The Poisson Method of Poverty Measurement Using Non-monetary Indicators: A Replication Study Based on Australian Data

Abstract

AbstractThis study revisits the Poisson-based framework to derive optimal thresholds of relative deprivation in the Australian context. Poverty measurement in developed countries mainly relies upon household income to capture those who are poor from the rest of the population. However, there is a growing recognition that the non-monetary indicators of relative deprivation can significantly improve the identification of those living in poverty. Relative deprivation is typically operationalised as not being able to afford and obtain a list of items that are considered essential in a given society. The key advantage of using such non-monetary indicators relates to its ability to directly capture the manifestations of poverty and assess people’s living standards. Yet, one salient issue is the selection of a meaningful threshold from which the deprived and the non-deprived can be separated. Following on Babones et al. (Babones et al. Social Indicators Research 126:711–726, 2016), this study replicates the Poisson method to specify an appropriate threshold value (k)—the number of missing essential items—that defines a person or household as deprived in Australia. Based on data from the 2018 Household, Income and Labour Dynamics in Australia (HILDA) survey, thresholds of k ≥ 4 for non-possession (merely lacking items), k ≥ 3 for derived deprivation (lacking and not being able to afford items), and k ≥ 3 for inferred deprivation (lacking and regarding items as essential) are suggested, respectively.