Advanced Search
MyIDEAS: Login to save this paper or follow this series

Sources of Income Persistence: Evidence from Rural El Salvador

Contents:

Author Info

  • Walter Sosa-Escudero

    ()
    (Universidad de San Andrés)

  • Mariana Marchionni

    ()
    (Centro de Estudios Distributivos, Laborales y Sociales (CEDLAS) - FCE - UNLP)

  • Omar Arias

    ()
    (Poverty and Gender Group of the Latin American and Caribbean Department of the World Bank)

Abstract

This paper uses a unique panel dataset (1995-2001) of rural El Salvador to investigate the main sources of the persistence and variability of incomes. First we propose an econometric framework where a general dynamic panel model is validly reduced to a simple linear structure with a dynamic covariance structure, which augments considerably the number of degrees of freedom usually lost in the construction of instruments to estimate standard dynamic panel models. Then we investigate the extent to which families are continuously poor due to endowments (observed and unobserved) that yield low income potential or due to systematic income shocks that they are unable to smooth. We find that life-cycle incomes are largely explained by the relatively time-invariant productive characteristics of families and their members such as education, public goods and other assets. Observed income determinants account for about half of income persistence. Controlling for unobserved heterogeneity leaves little room for pure state dependence. Although of second order, high volatility and the inability to insure from shocks is a more important source of variation in incomes than in developed countries. Low income potential is the more likely source of poverty traps in Rural El Salvador. Many of the family endowments are manipulable by policy interventions, although many not in the short term.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://cedlas.econo.unlp.edu.ar/archivos_upload/doc_cedlas37.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CEDLAS, Universidad Nacional de La Plata in its series CEDLAS, Working Papers with number 0037.

as in new window
Length: 34 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:dls:wpaper:0037

Contact details of provider:
Postal: Calle 48 No555 - La Plata (1900)
Phone: 21- 1466
Fax: 54-21-25-9536
Web page: http://cedlas.econo.unlp.edu.ar/
More information through EDIRC

