Poverty Analysis Using an International Cross-Country Demand System

This paper proposes a new method for ex ante analysis of the poverty impacts arising from policy reforms. Three innovations underlie this approach. The first is the estimation of a global demand system using a combination of micro-data from househo...

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Main Authors:	Cranfield, J. A. L., Preckel, Paul V., Hertel, Thomas W.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	AGRICULTURAL PRODUCERS BASE YEAR CONSUMER DEMAND CONSUMER PREFERENCES CONSUMER PRICE CONSUMER PRICES CONSUMERS CONSUMPTION BUNDLE CONSUMPTION DATA CONSUMPTION LEVEL CONSUMPTION LEVELS DEMAND FOR FOOD DEVELOPING COUNTRIES DEVELOPMENT ISSUES DEVELOPMENT RESEARCH DURABLE GOODS ENGEL CURVES EXPENDITURE EXPENDITURE DATA EXPENDITURE DISTRIBUTION EXPENDITURE FUNCTION EXPENDITURE INFORMATION EXPENDITURE LEVEL EXPENDITURES FINANCIAL CRISIS FOOD EXPENDITURE FOOD EXPENDITURES FOOD PRICE FOOD PRICES FOOD PRODUCTS GDP HOUSEHOLD EXPENDITURE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD WELFARE HUMAN NEEDS INCIDENCE OF POVERTY INCOME INCOME INEQUALITY INCOME LEVELS INDEXATION INEQUALITY MEASURES INTERNATIONAL TRADE LEVEL OF POVERTY LEVELS OF CONSUMPTION LOW-INCOME HOUSEHOLDS MULTILATERAL TRADE NATIONAL LEVEL NATIONAL POPULATIONS NATIONAL POVERTY OPTIMIZATION PARTICULAR POVERTY LINE PER CAPITA CONSUMPTION PER CAPITA INCOME POLICY ANALYSIS POLICY RESEARCH POLICY RESEARCH WORKING PAPER POORER HOUSEHOLDS POVERTY ANALYSIS POVERTY GAP POVERTY LEVEL POVERTY LEVELS POVERTY LINE POVERTY LINES POVERTY MEASURE POVERTY MEASURES POVERTY RATES PRICE CHANGE PRICE CHANGES PRICE EFFECT PRICE ELASTICITY PRICE INCREASE PRICE INCREASES PRICE INFLATION PRICE LEVEL PRICE VECTOR PROGRESS RANDOM VARIABLE RESPECT RICH COUNTRIES SQUARED POVERTY GAP SUBSISTENCE SUBSTITUTION TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS USE PER CAPITA UTILITY FUNCTION UTILITY LEVEL WTO
Online Access:	http://documents.worldbank.org/curated/en/2007/07/7979280/poverty-analysis-using-international-cross-country-demand-system http://hdl.handle.net/10986/7476

