The purpose of this paper is to identify the main determinants of the probability of a household being poor, middle class, or rich.
A new and integrated approach to the measurement of inequality in income distribution, poverty, and richness was recently proposed. Based on that approach and considering data for the Portuguese economy, the authors estimate a multinomial model in order to identify the main determinants of the probability of a household being poor, middle class, or rich using a set of characteristics of the households and the household's individual of reference as explanatory variables.
The evidence obtained indicates that: the determinants of poverty and richness are similar in qualitative terms; and household type, main source of income, education, and labor market state are the most important factors explaining these phenomena.
Following a methodology recently proposed by Crespo et al. toward an integrated measurement of inequality, poverty, and richness, the present study contributes to this line of research by using a micro‐econometric model applied to the Portuguese economy in order to identify the determinants of poverty and richness.