Related research

Keywords: Income mobility; Poverty Traps; Panel Data; El Salvador;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Lanjouw, Peter, 2001. "Nonfarm Employment and Poverty in Rural El Salvador," World Development, Elsevier, vol. 29(3), pages 529-547, March.
  2. Joel L. Horowitz & Marianthi Markatou, 1993. "Semiparametric Estimation Of Regression Models For Panel Data," Econometrics 9309001, EconWPA.
  3. David Newhouse, 2005. "The Persistence of Income Shocks: Evidence from Rural Indonesia," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 415-433, 08.
  4. Jimenez-Martin, Sergi, 1998. "On the testing of heterogeneity effects in dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 58(2), pages 157-163, February.
  5. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
  6. Bera, Anil K. & Sosa-Escudero, Walter & Yoon, Mann, 2001. "Tests for the error component model in the presence of local misspecification," Journal of Econometrics, Elsevier, vol. 101(1), pages 1-23, March.
  7. Abowd, John M & Card, David, 1989. "On the Covariance Structure of Earnings and Hours Changes," Econometrica, Econometric Society, vol. 57(2), pages 411-45, March.
  8. Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
  9. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, vol. 72(1), pages 1-32, 01.
  10. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  11. Gottschalk, Peter & Moffitt, Robert A, 1994. "Welfare Dependence: Concepts, Measures, and Trends," American Economic Review, American Economic Association, vol. 84(2), pages 38-42, May.
  12. Horowitz, Joel L & Markatou, Marianthi, 1996. "Semiparametric Estimation of Regression Models for Panel Data," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 145-68, January.
  13. Francisca Antman & David McKenzie, 2007. "Poverty traps and nonlinear income dynamics with measurement error and individual heterogeneity," Journal of Development Studies, Taylor & Francis Journals, vol. 43(6), pages 1057-1083.
  14. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
  15. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  16. World Bank, 2005. "El Salvador : Poverty Assessment, Strengthening Social Policy," World Bank Other Operational Studies 8427, The World Bank.
  17. Hendry, David F & Mizon, Grayham E, 1978. "Serial Correlation as a Convenient Simplification, not a Nuisance: A Comment on a Study of the Demand for Money by the Bank of England," Economic Journal, Royal Economic Society, vol. 88(351), pages 549-63, September.
  18. Walter Sosa Escudero & Anil K. Bera, 2008. "Tests for Unbalanced Error Component Models Under Local Misspecication," CEDLAS, Working Papers 0065, CEDLAS, Universidad Nacional de La Plata.
  19. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
  20. Martin Ravallion & Shubham Chaudhuri, 1997. "Risk and Insurance in Village India: Comment," Econometrica, Econometric Society, vol. 65(1), pages 171-184, January.
  21. Milton Friedman & Simon Kuznets, 1954. "Income from Independent Professional Practice," NBER Books, National Bureau of Economic Research, Inc, number frie54-1.
  22. Jalan, Jyotsna & Ravallion, Martin, 1999. "Income gains to the poor from workfare - estimates for Argentina's TRABAJAR Program," Policy Research Working Paper Series 2149, The World Bank.
  23. Pritchett, Lant & Suryahadi, Asep & Sumarto, Sudarno, 2000. "Quantifying vulnerability to poverty - a proposed measure, applied to Indonesia," Policy Research Working Paper Series 2437, The World Bank.
  24. Holtz-Eakin, Douglas, 1988. "Testing for individual effects in autoregressive models," Journal of Econometrics, Elsevier, vol. 39(3), pages 297-307, November.
  25. Fields, Gary S. & Duval Hernández, Robert & Freije-Rodriguez, Samuel & Sanchez Puerta, Maria Laura, 2007. "Earnings Mobility in Argentina, Mexico, and Venezuela: Testing the Divergence of Earnings and the Symmetry of Mobility Hypotheses," IZA Discussion Papers 3184, Institute for the Study of Labor (IZA).
  26. Lokshin Michael & Ravallion Martin, 2004. "Household Income Dynamics in Two Transition Economies," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 8(3), pages 1-33, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ricardo N. Bebczuk, 2008. "Dolarización y Pobreza en Ecuador," CEDLAS, Working Papers 0066, CEDLAS, Universidad Nacional de La Plata.
  2. Cerro, Ana María & Ortega, Ana Carolina, 2012. "Sources of Regional Crime Persistence Argentina 1980-2008," MPRA Paper 44482, University Library of Munich, Germany.
  3. Walter Sosa Escudero, 2007. "Testing for Persistence in the Error Component Model:A One-Sided Approach," Working Papers 94, Universidad de San Andres, Departamento de Economia, revised Feb 2007.
  4. Ricardo Bebczuk & Francisco Haimovich, 2007. "MDGs and Microcredit: An Empirical Evaluation for Latin American Countries," CEDLAS, Working Papers 0048, CEDLAS, Universidad Nacional de La Plata.
  5. Maribel Jimenez & Monica Jimenez, 2009. "La Movilidad Intergeneracional del Ingreso: Evidencia para Argentina," CEDLAS, Working Papers 0084, CEDLAS, Universidad Nacional de La Plata.
  6. Walter Sosa Escudero & Anil K. Bera, 2008. "Tests for Unbalanced Error Component Models Under Local Misspecication," CEDLAS, Working Papers 0065, CEDLAS, Universidad Nacional de La Plata.
  7. Paula Giovagnoli, 2007. "Failures in school progression," CEDLAS, Working Papers 0050, CEDLAS, Universidad Nacional de La Plata.
  8. Ricardo Bebczuk, 2009. "SME Access to Credit in Guatemala and Nicaragua: Challenging Conventional Wisdom with New Evidence," CEDLAS, Working Papers 0080, CEDLAS, Universidad Nacional de La Plata.
  9. Leopoldo Tornarolli & Adriana Conconi, 2007. "Informalidad y Movilidad Laboral: Un Análisis Empírico para Argentina," CEDLAS, Working Papers 0059, CEDLAS, Universidad Nacional de La Plata.
  10. Guillermo E. Perry & Omar S. Arias & J. Humberto López & William F. Maloney & Luis Servén, 2006. "Poverty Reduction and Growth : Virtuous and Vicious Circles," World Bank Publications, The World Bank, number 6997, July.
  11. Diego Battiston & Francisco Franchetti, 2008. "Inequality in Health Coverage, Empirical Analysis with Microdata for Argentina 2006," CEDLAS, Working Papers 0063, CEDLAS, Universidad Nacional de La Plata.
  12. Mariana Marchionni & Germán Bet & Ana Pacheco, 2007. "Empleo, Educación y Entorno Social de los Jóvenes: Una Nueva Fuente de Información," CEDLAS, Working Papers 0061, CEDLAS, Universidad Nacional de La Plata.
  13. Sebastian Galiani & Federico Weinschelbaum, 2007. "Modeling Informality Formally: Households and Firms," CEDLAS, Working Papers 0047, CEDLAS, Universidad Nacional de La Plata.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dls:wpaper:0037. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Pacheco).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.