id	okr-10986-7476
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repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	AGRICULTURAL PRODUCERS BASE YEAR CONSUMER DEMAND CONSUMER PREFERENCES CONSUMER PRICE CONSUMER PRICES CONSUMERS CONSUMPTION BUNDLE CONSUMPTION DATA CONSUMPTION LEVEL CONSUMPTION LEVELS DEMAND FOR FOOD DEVELOPING COUNTRIES DEVELOPMENT ISSUES DEVELOPMENT RESEARCH DURABLE GOODS ENGEL CURVES EXPENDITURE EXPENDITURE DATA EXPENDITURE DISTRIBUTION EXPENDITURE FUNCTION EXPENDITURE INFORMATION EXPENDITURE LEVEL EXPENDITURES FINANCIAL CRISIS FOOD EXPENDITURE FOOD EXPENDITURES FOOD PRICE FOOD PRICES FOOD PRODUCTS GDP HOUSEHOLD EXPENDITURE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD WELFARE HUMAN NEEDS INCIDENCE OF POVERTY INCOME INCOME INEQUALITY INCOME LEVELS INDEXATION INEQUALITY MEASURES INTERNATIONAL TRADE LEVEL OF POVERTY LEVELS OF CONSUMPTION LOW-INCOME HOUSEHOLDS MULTILATERAL TRADE NATIONAL LEVEL NATIONAL POPULATIONS NATIONAL POVERTY OPTIMIZATION PARTICULAR POVERTY LINE PER CAPITA CONSUMPTION PER CAPITA INCOME POLICY ANALYSIS POLICY RESEARCH POLICY RESEARCH WORKING PAPER POORER HOUSEHOLDS POVERTY ANALYSIS POVERTY GAP POVERTY LEVEL POVERTY LEVELS POVERTY LINE POVERTY LINES POVERTY MEASURE POVERTY MEASURES POVERTY RATES PRICE CHANGE PRICE CHANGES PRICE EFFECT PRICE ELASTICITY PRICE INCREASE PRICE INCREASES PRICE INFLATION PRICE LEVEL PRICE VECTOR PROGRESS RANDOM VARIABLE RESPECT RICH COUNTRIES SQUARED POVERTY GAP SUBSISTENCE SUBSTITUTION TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS USE PER CAPITA UTILITY FUNCTION UTILITY LEVEL WTO
spellingShingle	AGRICULTURAL PRODUCERS BASE YEAR CONSUMER DEMAND CONSUMER PREFERENCES CONSUMER PRICE CONSUMER PRICES CONSUMERS CONSUMPTION BUNDLE CONSUMPTION DATA CONSUMPTION LEVEL CONSUMPTION LEVELS DEMAND FOR FOOD DEVELOPING COUNTRIES DEVELOPMENT ISSUES DEVELOPMENT RESEARCH DURABLE GOODS ENGEL CURVES EXPENDITURE EXPENDITURE DATA EXPENDITURE DISTRIBUTION EXPENDITURE FUNCTION EXPENDITURE INFORMATION EXPENDITURE LEVEL EXPENDITURES FINANCIAL CRISIS FOOD EXPENDITURE FOOD EXPENDITURES FOOD PRICE FOOD PRICES FOOD PRODUCTS GDP HOUSEHOLD EXPENDITURE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD WELFARE HUMAN NEEDS INCIDENCE OF POVERTY INCOME INCOME INEQUALITY INCOME LEVELS INDEXATION INEQUALITY MEASURES INTERNATIONAL TRADE LEVEL OF POVERTY LEVELS OF CONSUMPTION LOW-INCOME HOUSEHOLDS MULTILATERAL TRADE NATIONAL LEVEL NATIONAL POPULATIONS NATIONAL POVERTY OPTIMIZATION PARTICULAR POVERTY LINE PER CAPITA CONSUMPTION PER CAPITA INCOME POLICY ANALYSIS POLICY RESEARCH POLICY RESEARCH WORKING PAPER POORER HOUSEHOLDS POVERTY ANALYSIS POVERTY GAP POVERTY LEVEL POVERTY LEVELS POVERTY LINE POVERTY LINES POVERTY MEASURE POVERTY MEASURES POVERTY RATES PRICE CHANGE PRICE CHANGES PRICE EFFECT PRICE ELASTICITY PRICE INCREASE PRICE INCREASES PRICE INFLATION PRICE LEVEL PRICE VECTOR PROGRESS RANDOM VARIABLE RESPECT RICH COUNTRIES SQUARED POVERTY GAP SUBSISTENCE SUBSTITUTION TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS USE PER CAPITA UTILITY FUNCTION UTILITY LEVEL WTO Cranfield, J. A. L. Preckel, Paul V. Hertel, Thomas W. Poverty Analysis Using an International Cross-Country Demand System
relation	Policy Research Working Paper; No. 4285
description	This paper proposes a new method for ex ante analysis of the poverty impacts arising from policy reforms. Three innovations underlie this approach. The first is the estimation of a global demand system using a combination of micro-data from household surveys and macro-data from the International Comparisons Project (ICP). Estimation is undertaken in a manner that reconciles these two sources of information, explicitly recognizing that per capita national demands are an aggregation of the disaggregated, individual household demands. The second innovation relates to a methodology for post-estimation calibration of the global demand system, giving rise to country-specific demand systems and an associated expenditure function which, when aggregated across the expenditure distribution, reproduce observed per capita budget shares exactly. This leads to the third innovation, which is the establishment of a unique poverty level of utility and an appropriately modified set of Foster-Greer-Thorbecke poverty measures. With these tools in hand, the authors are able to calculate the change in the head-count of poverty, poverty gap, and squared poverty gap arising from policy reforms, where the poverty measures are derived using a unique poverty level of utility, rather than an income or expenditure-based measure. They use these techniques with a demand system for food, other nondurables and services estimated using a combination of 1996 ICP data set and national expenditure distribution data. Calibration is demonstrated for three countries for which household survey expenditure data are used during estimation-Indonesia, the Philippines and Thailand. To show the usefulness of these calibrated models for policy analysis, the authors assess the effects of an assumed 5 percent food price rise as might be realized in the wake of a multilateral trade agreement. Results illustrate the important role of subsistence expenditures at lowest income levels, but of discretionary expenditure at higher income levels. The welfare analysis underscores the relatively large impact of the price hike on poorer households, while a modified Foster-Greer-Thorbecke poverty measure shows that the 5 percent price rise increases the incidence and intensity of poverty in all three cases, although the specific effects vary considerably by country.
