Abstract

Our paper contains an investigation on poverty based on the absolute approach. In doing so, different price levels are taken into account, emphasising the possible effects of different costs of living in various geographical areas. For Italy, this issue seems crucial, considering dramatic economic gaps between Northern and Southern areas. Yet, there is few data available, so that only a pioneering study can carried out. Therefore, we estimate absolute poverty thresholds both for regions and macro areas. The analysis is based on consumption data from ISTAT expenditures survey. Our reasoning why we use consumption data, even though in some cases income seems more appropriate, is to present poverty estimates comparable with official statistics for Italy. General results show a partial narrowing in the geographical gap in favour of the South, with respect to traditional approaches; indeed, inequalities between regions could turn out to be less obvious by considering different cost of living indices than it is the case if the same level of prices is used. The analysis is performed using several indicators (i.e. head-count, poverty gap and Sen index). Moreover, a logit regression is conducted to show that, if regional thresholds are used, geographical dummies become not significantly different from 0 in explaining poverty rates, whereas the relevance of other socio-economic aspects increases. Finally, we show how results can change if we remove the specific hypotheses here considered in the estimation of poverty thresholds.