SEQUENTIAL STOCHASTIC DOMINANCE AND THE ROBUSTNESS OF POVERTY ORDERINGS

Authors


*Jean-Yves Duclos, Département d’économique and CIRPÉE, Pavillon De Sève, Université Laval, Sainte-Foy, Québec, Canada, G1K 7P4 (jyves@ecn.ulaval.ca).

Abstract

When comparing poverty across distributions, an analyst must select a poverty line to identify the poor, an equivalence scale to compare individuals from households of different compositions and sizes, and a poverty index to aggregate individual deprivation into an index of total poverty. A different choice of poverty line, poverty index or equivalence scale can of course reverse an initial poverty ordering. This paper develops easily-checked sequential stochastic dominance conditions that throw light on the robustness of poverty comparisons to these important measurement issues. These general conditions extend well-known results to any order of dominance, to the choice of individual versus family based aggregation, and to the estimation of “critical sets” of measurement assumptions. Our theoretical results are briefly illustrated using data for four countries drawn from the Luxembourg Income Study databases.

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