Choosing an optimal material deprivation indicator threshold

ABSTRACT

Severe material deprivation, a dimension of the poverty and social exclusion index, one of Europe 2020 Strategy headline indicators, is defined as enforced lack of at least four of nine specific items. Proposals for modifications in the indicator include the Material and Social Deprivation indicator which is based on an updated set of thirteen items, whereas the choice of the threshold was data-driven. This paper proposes a simple, yet a rigorous methodology based on the Youden index to set a threshold to classify individuals into ‘deprived’ and ‘non-deprived’ groups. Applying the Youden index to 2014–2018 EU-Statistics on Income and Living Conditions data suggests an optimal cut-off point of the value of 5. This is in line with the suggestions of the Indicators Sub-Group of the Social Protection Committee. The estimated rates of material deprivation based on the new indicator are 2.2-times higher on average than the current rate. Assuming that the newly proposed definition better reflects the true nature of deprivation in the EU, the aggregate measure of ‘at risk of poverty or social exclusion’ has been underestimated, as material deprivation is one of its three dimensions.

KEYWORDS:

• Material deprivation
• poverty
• Youden index
• EU

JEL CLASSIFICATION:

• I32
• I31

Supplemental data

Supplemental data for this article can be accessed here.

Acknowledgments

The work was supported by the Czech Science Foundation under Grant no. 18-07036S “Methodology and reality of poverty: Czech Republic in the European context”. The EU-SILC datasets were made available on the basis of contract no. 247/2019-EU-SILC-HBS between the European Commission, Eurostat, and the Institute of Sociology of the Czech Academy of Sciences. The responsibility for all conclusions drawn from the data lies entirely with the authors.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Grantová Agentura České Republiky [18-07036S].