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Satya R. Chakravarty and Nachiketa Chattopadhyay

Poverty alleviation still occupies a top position in many countries’ economic and political agendas. Although income has a central role in defining poverty and well-being, poverty should, more generally, be framed as a multidimensional phenomenon. Examples of these dimensions are housing, literacy and life expectancy. The scope of this chapter is to present a discussion on the axiomatic approach to the measurement of multidimensional poverty and material deprivation, where the former should encompass all dimensions of well-being, while the latter concerns only the functioning failures related to material living conditions. The chapter ends with a discussion of the main indices proposed in the literature on the measurement of these phenomena.

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Carlos Gradín, Olga Cantó and Coral del Río

In this chapter, we review the empirical literature on poverty over time that, since the end of the 1970s, has tried to find adequate answers to three main issues. The first is to provide an adequate measure of total inter-temporal poverty observed along a given time span in order to measure the relevance of chronic and transitory poverty. The second issue is to identify the main characteristics associated with each inter-temporal poverty type, its major determinants and consequences on individual well-being. Finally, a third key question is to identify which are the most effective policies in fighting against the poverty phenomenon by adequately focusing each alleviating policy on the individuals with a particular time poverty profile.

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Michael Hoy and Buhong Zheng

Historically, the measurement of poverty has been based on a set of key axioms but limited to a static framework. Features such as multidimensionality and the time factor have only recently been incorporated into poverty measurement. Several alternative approaches have been proposed. This chapter presents a review of the literature that proposes how to conceptualize or develop specific measures of inter-temporal or lifetime poverty, addressing measurement issues, alternative perspectives on frequency, and concerns about data availability. Reflecting this budding literature, the chapter presents alternative axioms that have been proposed to capture the various approaches to inter-temporal or lifetime poverty. A variety of combinations and alternative formulations of these axioms is considered. Concluding remarks underline the need for further research and focus on the role of empirical analysis in shedding light on issues such as mitigation and chronic poverty.

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Paolo Verme

The chapter provides a review of the empirical literature in economics that has attempted to test the relative income hypothesis as put forward by Duesemberry (1949) and the relative deprivation hypothesis as formalized by Runciman (1966). It is argued that these two hypotheses and the empirical models used to test these two hypotheses are essentially similar and make use of the same relative income concept. The review covers the main intellectual contributions that led to the formulation and tests of these hypotheses, the main formulations of the utility and econometric equations used in empirical studies, the main econometric issues that complicate the testing of the hypotheses, and the empirical results found in the literature. The majority of studies use absolute and relative income together as explanatory factors in utility models and find absolute income to have a positive and significant effect on utility (happiness). The majority of studies also find relative income to be a significant factor in explaining utility, but the sign of this relation varies across studies. The source of this variation is complex to detect because very few results are directly comparable across studies due to differences in model specifications.

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Lucio Esposito

The concepts of relative deprivation and relative satisfaction, as opposed to inequality, can refer not only to a set of individuals, but also to single individuals. The interest in these concepts is thus motivated by the desire to obtain indicators at the individual level. The chapter starts by presenting evidence of the academic interest in these topics and reviewing the main theoretical models developed, adopting a relativistic specification of utility. It then moves on to the issue of measurement. Different approaches to measurement are introduced. The main indices proposed by the literature and extensions to a dynamic setting are illustrated, and the concept of the reference group is analysed. Concluding remarks focus on the importance of acknowledging interpersonal comparison effects and introducing relativist concerns in models aimed at explaining a wide range of social phenomena.

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Ricardo Mora and Jacques Silber

This chapter attempts to review the empirical literature covering various aspects of segregation: residential segregation by race or income, occupational segregation by gender and race, and ethnic group and school segregation. Given the huge number of studies covering these different facets of segregation, this chapter presents a more detailed survey of school than of occupational or residential segregation, and its main focus is on the United States, although findings concerning occupational or residential segregation in other parts of the world are also mentioned. Special attention is given to two topics: the difficulty of evaluating the impact of school desegregation policies, and the specificity of residential segregation measurement which requires the use of spatial indices.

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Oscar Volij

Segregation and the study of its effects on socioeconomic variables has increasingly become an object of interest for economists. The multifaceted nature of the concept of segregation has led to the development of numerous indices which have tried to capture its different aspects. This chapter surveys the segregation literature focusing on axiomatic models. The axiomatic approach, by emphasizing the essential properties that the various measures share and those on which they differ, can help researchers to select the segregation indices that best fit their purposes. After presenting the basic notation, the chapter introduces the Lorenz segregation ordering on two-group cities and the four basic properties it satisfies. Examples of segregation indices are then illustrated. Additional axioms that segregation indices may satisfy, and some characterization results, are also presented. Finally, the case of variable number of groups is analysed and a further characterization theorem is formulated.

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Bea Cantillon, András Gábos, Tim Goedemé and Ist ván György Tóth

This chapter reviews some of the empirical trends in social exclusion in Europe. Particular attention is paid to European Union (EU) social indicators that are meant to measure social exclusion, as they often play a central role in policy evaluation. The chapter focuses on some of these measures, namely the at-risk-of-poverty indicator, the share of jobless households, and material deprivation. The authors analyse their trends and levels, as well as their interactions and overlap (from both a cross-sectional and a longitudinal perspective. Finally, the authors investigate the link of these indicators with employment and redistribution, which are central items for policy making related to social exclusion in the EU. The review suggests that trends and levels in social exclusion were disappointingly far from the policy goals set by the EU, and have worsened as a result of the financial crisis.

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Luna Bellani and Alessio Fusco

This chapter reviews the theoretical approaches to social exclusion, which is a concept referring to a state of multidimensional disadvantage but also to the process through which an individual progressively becomes marginalized in a society. After explaining the context in which this concept emerged in the European Union, the sociological approaches are explained, followed by the axiomatic approach drawn from economics. Finally, the authors conclude by providing a comparison of the concept of social exclusion with that of income poverty.

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Indranil Dutta and Gaston Yalonetzky

The notion of social inequality lends itself to different understandings. One of them is the measurement of inequality over non-monetary dimensions of well-being. The companion Chapter 17 in this Handbook by Lasso de la Vega discusses theoretically the methods to measure inequality when variables are ordinal, and the methods for inequality measurement with bounded continuous variables. The present authors provide empirical illustrations of research implementing this method. Another understanding of social inequality refers to inequality in an indicator of interest between or across socioeconomic groups. The authors explore several methods proposed for this latter purpose and provide empirical illustration.