On the contribution of the three I's of poverty to chronic and transitory poverty

This paper uses the Watts poverty index in order to derive a breakdown of poverty into chronic and transitory poverty. Following a paper by Chakravarty et al. (2008), we then suggest a new decomposition of these two components. Using the new decomposition, we are able to analyze the contribution of the "three I's of poverty" (see, Jenkins and Lambert, 1997), the incidence of poverty (i.e. the head count ratio), intensity (depth) of poverty (i.e. the Watts poverty gap ratio) and inequality among the poor (i.e. the mean logarithm deviation index of income inequality among the poor) to chronic and transitory poverty. An empirical illustration is also presented, based on a panel built by the Central Bureau of Statistics in Israel on the basis of administrative data during the period 1995-2006. The results show that chronic poverty is 57% of total poverty, and is affected more by the intensity (depth) of poverty than by inequality among the poor, while transitory poverty is roughly equally affected by the three I's of poverty.