Decomposing permanent and transitory poverty

This paper proposes a new method of calculating the proportion of permanently impoverished persons among persons in poverty as a whole. The paper shows that the widely used Shorrocks-Index for decomposing permanent and transitory inequality can also be acquired to describe poverty. This method overcomes certain difficulties involved in the methods of Rodgers & Rodgers (1993). The characteristics of the proposed Poverty-Stability-Index allow for an intuitive differentiation between the relative sizes of permanent and transitional poverty. Empirical results using data from the German Socio-Economic Panel (GSOEP) will be presented for East- and West-Germany.