Weighting the Weight of Weighting: the Implications of Using Different Poverty Measures and Household Equivalence Scales for Welfare Assessments in Ro
Weighting the Weight of Weighting: the Implications of Using Different Poverty Measures and Household Equivalence Scales for Welfare Assessments in Ro

Summary/Abstract: The purpose of the present paper is to shed light on some implications of using direct versus indirect poverty measures and standard household equivalence scales for the analysis of poverty and social exclusion in Romania. The argumentation builds on the study of Éltető and Havasi (2002), who investigated the effects of introducing the modified OECD equivalence scale (recommended by EUROSTAT) for poverty estimates in Hungary. For Romania, similar critiques of the modified OECD scale had been traced by Molnar (1999) and Teşliuc et. al. (2003). Given the structure of household expenditures in Romania, the high costs of raising children and the small value of state transfers for children and the family, it can be said that the weight assigned to children by the modified OECD scale is too small and leads to an inaccurate picture on the configuration of poverty. On the basis of statistical analyses performed upon the 2003 World Bank poverty assessment report dataset, it is argued that the application of the modified OECD equivalence scale is highly likely to underestimate the poverty rate in Romania, especially among the households with two or more children. Although the initial OECD scale shows a relatively lower poverty rate of households with elderly members, these rates approximate better the results of previous researches than those of the modified OECD scale. The methodological choice for using indicators of household consumption or income should be carefully grounded, given that correlations between these two indicators are rather weak. Whereas both relative measures based on income (excluding the value of goods produced for household consumption) and those based on consumption indicate poverty rates higher than 25%, only 15% of the households fall below both poverty thresholds.

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