A new approach for determining minimum housing expenditures within the absolute poverty line in Italy

Abstract

The approach to measure absolute poverty adopted by the Italian National Statistics Institute (Istat) involves identifying essential needs of households and then calculate the monetary value of a basket of goods and services deemed sufficient to meet these basic needs. Such an approach needs to be revised periodically to take into account changes in basic needs and the availability of new data sources for defining needs and costs. In this paper we present a refined methodological approach to estimate housing needs, which is a relevant component to the poverty line. By using two new and reliable data sources, a census of all rental contracts as well as data on minimum heating requirements, the revised methodology enhanced poverty estimates in two ways. First, it increased the overall precision of the poverty line estimate, since the minimum housing expenditure needs were calculated using exogenous information rather than endogenous information gathered by the survey used to assess poverty condition. Second, the new data sources allowed for increased territorial detail, further factoring geographical cost-of-living differences in the estimation process.