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We document the contribution of skin color toward quantifying inequality of opportunity over a proxy indicator of wealth. Our Ferreira–Gignoux estimates of inequality of opportunity as a share of total wealth inequality show that once parental wealth is included as a circumstance variable, the share of inequality of opportunity rises above 40%, overall and for every age cohort. By contrast, the contribution of skin tone to total inequality of opportunity remains minor throughout.

Counting poverty measures have gained prominence in the analysis of multidimensional poverty in recent decades. Poverty orderings based on these measures typically depend on methodological choices regarding individual poverty functions, poverty cut-offs, and dimensional weights whose impact on poverty rankings is often not well understood. In this paper we propose new dominance conditions that allow the analyst to evaluate the robustness of poverty comparisons to those choices. These conditions provide an approach to evaluating the sensitivity of poverty orderings superior to the common approach of considering a restricted and arbitrary set of indices, cut-offs, and weights. The new criteria apply to a broad class of counting poverty measures widely used in empirical analysis of poverty in developed and developing countries including the multidimensional headcount and the adjusted headcount ratios. We illustrate these methods with an application to time-trends in poverty in Australia and cross-regional poverty in Peru. Our results highlight the potentially large sensitivity of poverty orderings based on counting measures and the importance of evaluating the robustness of results when performing poverty comparisons across time and regions.

The challenges associated with poverty measurement using a cardinal variable have received much attention over the past four decades, but there is a dearth of literature on how to meaningfully assess poverty with an ordinal variable. This article proposes a class of simple, intuitive, and policy-relevant poverty measures for ordinal variables. The measures are sensitive to the depth of deprivations, unlike the headcount ratio. Moreover, under appropriate restrictions, the measures ensure that priority is given to the poorest among the poor when targeting, monitoring, and evaluating poverty alleviation programs. To assess the robustness of poverty comparisons to alternative choices of parameters, the article develops various stochastic dominance tests (some of which are novel contributions to the stochastic dominance literature). The empirical illustration documenting changes in sanitation deprivation in Bangladesh showcases the measures’ ability to identify instances in which overall sanitation deprivation improved while leaving the poorest behind.

Highlights•A large and growing body of work uses endogenous (data driven) weights to compute multidimensional poverty.•Broad classes of endogenous weights violates key properties of poverty indices such as monotonicity and subgroup consistency.•Using data from Ecuador and Uganda we show that these violations are widespread.•Poverty evaluation under these circumstances are seriously compromised.•Our results can be extended to other composite welfare measures such as the widely used asset indices.AbstractMultidimensional poverty measures have become a standard feature in poverty assessments. A large and growing body of work uses endogenous (data driven) weights to compute multidimensional poverty. We demonstrate that broad classes of endogenous weights violates key properties of poverty indices such as monotonicity and subgroup consistency, without which poverty evaluation and policy targeting are seriously compromised. Using data from Ecuador and Uganda we show that these violations are widespread. Our results can be extended to other composite welfare measures such as the widely used asset indices.

The last few years have witnessed an increasing emphasis on going beyond GDP per capita when measuring a nation’s quality of life. Countries (e.g. UK, France, Canada, Germany, Italy, Japan, Korea, Spain) and international organizations (e.g. OECD) have been developing methods suitable for non-income indicators. However, this involves serious measurement challenges due to: (a) multidimensionality, and (b) ordinality (i.e. unlike income these indicators do not have a natural scale). This paper is the first summary of the methods developed in the last decade in the field of inequality and welfare measurement to address these challenges. Next, we utilize the presented methodology and provide evidence on the ranking of OECD countries in terms of welfare and inequality in education and happiness. We find that when dimensions are analysed separately, welfare dominance is frequent (42% of all comparisons in education and 31% in life satisfaction). The number drops to only 4.4% for bivariate dominance, which highlights the empirical relevance of multidimensional analysis. Greece, Portugal and Hungary feature the lowest joint welfare. Northern European countries are most often dominating and Southern European countries are most often dominated in both inequality and welfare analyses.

The notion of social inequality lends itself to different understandings. One of them is the measurement of inequality over non-monetary dimensions of well-being. The companion Chapter 17 in this Handbook by Lasso de la Vega discusses theoretically the methods to measure inequality when variables are ordinal, and the methods for inequality measurement with bounded continuous variables. The present authors provide empirical illustrations of research implementing this method. Another understanding of social inequality refers to inequality in an indicator of interest between or across socioeconomic groups. The authors explore several methods proposed for this latter purpose and provide empirical illustration.

