Distributions in motion: Economic growth, inequality, and poverty dynamics

October 18, 2010


Francisco Ferreira (The World Bank)


The joint determination of aggregate economic growth and distributional change has been studied empirically from at least three different perspectives. A macroeconomic approach that relies on cross-country data on poverty, inequality, and growth rates has generated some interesting stylized facts about the correlations between these variables, but has not shed much light on the underlying determinants. “Meso-” and microeconomic approaches have fared somewhat better. The microeconomic approach, in particular, builds on the observation that growth, changes in poverty, and changes in inequality are simply different aggregations of information on the incidence of economic growth along the income distribution. This paper reviews the evolution of attempts to understand the nature of growth incidence curves, from the statistical decompositions associated with generalizations of the Oaxaca-Blinder method, to more recent efforts to generate “economically consistent” counterfactuals, drawing on structural, reduced-form, and computable general equilibrium models.


Poverty and inequality dynamics; growth incidence curves.
JEL: D31



A New Model for Constructing Poverty Lines

October 11, 2010
By: Kakwani, Nanak


In this paper, we present a new model for constructing poverty lines. The model uses consumer theory to construct both food and nonfood poverty thresholds. Although one cannot completely eliminate the value judgments inherent in the construction of poverty thresholds, this model helps to make the ad hoc assumptions that are generally made more justifiable. The model ensures that poverty line is consistent across regions. The methodology developed in the paper is used to illustrate the construction of poverty thresholds in Pakistan.
Keywords: economies of scale, poverty measures, poverty line, consistent poverty line, consumer theory, calorie cost



Happiness and Financial Satisfaction in Israel: Effects of Religiosity, Ethnicity, and War

October 4, 2010

by van Praag, Bernard M. S. (University of Amsterdam), Romanov, Dmitri (Central Bureau of Statistics, Israel), Ferrer-i-Carbonell, Ada (IAE Barcelona (CSIC))

We analyze individual satisfaction with life as a whole and satisfaction with the personal financial situation for Israeli citizens of Jewish and Arab descent. Our data set is the Israeli Social Survey (2006). We are especially interested in the impact of the religions Judaism, Islam and Christianity, where we are able to differentiate between individuals who vary in religiosity between secular and ultra-orthodox. We find a significant effect of religiosity on happiness. With respect to Jewish families it is most striking that the impact of family size on both life and financial satisfaction seems to vary with religiosity. This might be a reason for differentiation in family equivalence scales. For Arab families we did not find this effect. First-generation immigrants are less happy than second-generation immigrants, while there is no significant difference between second-generation families and native families. The effect of the Lebanon War is much less than expected.
Keywords: happiness, subjective well-being, financial satisfaction, Israel, religion, immigration, terrorism
JEL: H56