Inequality and Poverty

Search Inequality & Poverty

Researchers confront several methodological decisions when measuring inequality and/or poverty. We recognise that users of the LIS microdata make varied choices, depending on the purpose of their individual projects. However, in order to create standardised indicators, we have adopted a set of practices for the LIS Inequality and Poverty Key Figures which are described here.

Population Coverage

All surveyed households and their members are included in our estimates of Gini and Atkinson coefficients, percentile ratios, and poverty lines. Poverty lines are calculated based on the total population. Those lines are then used to calculate poverty rates among subgroups (children and the elderly). Thus, when calculating poverty rates, the subgroups vary, but the poverty lines remain constant within any given dataset.

Income Concept

All Key Figures use the LIS data on disposable household income. For more information on the components of income included in this measure, see the Variable Definition List at LIS Documentation.

Equivalence Scale

Throughout the Key Figures, we use equivalised income. For the Inequality and Poverty Key Figures, equivalised income is equal to unadjusted household income (DHI) divided by the square root of the number of household members (NHHMEM) (Equivalised Income = DHI/√NHHMEM). All members of a given household have the same equivalent income, regardless of age, gender, or relationship to the household head.

Weighting

We use person-level adjusted weights when generating income indicators for the total population (HWGT*NHHMEM) . When computing the poverty rate among children, we construct a child weight by multiplying the household weight by the number of household members under the age of eighteen (HWGT*NHHMEM17). When computing the rate of poverty among the elderly, an elderly weight is constructed using the number of household members aged 65 and older ((HWGT*NHHMEM65).

Bottom- and Top-Coding

Although LIS does not apply bottom- or top-coding to the microdatasets themselves, we bottom-and top-code income when creating the Key Figures. Data are bottom-coded at 1% of equivalised mean income and top-coded at 10 times the median of non-equivalised income.

Missing Values and Zero Incomes

All households where disposable income (DHI) is missing or exactly equal to zero are excluded from the Key Figures.

Treatment of Currency

Note that, in the Key Figures, median and mean equivalised income are expressed in the units of national currency that were in use at the time of data collection. Please see LIS Datasets Information to properly interpret the Key Figures.