A Review of Stochastic Dominance Methods for Poverty Analysis

Download or read book A Review of Stochastic Dominance Methods for Poverty Analysis written by César García-Gómez and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stochastic dominance techniques have been mainly employed in poverty analyses to overcome what it is called the multiplicity of poverty indices problem. Moreover, in the multidimensional context, stochastic dominance techniques capture the possible relationships between the dimensions of poverty as they rely upon their joint distribution, unlike most multidimensional poverty indices, which are only based on marginal distributions. In this paper, we first review the general definition of unidimensional stochastic dominance and its relationship with poverty orderings. Then we focus on the conditions of multivariate stochastic dominance and their relationship with multidimensional poverty orderings, highlighting the additional difficulties that the multivariate setting involves. In both cases, we focus our discussion on first- and second-order dominance, though some guidelines on higher order dominance are also mentioned. We also present an overview of some relevant empirical applications of these methods that can be found in the literature in both univariate and multivariate contexts.