This paper proposes a decomposition of a general class of absolute measures of panel welfare change into growth, dispersion and exchange mobility components, which is useful for both intergenerational and intragenerational mobility assessments. We show that this decomposition is the only one within a broad set of possibilities that satisfies a key dispersion-sensitivity property and that prioritising improvements among those initially poorest is identical to a favourable view of exchange mobility.

The challenges associated with poverty measurement within an axiomatic framework, especially with cardinal variables, have received due attention during the last four decades. However, there is a dearth of literature studying how to meaningfully assess poverty with ordinal variables, capturing the depth of deprivations. In this paper, we first propose a class of additively decomposable ordinal poverty measures and provide an axiomatic characterisation using a set of basic foundational properties. Then, in a novel effort, we introduce a set of properties operationalising prioritarianism in the form of different degrees of poverty aversion in the ordinal context and characterise corresponding subclasses of measures. Moreover, for all the characterised classes and subclasses of measures, we develop stochastic dominance conditions, some of which are in themselves novel contributions to the stochastic dominance literature. Finally, we demonstrate the efficacy of our methods using an empirical illustration scrutinising the change in sanitation deprivation in Bangladesh.

Mexico is a country with high levels of inequality and low intergenerational social-mobility rates for those located at the bottom extremes of the wealth distribution. Although such low rates suggest that at least a share of the observed income inequality may be due to an unequal distribution of opportunities, this conjecture has not been thoroughly tested in the literature. The present article fills this gap estimating the lower bound of the contribution of unequal opportunities to income and wealth inequality in Mexico, with an operationalization of the “ex-ante” approach to the measurement of inequality of opportunity. Relying on a national representative survey designed for the analysis of social mobility, namely, the ESRU Survey on Social Mobility in Mexico (2011), we are able to define a broad set of circumstance groups (“types”), encompassing the wealth of the household of origin. This available information reduces the omitted variable bias of previous estimations and allows for a better account of the role of inequality of opportunity in income inequality. Our results show that the lower bound of the contribution of unequal opportunities to total income inequality and total wealth inequality is around 30 per cent, which is substantially higher than previous estimations for Mexico and ranks among the highest values in Latin America.

A number of chronic poverty measures are now empirically applied to quantify the prevalence and intensity of chronic poverty, vis-à-vis transient experiences, using panel data. Welfare trajectories over time are assessed in order to identify the chronically poor and distinguish them from the non-poor, or the transiently poor, and assess the extent and intensity of intertemporal poverty. We examine the implications of measurement error in the welfare outcome for some popular discontinuous chronic poverty measures, and propose corrections to these measures that seeks to minimize the consequences of measurement error. The approach is based on a novel criterion for the identification of chronic poverty that draws on fuzzy set theory. We illustrate the empirical relevance of the approach with a panel dataset from rural Ethiopia and some simulations. © 2017 International Association for Research in Income and Wealth

This paper adopts a new approach to the measurement of chronic multidimensional poverty. It relies on the counting approach of Alkire and Foster (2011) for the measurement of multidimensional poverty in each time period, and then on the duration approach of Foster (2009) for the measurement of multidimensional poverty persistence across time. The proposed indices are sensitive both to (i) the share of dimensions in which people are deprived and (ii) the duration of their multidimensional poverty experience. A related set of indices is proposed to measure transient poverty. An empirical illustration is provided for Chile between 1996 and 2006.

This paper proposes new measures and graphical representations of the change in bi-polarization and in the relative importance of the middle class that took place in a given country during a given period. These tools extend, in fact, the concepts of inter-distribution income inequality and Lorenz curves by making, first, a distinction between overall, “pure growth based” and “shape related” distributional changes; and then between a “first-order” and a “second-order” change in “shape related” distributional change. The empirical illustration is based on data covering 17 Latin American countries in 2000 and 2009, obtained from the Latinobarometro surveys for these years. The standard of living of individuals was derived on the basis of correspondence analysis. These new tools help us to understand the changes that took place in the distribution of standards of living during the period analyzed.

