Testing for stochastic dominance up to a common relative poverty line

Tahsin Mehdi

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Abstract

Although a wide array of stochastic dominance tests exist for poverty measurement and identification, they assume the income distributions have independent poverty lines or a common absolute (fixed) poverty line. We propose a stochastic dominance test for comparing income distributions up to a common relative poverty line (i.e., some fraction of the pooled median). A Monte Carlo study demonstrates its superior performance over existing methods in terms of power. The test is then applied to some Canadian household survey data for illustration.
Original languageEnglish
Article number5
Number of pages9
JournalEconometrics
Volume8
Issue number1
DOIs
Publication statusPublished - 11 Feb 2020

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