Nội dung chi tiết: Department of economics issn 1441 5429 d
Department of economics issn 1441 5429 d
MONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dian Evidence"Ankita Mishra* * and Ranjan Ray*Abstract:The contribution of this paper is both methodological and empirical It proposes a methodology for evaluating the distributional implications of puce movement for inequality and poverty measurement. The methodology' is based on a distinction betwe Department of economics issn 1441 5429 den inequalities in nominal expenditures, where the expenditures are either measured 111 nominal terms or a common price deflator IS applied for all ho
Department of economics issn 1441 5429 d
useholds, and that in real expenditures which takes into account the varying household preferences and differences in household composition in convertMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 don their household size and composition and their level of relative affluence. The empirical application to the Indian budget data sets shows the usefulness of the proposed procedures. The Indian empirical evidence is of particular interest since the period chosen (1993-2005) covered both first and Department of economics issn 1441 5429 dsecond generation reforms in India. The results suggest that while rural poverty rates, in both nominal and real terms, fell sharply during this perio
Department of economics issn 1441 5429 d
d, they were accompanied by an increase 111 both nominal and real expenditure inequality. In contrast, the urban poverty rates were mostly static or eMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 df this period The study also contains a decomposition analysis of the movement 111 inequality and poverty rates. The decomposition IS done both between family types and between social groups.Keywords: Real Expenditure Poverty. Inequality Decomposition. Scheduled Class. Equivalence Scales. Price Scal Department of economics issn 1441 5429 ding.JEL codes: Cl3. D12. D63.132.The research for this paper was funded by an Australian Research Council Discovery Grant (DP 0773489).The authors als
Department of economics issn 1441 5429 d
o acknowledge the help of the National Sample Survey Organisation of India in giving them access to the unit recoid data sets used in tills study.’ AnMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dauthor. Depart of Economics. Monash University. Claytonc 2009 Ankita Mislua and Ranjan RayAll rights reserved. No part of this paper may be reproduced in any form, or stoied in a retrieval system, without the prior written permission of the authorỈ. IntroductionSince expenditure pattern varies acros Department of economics issn 1441 5429 ds households, primarily due to differences in their economic circumstances and in then household size and composition, differential movement in prices
Department of economics issn 1441 5429 d
of Items over time will have a differential impact on welfare across households. For example, inflation that is accompanied by an increase in the relMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dof items that are consumed primarily by children increase more than those consumed primarily by adults, then households with large numbers of children will be hit harder than, say, childless households. Again, if the price increases are concentrated in items that exhibit substantial economics of sca Department of economics issn 1441 5429 dle, then inflation will hit the smaller households harder than the huger households simply because the former arc unable to benefit from bulk purchase
Department of economics issn 1441 5429 d
to the same extent as rhe latter. All that this means is that rhe aggregate inflation figure published routinely by authorities may hide substantial MONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 d and poverty.With regard to inequality measurement, this point was recognised by Muellbauer (1974) over three decades back when he distinguished between real and nominal expenditure inequality and showed the divergence between rhe two during rhe 6 years, 1964-1970, of Labour rule in rhe UK. His prin Department of economics issn 1441 5429 dcipal empirical finding was that rhe decline in real expenditure inequality was less than that nr nominal expenditure inequality thus establishing tha
Department of economics issn 1441 5429 d
t price inflation in rhe UK during this period has been regressive, ie, inequality increasing. Muellbauer's contribution, that included a methodology MONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dnges and applied to UK dara in Ray (1985) and, more recently, to Australian dara in Nicholas, Ray and Valenzuela (2008). The study by Nicholas, Ray and Valenzuela (2008)3shares rhe empirical feature of Muellbauer’s (1974) finding by showing that price changes in Australia ill the latter half of the Department of economics issn 1441 5429 d1990s have favoured the rich.The issue of rhe differential impact of price changes across households is also relevant in pox ci ty comparisons. The cr
Department of economics issn 1441 5429 d
iticism of the World Bank methodology for calculating poverty rates made by, among others, Reddy and Pogge (forthcoming), is based on the idea that, gMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dextend tins point to argue that the effective price index varies from one poor household to another tints questioning the use of household invariant price index in making temporal adjustment to the poverty line ill comparing poverty rates over time. The issue gets more complex in international pover Department of economics issn 1441 5429 dty' comparisons since rhe exchange rates used in converting an internationally specified poverty lines denominated in . say. the US dollar mlo the nat
Department of economics issn 1441 5429 d
ional currencies must be converted using exchange rates that are more relevant for the poor. The idea here is rhe same-due to differences ill the housMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dl vary not only’ between households below and above rhe poverty lines but also between households at varying levels of poverty. Illis aspect is rarely acted upon by government agencies 111 devising and revising poverty lines in response to price movements.A logical implication of the above discussio Department of economics issn 1441 5429 dn is that .based on the same vector of item prices, each household will face a different overall effective price index depending on its expenditure al
Department of economics issn 1441 5429 d
location over the various consumption categories. Since this effective price index will vary across households, this will cause a divergence between nMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dlates inequality 111 pel capita or per adult equivalent money expenditures, and real inequality’ as the measure of inequality where we deflate the4money expenditures by the household specific price indices. In case of poverty comparisons, the corresponding distinction is between poverty rates based Department of economics issn 1441 5429 don poverty lines used in official poverty calculations and poverty rates based on this idea of household specific inflation adjustments to then nomina
Department of economics issn 1441 5429 d
l expenditures. Much of the recent debate over poverty lines in India4 has been between the advocates of the "direct method”, where the poverty line iMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dbased poverty' line that was originally derived from a calorie norm but then periodically revised using official price indices, rhe present exercise abstracts hom that debate and compares the official “indirect” method with another “indirect method” that questions the use of the official price index Department of economics issn 1441 5429 d in updating the poverty lines m the same maimer for all households and dial loo using a weighting scheme to aggregate the item wise prices into an ov
Department of economics issn 1441 5429 d
erall price index using a non representative consumption basket for the poor.The principal motivation of this paper is to provide a unified methodologMONASH UniversityBusiness and EconomicsDepartment of EconomicsIssn 1441 5429Discussion paper 27/09Prices, Inequality and Poverty: Methodology and Indi Department of economics issn 1441 5429 dto Indian data. In particular', the paper proposes a methodology for assessing whether relative price movements in India have been inequality increasing or decreasing. Illis paper also provides new and improved estimates of equivalence scales, proposes a test of the variation of the equivalence scal Department of economics issn 1441 5429 des with relative prices, and provides evidence of consumer's expenditure responses to price and aggregate expenditure changes, all of which are requir
Department of economics issn 1441 5429 d
ed m studies that involve welfare comparisons between households. The period considered, 1993 94 - 2004 , is particularly significant for it covers th