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The Journal of Economic Inequality

, Volume 16, Issue 3, pp 439–454 | Cite as

Vulnerability to poverty revisited: Flexible modeling and better predictive performance

  • Maike HohbergEmail author
  • Katja Landau
  • Thomas Kneib
  • Stephan Klasen
  • Walter Zucchini
Open Access
Article

Abstract

This paper analyzes several modifications to improve a simple measure of vulnerability as expected poverty. Firstly, in order to model income, we apply distributional regression relating potentially each parameter of the conditional income distribution to the covariates. Secondly, we determine the vulnerability cutoff endogenously instead of defining a household as vulnerable if its probability of being poor in the next period is larger than 0.5. For this purpose, we employ the receiver operating characteristic curve that is able to consider prerequisites according to a particular targeting mechanism. Using long-term panel data from Germany, we build both mean and distributional regression models with the established 0.5 probability cutoff and our vulnerability cutoff. We find that our new cutoff considerably increases predictive performance. Placing the income regression model into the distributional regression framework does not improve predictions further but has the advantage of a coherent model where parameters are estimated simultaneously replacing the original three step estimation approach.

Keywords

Vulnerability to poverty Distributional regression Generalized additive model for location Scale and shape Receiver operating characteristic curve 

Notes

Acknowledgments

We thank two anonymous referees and Stephen Jenkins for helpful comments on earlier versions of this paper. We are grateful for funding from the Ministry of Science and Culture (Lower Saxony).

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© The Author(s) 2018

Open AccessThis article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

Authors and Affiliations

  1. 1.Chair of StatisticsUniversity of GoettingenGoettingenGermany
  2. 2.Chair of Development EconomicsUniversity of GoettingenGoettingenGermany

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