International evidence on the impact of transfers and taxes on alternative poverty indexes

Changes in the headcount rate are the standard metric for gauging how public transfers and taxes affect poverty. An alternative strategy is to rely on distribution-sensitive indexes (Sen. 1976, 1981). How would the measured impacts of policy change if such ail approach were used? This study provides new empirical evidence based on Luxembourg Income Study data for 17 countries. Poverty is measured using three indexes from the class developed by Foster et al. (1984). one of which is the headcount rate. Estimates of the policy impacts are obtained by computing index values with before- and after-policy income. Evidence is also provided on the determinants of cross-country differences in index values and policy effectiveness. (C) 2003 Elsevier Inc. All rights reserved.