Transition Events in the Dynamics of Poverty. Calculating the Likelihood an Event Occurs

09/01/2002

The value of the estimated coefficients from the discrete-time multivariate hazard models do not have a straightforward interpretation. We can use these coefficients to determine whether an event increases or decreases an individuals' likelihood of experiencing a poverty transition, but alone, they do not provide information about the degree to which individuals are more or less likely to transition. We can, however, use these estimated coefficients and individuals' own characteristics to calculate the likelihood of entering poverty (or exiting poverty) when an event occurs. To calculate the likelihood of entering poverty with a shift from a two-adult to a female-headed household, for example, we (1) calculate each individual's estimated probability (i.e., likelihood) of entering poverty when the event is assumed to occur(20) and (2) average these estimated probabilities (i.e., likelihoods) across individuals. The average of these estimated probabilities gives the average likelihood of entering poverty when the event occurs.

We also calculate how the likelihood of entering/exiting poverty changes when the event occurs. To do this we first calculate (1) the average likelihood of entering poverty when the event occurs and (2) the average likelihood of entering poverty when the event does not occur.(21) Next, we calculate the difference between these two likelihoods, where this difference provides an estimate of how the likelihood of entering/exiting poverty changes when an event occurs. To quantify, for example, how a shift from a two-adult to a female-headed household affects poverty entries, we calculate the difference in the probability of entering poverty when the household structure shift does occur versus the probability of entering poverty when the household structure shift does not occur. This difference in the probabilities provides an estimate of how the likelihood of entering poverty changes with a shift from a two-adult to a female-headed household.

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