.- help for ^povdeco5^ .-Poverty indices, with decomposition by subgroup --------------------------------------------------

^povdeco5^ varname [ [^fw^eights ^aw^eights] ^if^ exp ^in^ range], ^pl^ine^(^#^)^ ^varpl^(^zvar^) [^by^group^(^groupvar^)^]

Mandatory --------- The user must supply the poverty line value(s), either as a single number # in ^pl^ine^(^#^)^, or provide the variable name containing the values as zvar in ^varpl^(^zvar^). See Note below for details. The Description implicitly discusses the first case.

Options ------- ^by^group^(^groupvar^)^ requests poverty decompositions by population subgroup, with subgroup membership summarized by groupvar.

Saved results ------------- S_FGT0 FGT(0), defined below S_FGT1 FGT(1), defined below S_FGT2 FGT(2), defined below

Examples -------- . ^povdeco5 y [w=wgtvar], pl(100)^ . ^povdeco5 y, by(famtype) pl(100)^ . ^povdeco5 x, by(famtype) varpl(z)^ . ^povdeco5 y if sex==1, pl(100)^

Description -----------

^povdeco5^ estimates three poverty indices from the Foster, Greer and Thorbecke (1984) class, FGT(a), plus related statistics (such as mean income amongst the poor). FGT(0) is the headcount ratio (the proportion poor); FGT(1) is the average normalised poverty gap; FGT(2) is the average squared normalised poverty gap. The larger a is, the greater the degree of `poverty aversion' (sensitivity to large poverty gaps). Optionally provided are decompositions of these indices by population subgroup. Poverty decompositions by subgroup are useful for providing poverty `profiles' at a point in time, and for analyzing secular trends in poverty using shift-share analysis. Unit record (`micro' level) data are required.

^povdeco5^ is for use with Stata versions 5 to 8.1. Use ^povdeco^ with Stata versions 8.2 onwards.

Detailed description --------------------

Consider a population of persons (or households ...), i = 1,...,n, with income y_i, and weight w_i. Let f_i = w_i/N, where i=n N = SUM(w_i). When the data are unweighted, w_i = 1 and N = n. i=1 The poverty line is z, and the poverty gap for person i is max(0, z-y_i). Suppose there is an exhaustive partition of the population into mutually-exclusive subgroups k = 1,...,K.

The FGT class of poverty indices is given by i=n FGT(a) = SUM (f_i).(I_i).[(z-y_i)/z)]^^a i=1

where I_i = 1 if y_i < z and I_i = 0 otherwise.

Each FGT(a) index can be additively decomposed as

k=K FGT(a) = SUM (v_k).[FGT_k(a)] k=1

where v_k = N_k/N is the number of persons in subgroup k divided by the total number of persons (subgroup population share), and FGT_k(a), poverty for subgroup k, is calculated as if each subgroup were a separate population. Also displayed when subgroup decompositions requested, for each k, are: subgroup poverty 'share', S_k = v_k.FGT_k(a)/FGT(a), and subgroup poverty 'risk', R_k = FGT_k(a)/FGT(a) = S_k/v_k.

Note on poverty line specification ---------------------------------- Typically one's data are in one of two forms. Either (1) the money incomes for each unit i, x_i, are equivalised using an equivalence scale factor, m_i, so that y_i = x_i/m_i, and the poverty line is a single (common) value, in the same units as equivalised income, z. Or (2) incomes are not equivalised, but there are different poverty lines depending on (for example) household type. Suppose the line for unit i is z_i. Observe that if z_i = z.m_i, FGT poverty index calculations based on {y_i,z} give exactly the same answers as calculations based on {x_i,z_i}, i=1,...,n. For case (1), use pl(#) to specify the poverty line. For case (2), use varpl(zvar) to specify the poverty lines.

Author ------ Stephen P. Jenkins <stephenj@@essex.ac.uk> Institute for Social and Economic Research University of Essex, Colchester CO4 3SQ, U.K.

NB minor fix in February 2001 so that compatible with Stata 7. [Still runs with Stata 5 and Stata 6.]

Reference ---------- Foster, J.E., Greer, J., and Thorbecke, E., (1984). "A class of decomposable poverty indices", Econometrica, 52, 761-766. Also see -------- ^inequal^ (sg30: STB-23) if installed; ^rspread^ (sg31: STB23) if installed ^ineqdeco^ if installed; ^sumdist^ if installed; ^poverty^ if installed