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The Measurement Of Poverty With Geographical And Intertemporal Price Dispersion: Evidence From Rwanda

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Christophe Muller

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Abstract

It is not known to what extent welfare measures result from seasonal and geographical price differences rather than from differences in living standards across households. Using data from Rwanda in 1983, we show that the change in mean living standard indicators caused by local and seasonal price deflation is moderately significant at every quarter. By contrast, the differences in poverty measures caused by this deflation can be considerable, for chronic as well as transient or seasonal poverty indicators. Thus, poverty monitoring and anti-poverty targeting can be badly affected by inaccurate deflation of living standard data. Moreover, when measuring seasonal poverty, the deflation based on regional prices instead of local prices only partially corrects for spatial price dispersion. Using annual local prices instead of quarterly local prices only yields a partial deflation, which distorts the measure of poverty fluctuations across seasons and biases estimates of annual and chronic poverty. Copyright 2008 The Authors.

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File URL: http://www.blackwell-synergy.com/links/doi/10.1111/j.1475-4991.2007.00258.x/enhancedabs
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Article provided by Blackwell Publishing in its journal Review of Income and Wealth.

Volume (Year): 54 (2008)
Issue (Month): 1 (03)
Pages: 27-49
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Handle: RePEc:bla:revinw:v:54:y:2008:i:1:p:27-49

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  1. Muller, Christophe, 2002. "Prices and living standards: evidence for Rwanda," Journal of Development Economics, Elsevier, vol. 68(1), pages 187-203, June. [Downloadable!] (restricted)
  2. Tang, D.P. & Wang, P., 1993. "On Relative Price Variability and Hyperinflation," Papers 5-93-5, Pennsylvania State - Department of Economics.
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  3. Deaton, A., 1990. "Price Elasticities From Surveys Data: Extensions And Indonesian Results," Papers 69, World Bank - Living Standards Measurement.
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  4. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-30, June. [Downloadable!] (restricted)
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  5. Deaton, Angus, 1998. "Getting Prices Right: What Should Be Done?," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 37-46, Winter. [Downloadable!] (restricted)
  6. Angus Deaton & Alessandro Tarozzi, 2000. "Prices and poverty in India," Working Papers 213, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies.. [Downloadable!]
  7. Ravallion, Martin, 1988. "Expected Poverty under Risk-Induced Welfare Variability," Economic Journal, Royal Economic Society, vol. 98(393), pages 1171-82, December. [Downloadable!] (restricted)
  8. Domberger, Simon, 1987. "Relative Price Variability and Inflation: A Disaggregated Analysis," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 547-66, June. [Downloadable!] (restricted)
  9. Clark, Stephen & Hemming, Richard & Ulph, David, 1981. "On Indices for the Measurement of Poverty," Economic Journal, Royal Economic Society, vol. 91(362), pages 515-26, June. [Downloadable!] (restricted)
  10. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
  11. Howes, Stephen & Lanjouw, Jean Olson, 1998. "Does Sample Design Matter for Poverty Rate Comparisons?," Review of Income and Wealth, Blackwell Publishing, vol. 44(1), pages 99-109, March.
  12. Danziger, Leif, 1987. "Inflation, Fixed Cost of Price Adjustment, and Measurement of Relative-Price Variability: Theory and Evidence," American Economic Review, American Economic Association, vol. 77(4), pages 704-13, September. [Downloadable!] (restricted)
  13. Deaton, A. & Zaidi, S., 1999. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," Papers 192, Princeton, Woodrow Wilson School - Development Studies.
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  14. Lipton, Michael & Ravallion, Martin, 1993. "Poverty and policy," Policy Research Working Paper Series 1130, The World Bank. [Downloadable!]
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    • Lipton, Michael & Ravallion, Martin, 1995. "Poverty and policy," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 41, pages 2551-2657 Elsevier. [Downloadable!] (restricted)
  15. Stevens, Ann Huff, 1994. "The Dynamics of Poverty Spells: Updating Bane and Ellwood," American Economic Review, American Economic Association, vol. 84(2), pages 34-37, May. [Downloadable!] (restricted)
  16. Christophe Muller, 2004. "The Valuation Of Non-Monetary Consumption," Working Papers. Serie AD 2004-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  17. Kakwani, Nanak & Hill, Robert J., 2002. "Economic theory of spatial cost of living indices with application to Thailand," Journal of Public Economics, Elsevier, vol. 86(1), pages 71-97, October. [Downloadable!] (restricted)
  18. Grootaert, Christiaan & Kanbur, Ravi, 1994. "A New Regional Price Index for Cote d'Ivoire Using Data from the International Comparisons Project," Journal of African Economies, Oxford University Press, vol. 3(1), pages 114-41, April.
  19. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July. [Downloadable!] (restricted)
  20. Ravallion, Martin & Bidani, Benu, 1994. "How Robust Is a Poverty Profile?," World Bank Economic Review, Oxford University Press, vol. 8(1), pages 75-102, January.
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  21. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June. [Downloadable!] (restricted)
  22. Chakravarty, Satya R., 1983. "A new index of poverty," Mathematical Social Sciences, Elsevier, vol. 6(3), pages 307-313, December. [Downloadable!] (restricted)
  23. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May. [Downloadable!] (restricted)
  24. Andre, Catherine & Platteau, Jean-Philippe, 1998. "Land relations under unbearable stress: Rwanda caught in the Malthusian trap," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 1-47, January. [Downloadable!] (restricted)
  25. Muellbauer, John, 1974. "Inequality Measures, Prices and Household Composition," Review of Economic Studies, Blackwell Publishing, vol. 41(4), pages 493-504, October. [Downloadable!] (restricted)
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