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“Region-specific versus country-specific poverty lines in analysis of poverty” Mogstad, et al. 2007

The authors argue that country-specific income poverty lines disregard regional differences in prices and needs within a country and may produce results that give a misleading picture of the geographic and demographic composition of the poor. The use of region-specific poverty lines would take into account these regional differences in prices and needs.

When comparing to country-specific poverty lines to regional-specific lines country lines have downward biased poverty rates in urban areas and upward biased poverty rates in rural areas as this graph demonstrates.

Despite this difference the empirical results show that the overall poverty level is not significantly affected by this alternative definition of the poverty threshold. The geographic as well as the demographic variability of poverty profiles depend heavily on whether region- or country-specific thresholds are applied.

For region specific poverty lines to be useful there must be identical prices of goods and services as well as uniform norms and consumption habits throughout regions within a given country. Using country specific poverty lines may be inappropriate if there is significant variability in the commodity requirements among regions within a given country, even if prices do not vary.

Norway is used as a case study for the comparison of country v. regional poverty lines. The article found that the poverty rates among young singles and non-western immigrants were significantly higher than what was suggested by previous empirical evidence based on country-specific poverty lines.

Magne Mogstad, Audum Langorgen, Roulf Aaberge (2007): Review essay Journal of Economic Inequality, 2007, 5: 115-122

Summary by Anita Graffius