A natural concern with multivariate poverty measures, as well as with other composite indices, is the robustness of their ordinal comparisons to changes in the indices’ parameter values. Applying multivariate stochastic dominance techniques, this paper derives the distributional conditions under which a multidimensional poverty comparison based on the popular counting measures, and ordinal variables, is fully robust to any values of the indices’ parameters. As the paper shows, the conditions are relevant to most of the multidimensional poverty indices in the literature, including the Alkire–Foster family, upon which the UNDP’s “Multidimensional Poverty Index” (MPI) is based. The conditions are illustrated with an example from the EU-SILC data set.

A re-emerging literature on robustness in multidimensional welfare and poverty comparisons has revived interest in multidimensional stochastic dominance. Considering the widespread use of ordinal variables in wellbeing measurement, and particularly in composite indices, I derive multivariate stochastic dominance conditions for ordinal variables. These are the analogues of the conditions for continuous variables (e.g., Bawa, 1975, and Atkinson and Bourguignon, 1982). The article also derives mixed-order-of-dominance conditions for any type of variable. Then I propose an extension of Anderson's nonparametric test in order to test these conditions for ordinal variables. In addition, I propose the use of vectors and matrices of positions in order to handle multivariate, multinomial distributions. An empirical application to multidimensional wellbeing in Peru illustrates these tests.

The multidimensional nature of wellbeing is now the widely accepted approach in frontier research on poverty, inequality and policy analysis. However, significant challenges and disagreement remain...

Most welfare studies assume that well-being is monotonically related to the variables used for the analysis. While this assumption is reasonable for many dimensions of well-being like income, education, or empowerment, there are some cases where it is definitively not relevant, in particular with respect to health. For instance, health status is often proxied using the Body Mass Index (BMI). Low BMI values can capture undernutrition or the incidence of severe illness, yet a high BMI is neither desirable as it indicates obesity. Usual illfare indices derived from poverty measurement are then not appropriate. This paper proposes illfare indices that are consistent with some situations of nonmonotonic well-being relationships and examines the partial orderings of different distributions derived from various classes of illfare indices. An illustration is provided for child health as proxied by a weight-for-age indicator using DHS data for Bangladesh, Colombia and Egypt during the last few decades.

A growing interest in multidimensional poverty measures among academics and policymakers has been patent in recent years. Yet the literature has focused on cross-sectional evidence. This paper proposes a novel decomposition of changes in multidimensional poverty, as measured by the basic members of the Alkire–Foster family of measures. The method works for any type of dataset; and, in the case of panel datasets, it is useful for relating changes in these Alkire–Foster measures to transitions into and out of multidimensional poverty. The decomposition techniques are illustrated with the Young Lives panel dataset comprising cohorts of children from Ethiopia, Andhra Pradesh, Peru and Vietnam. Changes in the adjusted headcount ratio are decomposed into changes in the multidimensional headcount and changes in the average number of deprivations among poor people. Each of the latter is further decomposed into changes in relevant statistics including the probabilities of moving into and out of multidimensional poverty. This paper is one initial attempt to build a bridge between the literatures of poverty dynamics and multidimensional poverty measures. These have developed substantially but separately, for a long time. The underlying motivation is a question whether it is possible to analyse multidimensional poverty dynamics in a way that is conceptually meaningful, empirically informative, and useful for policy decisions. While we believe that much more work needs to be done in this direction, we hope that this paper provides some ideas and examples of what could be accomplished.

We propose a framework for the measurement of income mobility over several time periods, based on the notion that multi-period mobility amounts to measuring the degree of association between the individuals and the time periods in a contingency table. We provide both indices and a pre-ordering condition for multi-period mobility assessments. We illustrate our approach with an empirical application using the EU-SILC rotating panel dataset.

Most methods for the analysis of distributional change rely on the changes in the income of a particular group of people, taking either the situation of this group in the previous period, or the average change in the population, as reference point. By contrast, we propose a measure of distributional change based on the comparison of a group’s wellbeing standard against a richer group, thereby capturing a notion of change in relative income, which embodies the influence of others’ wellbeing on the judgment of the group’s own situation. The indices, and related relative income change (RIC) curves, are based on ratios of generalized mean incomes between two groups, which render them closely related to Zenga’s inequality measures and Lorenz curve comparisons, when arithmetic means are used. We consider both relative and absolute income cut-offs for the group partitions. Differences and similarities between our measures of relative income change and the Growth Incidence Curve are also discussed. These are highlighted in an empirical illustration on European countries.

