Measuring poverty using both income and wealth: A cross-country comparison between the U.S. and Spain

In this paper we study the correspondence between a household’s current income and its vulnerability to income shocks in two developed countries: the U.S. and Spain. Vulnerability is measured by the availability of wealth type resources to smooth consumption in a multidimensional approach to measuring poverty, which allows us to identify three groups of households. First, the twice-poor group which includes income-poor households who also lack of an adequate stock of wealth; second, the group of protected-poor households, which are all those income-poor families that have accumulated a buffer stock of wealth resources they can rely on; lastly, the vulnerable-non-poor group, which includes those households above the income-poverty line that do not hold any stock of wealth. The latter are, out of the group of non-poor, those who are more likely to be pushed into economic deprivation in times of economic hardship. Interestingly, the risk of belonging to one of these groups changes over the life-cycle in both countries while the size of the groups differs significantly between Spain and the U.S., although this result is quite sensible to whether one includes the housing wealth component in the wealth measure or not.