format	Publications & Research :: Policy Research Working Paper
author	Cranfield, J. A. L. Preckel, Paul V. Hertel, Thomas W.
author_facet	Cranfield, J. A. L. Preckel, Paul V. Hertel, Thomas W.
author_sort	Cranfield, J. A. L.
title	Poverty Analysis Using an International Cross-Country Demand System
title_short	Poverty Analysis Using an International Cross-Country Demand System
title_full	Poverty Analysis Using an International Cross-Country Demand System
title_fullStr	Poverty Analysis Using an International Cross-Country Demand System
title_full_unstemmed	Poverty Analysis Using an International Cross-Country Demand System
title_sort	poverty analysis using an international cross-country demand system
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2007/07/7979280/poverty-analysis-using-international-cross-country-demand-system http://hdl.handle.net/10986/7476
_version_	1764402125460209664
spelling	okr-10986-74762021-04-23T14:02:33Z Poverty Analysis Using an International Cross-Country Demand System Cranfield, J. A. L. Preckel, Paul V. Hertel, Thomas W. AGRICULTURAL PRODUCERS BASE YEAR CONSUMER DEMAND CONSUMER PREFERENCES CONSUMER PRICE CONSUMER PRICES CONSUMERS CONSUMPTION BUNDLE CONSUMPTION DATA CONSUMPTION LEVEL CONSUMPTION LEVELS DEMAND FOR FOOD DEVELOPING COUNTRIES DEVELOPMENT ISSUES DEVELOPMENT RESEARCH DURABLE GOODS ENGEL CURVES EXPENDITURE EXPENDITURE DATA EXPENDITURE DISTRIBUTION EXPENDITURE FUNCTION EXPENDITURE INFORMATION EXPENDITURE LEVEL EXPENDITURES FINANCIAL CRISIS FOOD EXPENDITURE FOOD EXPENDITURES FOOD PRICE FOOD PRICES FOOD PRODUCTS GDP HOUSEHOLD EXPENDITURE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD WELFARE HUMAN NEEDS INCIDENCE OF POVERTY INCOME INCOME INEQUALITY INCOME LEVELS INDEXATION INEQUALITY MEASURES INTERNATIONAL TRADE LEVEL OF POVERTY LEVELS OF CONSUMPTION LOW-INCOME HOUSEHOLDS MULTILATERAL TRADE NATIONAL LEVEL NATIONAL POPULATIONS NATIONAL POVERTY OPTIMIZATION PARTICULAR POVERTY LINE PER CAPITA CONSUMPTION PER CAPITA INCOME POLICY ANALYSIS POLICY RESEARCH POLICY RESEARCH WORKING PAPER POORER HOUSEHOLDS POVERTY ANALYSIS POVERTY GAP POVERTY LEVEL POVERTY LEVELS POVERTY LINE POVERTY LINES POVERTY MEASURE POVERTY MEASURES POVERTY RATES PRICE CHANGE PRICE CHANGES PRICE EFFECT PRICE ELASTICITY PRICE INCREASE PRICE INCREASES PRICE INFLATION PRICE LEVEL PRICE VECTOR PROGRESS RANDOM VARIABLE RESPECT RICH COUNTRIES SQUARED POVERTY GAP SUBSISTENCE SUBSTITUTION TRADE LIBERALIZATION TRADE POLICY TRADE REFORMS USE PER CAPITA UTILITY FUNCTION UTILITY LEVEL WTO This paper proposes a new method for ex ante analysis of the poverty impacts arising from policy reforms. Three innovations underlie this approach. The first is the estimation of a global demand system using a combination of micro-data from household surveys and macro-data from the International Comparisons Project (ICP). Estimation is undertaken in a manner that reconciles these two sources of information, explicitly recognizing that per capita national demands are an aggregation of the disaggregated, individual household demands. The second innovation relates to a methodology for post-estimation calibration of the global demand system, giving rise to country-specific demand systems and an associated expenditure function which, when aggregated across the expenditure distribution, reproduce observed per capita budget shares exactly. This leads to the third innovation, which is the establishment of a unique poverty level of utility and an appropriately modified set of Foster-Greer-Thorbecke poverty measures. With these tools in hand, the authors are able to calculate the change in the head-count of poverty, poverty gap, and squared poverty gap arising from policy reforms, where the poverty measures are derived using a unique poverty level of utility, rather than an income or expenditure-based measure. They use these techniques with a demand system for food, other nondurables and services estimated using a combination of 1996 ICP data set and national expenditure distribution data. Calibration is demonstrated for three countries for which household survey expenditure data are used during estimation-Indonesia, the Philippines and Thailand. To show the usefulness of these calibrated models for policy analysis, the authors assess the effects of an assumed 5 percent food price rise as might be realized in the wake of a multilateral trade agreement. Results illustrate the important role of subsistence expenditures at lowest income levels, but of discretionary expenditure at higher income levels. The welfare analysis underscores the relatively large impact of the price hike on poorer households, while a modified Foster-Greer-Thorbecke poverty measure shows that the 5 percent price rise increases the incidence and intensity of poverty in all three cases, although the specific effects vary considerably by country. 2012-06-07T21:37:30Z 2012-06-07T21:37:30Z 2007-07 http://documents.worldbank.org/curated/en/2007/07/7979280/poverty-analysis-using-international-cross-country-demand-system http://hdl.handle.net/10986/7476 English Policy Research Working Paper; No. 4285 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research

Poverty Analysis Using an International Cross-Country Demand System

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