Local Comparisons of Small Area Estimates of Poverty: An Application Within the Tuscany Region in Italy

The aim of this paper is to highlight some key issues and challenges in the analysis of poverty at the local level using survey data. In the last years there was a worldwide increase in the demand for poverty and living conditions estimates at the local level, since these quantities can help in planning local policies aimed at decreasing poverty and social exclusion. In many countries various sample surveys on income and living conditions are currently conducted, but their sample size is not enough to obtain reliable estimates at local level. When this happens, small area estimation (SAE) methods can be used. In this paper, a SAE model is used to compute the mean household equivalised income and the head count ratio for the 57 Labor Local Systems of the Tuscany region in Italy for the year 2011. The caveats of the analysis of poverty at the local level using small area methods are many, and some are still not so well explored in the literature, starting from the definition of the target indicators to the relevant dimensions of their measurement. We suggest in this paper that together with the universally recognized multidimensional, longitudinal and local dimensions of poverty, a new dimension must be considered: the price dimension, which should take into account local purchasing power parities to cor- rectly compare the poverty indicators based on income measures.