THE OECD APPROACH TO MEASURE AND MONITOR INCOME POVERTY ACROSS COUNTRIES Horacio Levy OECD Social Policy Division and Nicolas Ruiz OECD, Household Statistics and Progress Measurement Division 1 UNITED NATIONS ECONOMIC COMMISSION FOR EUROPE Seminar “The way forward in poverty measurement” (Geneva, 2 ‑ 4 December 2013)

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

Variable: single dimensional indicator (Income) Identification : Poverty line Aggregation : FGT (Econometrica, 1984) Example Incomes = (7,1,4,8) Poverty line z = 5 Deprivation vector g0 = (0,1,1,0) Headcount ratio P0(y;z) = µ(g0) = 2/4 Normalized gap vector g1 = (0, 4/5, 1/5, 0) Poverty gap = P1(y;z) = µ(g1) = 5/20 Squared gap vector g2 = (0, 16/25, 1/25, 0) FGT Measure = P2(y;z) = µ(g2) = 17/100 3 General (and traditional) approach to poverty measurement

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) 4 Which poverty line?

Data collection Income distribution indicators based on micro-data Network of national consultants Harmonization Questionnaire and TOR ( 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) 5 OECD Income Distribution Database (IDD,

6 Poverty monitoring: in first phase of the crisis, relative market income poverty rose widely Source: OECD Income Distribution Database, Percentage point changes in relative income poverty of household market and disposable income,

7 Source: OECD Income Distribution Database, Percentage point changes in anchored income poverty of household market and disposable income, Poverty monitoring: similar, but slightly sharper, picture using anchored poverty line

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

9 Thank you for your attention ! Contacts: Policy Brief: Crisis squeezes income and puts pressure on inequality and poverty: Inequality-and-Poverty-8p.pdf OECD work on income distribution and poverty, via: distribution-database.htm