Do Income Surveys Overestimate Poverty in Western Europe? Evidence from a Comparison with Institutional Frameworks

Abstract

Comparative poverty research flourishes, especially since comparable income data are easily available through the Luxembourg Income Study. However, widely-used income surveys suffer from a number of methodological pitfalls for comparative poverty research. This research report uses the data available in the Luxembourg Income Study for three countries — Germany, Sweden and the United Kingdom — to exemplify the limited comparability of widely-used income data used in poverty research. In a simple simulation exercise, entitlements to means-tested benefits are imputed for each household in the sample, based on the institutional regulations in each country. Compared to actual poverty rates in the original sample, imputed poverty rates are markedly smaller, if not reduced to zero. Even if one accounts for an incomplete take-up of benefits, a large gap between actual and simulated poverty rates still remains, largely caused by problems in survey design. The paper concludes with a number of recommendations for improving income surveys from the perspective of comparative poverty research.