When measuring poverty with counting measures, it is worth inquiring into the conditions prompting poverty reduction which not only reduce the average poverty score further but also decrease deprivation inequality among the poor, thereby emphasizing improvements among the poorest of the poor. For comparisons of cross-sectional datasets of the same society in dierent

Este paper estudia implicaciones dinámicas de aquellas decisiones del hogar que determinan la fecundidad y la acumulación de capital humano, vía la asignación de tiempo infantil y de recursos para componentes de calidad infantil como la nutrición; se concentra en los vínculos entre estas decisiones y el proceso de desarrollo económico. El énfasis se encuentra en la calidad infantil porque aun no ha sido tratado en un contexto dinámico junto con la asignación de tiempo infantil y debería ser considerado puesto que explícitamente permite contemplar la posibilidad de que el capital humano sea acumulado mas allá del punto en que el trabajo infantil es eliminado y aun mas allá de cuando la transición demográfica es concluida. El paper también ilustra un problema de equivalencia observacional por el cual tanto modelos unitarios basados en altruismo paterno como aquellos en el que esta ausente pueden generar cualitativamente los mismos diagramas de fase para la acumulación de capital humano así como otras decisiones del hogar. Finalmente, los dos modelos desarrollados en este paper son contrastados con la teoría de transición demográfica de Caldwell, la cual presta importancia a la dirección del flujo de intergeneracional de riqueza como determinante clave del régimen de fecundidad. El paper sugiere que en lugar de estar vinculados por una relación de causalidad, ambos fenómenos son mutuamente endógenos., In this paper I study the dynamic implications of household decisions that determine fertility and human capital accumulation with a theoretical model built on that of Hazan and Berdugo (2002). The links between the allocation of children's time, together with material resources towards child quality components, such as nutrition and the process of economic development are explored. I ive emphasis to investment in child quality because it has not previously been treated together with allocation of children's time in a dynamic setting. However these need to be dealt with together since they enable us explicitly to consider the possibility that human capital can be accumulated beyond the point at which child labor is effectively (rationally) eliminated, and even beyond that when fertility transition is concluded. I also show that this result can hold even in the absence of altruistic parents (in a unitary framework). Finally I show with these models that Caldwell's hypothesis about the correlation between intergenerational flows of resources and fertility regimes can be explained as being mediated by earning opportunities in educationally-intensive sectors which in turn influence parental incentives to invest in child quality.

During the last decade of the Twentieth century Peru has undertaken a public firms' privatization process involving the transfer of ownership at firms producing intermediate goods to foreign investors. This essay proposes a model for assesing the macroeconomic effects produced by the privatization of this kind of companies on the telecommunication industry. By using National income as a reference unit for measuring impacts, the model captures analytically, as short-term effects the rise in the relative prices of telephone services along with the transfer of poverty and the filling of the market gap led by the raise in service coverage. Furthermore, the model finds in the long-term a positive effect from the consequences of technological innovation at the sector, in the end a source of endogenous growth. Synthesizing, the essay concludes that a priori it is impossible to determine the nature of the overall effect from the sector's privatization, for it will depend on the prevalence of certain economic conditions identified on the model. Durante la última década del siglo XX, el Perú experimentó un proceso de privatización de empresas públicas que involucró la transferencia de la propiedad de empresas productoras de bienes intermedios a inversionistas extranjeros. El presente ensayo plantea un modelo para evaluar los efectos macroeconómicos generados por la privatización de este tipo de empresas en el sector de telecomunicaciones. Empleando el ingreso nacional como unidad de referencia para medir los impactos, el modelo captura analíticamente como efectos de corto plazo, al alza en el precio relativo de los servicios telefónicos junto con la transferencia de propiedad y la reducción en la brecha de mercado producida por el aumento en la cobertura del servicio. Asimismo, el modelo encuentra, en el largo plazo, un efecto positivo en las consecuencias de la innovación tecnológica en el sector, fuente en última instancia de crecimiento endógeno. En síntesis, el ensayo concluye que a priori es imposible determinar la naturaleza del efecto total de la privatización en el sector, pues, esta dependerá de la vigencia de ciertas condiciones económicas identificadas por el modelo.