Joint Estimation of the Characteristics and Intensity of Poverty in Spain : The Case of Imputed Rent

Abstract EN

In 2007 the Spanish National Institute of Statistics modified the methodological approach to the Survey of Income and Living Conditions and included an estimate of Imputed Rent.

It removes one of the main criticisms of Spanish poverty studies since this variable is associated with home ownership, and because more than 80% of Spanish families are homeowners, its exclusion biased the estimates of the size of Spain's poor population and poverty intensity.

We estimate a Heckman model with a selection equation in which the dependent variable is the probability of being poor, and a truncated regression to explain poverty intensity.

Our findings have at least two economic policy implications: Spanish social policy against poverty should take into account geographical differences but, at the same time, should consider Imputed Rent.

Without this variable efforts should concentrate in Spanish less developed regions and rural areas, but if we include it poverty increases in urban population.

The article has also reveals that most retired people cannot be considered poor if we take into account wealth (imputed rent included) instead of current income (pension).