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

In 2007 the Spanish National Institute of Statistics modified the methodologicalapproach to the Survey of Income and Living Conditions and included an estimate of ImputedRent. It removes one of the main criticisms of Spanish poverty studies since this variable isassociated with home ownership, and because more than 80% of Spanish families arehomeowners, its exclusion biased the estimates of the size of Spain's poor population andpoverty intensity. We estimate a Heckman model with a selection equation in which thedependent variable is the probability of being poor, and a truncated regression to explainpoverty intensity. Our findings have at least two economic policy implications: Spanish socialpolicy 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 lessdeveloped 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 intoaccount wealth (imputed rent included) instead of current income (pension)