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How Poverty Indicators Confound Poverty Reduction Evaluations: The Targeting Performance of Income Transfers in Europe

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Abstract

This paper investigates whether two popular poverty indicators, namely income poverty and material deprivation, reach similar conclusions about the poverty reduction effects of income transfers. Such evaluations generally use income poverty. It is well-known, however, that poverty indicators regularly disagree about a person’s poverty status. What is less known is whether such disagreement also confounds estimates of a program’s poverty reduction effects. This paper compares the targeting performance of social assistance, housing and family transfers in countries with different welfare states namely Germany, France, Ireland, the Netherlands, Sweden and the United Kingdom. It finds that a transfer’s targeting performance does not differ much when defining the transfer’s target group either as the poorest income quintile or the poorest material deprivation quintile. Yet, when combining the information from both indicators, transfers appear much more effective in reaching those groups that both poverty indicators identify as part of the target group. Transfers also appear much more efficient in excluding non-target populations. For the groups on which the poverty indicators disagree, more analysis is needed. Triangulation between poverty indicators thus improves the validity of program evaluations as it enables a better separation between (potential) poverty measurement issues and the measurement of a program’s (potential) effects.

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Notes

  1. This paper does not isolate the effect of transfers from other factors influencing well-being such as skills, behaviour or help received from others.

  2. Groups E and F are also called the ‘consistent poor’. Nolan and Whelan use this concept (starting with 1996).

  3. Decanq et al. (2013) and Eurostat provide more information about the EU-SILC (http://epp.eurostat.ec.europa.eu/portal/page/portal/microdata/eu_silc).

  4. For this analysis, the ‘ability to make ends meet’ indicator was sufficient. In some cases, I found that pre-transfer income was additionally needed to identify higher deprivation quintiles.

  5. Table 1 lists the population shares of the target groups (overlap between the poorest 20%) for the total household population.

  6. The French allowance only applies as of the second child (Online Appendix 3).

  7. Material deprivation information should not be used to determine program eligibility because it can easily be manipulated by prospective beneficiaries (Marlier et al. 2007).

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Acknowledgments

This EU-SILC approved research project was undertaken under affiliation with the Maastricht Graduate School of Governance at Maastricht University. It also contributes to the Social Policy and Innovation (ImPRovE) project, which benefited from financial support by the European Union’s Seventh Framework Programme (FP7/2012–2016) under grant agreement no 290613. I would like to thank four anonymous reviewers, Tim Goedemé, John Hills, Denis de Crombrugghe, the participants to the UNU-Merit-MGsoG lunch seminar (University of Maastricht 1 May 2012) and the CSB-lunch seminar (University of Antwerp 9 May 2012) for their valuable feedback and assistants Ainslie Cruickshank, Kirsten Davis and Khadidiatou Sy for their contributions.

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  1. Graduate School of Public and International Affairs, University of Ottawa, 120 University, Ottawa, ON, K1N 6N5, Canada

    Geranda Notten

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Correspondence to Geranda Notten.

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Notten, G. How Poverty Indicators Confound Poverty Reduction Evaluations: The Targeting Performance of Income Transfers in Europe. Soc Indic Res 127, 1039–1056 (2016). https://doi.org/10.1007/s11205-015-0996-4

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