty Subjective 33
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Relative Poverty Individual or household income is compared to income at some point in the overall distribution Commonly, half of the median (50th percentile) As the median income increases, so does the poverty line 44
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Relative vs. Absolute Absolute (US measure) Advantage is that it is simple and intuitive and it is sensitive to income growth in the economy. Disadvantage is that unless it is updated, it may not accurately reflect changes in standards of living. 55
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Relative vs. Absolute Relative Advantage is that changes as living standards change. Disadvantage is that there will always be some who are poor, even if everyone is better off. The only way to reduce relative poverty is to decrease inequality. Income growth overall may not be reflected in a relative measure. 66
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Adam Smith on Poverty Measurement In a passage from The Wealth of Nations on the “necessaries” of daily life… By necessaries, I understand not only the commodities which are indispensably necessary for the support of life, but what ever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. For Adam Smith, “necessaries” included linen shirts and leather shoes, although he 77
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Poverty Thresholds for Four-Person Families, 88 0 2 4 6 8 10 12 Constant 2000 $
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Consumption Poverty Compare actual consumption to a basket of basic of necessities. The poor are those whose consumption
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This note was uploaded on 09/07/2011 for the course ECON 375 taught by Professor Staff during the Fall '10 term at Maryland.

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L3 Sept 8 - Alternative Measures of Poverty Click to edit Master subtitle style 11 Official Definition Resources = all cash income except EITC

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