Statistical Inference for the Sen-Shorrocks-Thon Index of Poverty Intensity

Abstract

The proposition of the modified Sen index (the SST index) for measuring poverty intensity represents an important advance in the literature of poverty measures. This index is useful in empirical research on income distribution and poverty because it satisfies a set of desirable properties while the Sen index and some other indices do not. This index is symmetric, monotonic, continuous, homogeneous of degree zero in incomes and the poverty line, and consistent with the transfer axiom. It also admits a useful geometric interpretation. Hence, there is a considerable interest on the part of economists to apply this measure to sample income data in order to draw valid statistical inference about poverty intensity. This paper examines the asymptotic distribution of the SST index estimator, and proposes a useful test for comparing two population SST indices over time or across states. This test can be used for evaluating the deprivation dominance relationship among income distributions.