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Discerning Transient from Chronic Poverty in Nicaragua: Measurement with a two period panel data set

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Author Info

  • Marco Stampini
  • Benjamin Davis

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

Abstract

This paper deals with consumption dynamics and its effects on poverty. An econometric model is proposed in which changes in consumption across time are seen as fluctuations around the level of consumption that each family can sustain in the long term. The advantages of this approach are twofold. First, it allows identification of the main determinants of changes in poverty. Second, it allows distinguishing between chronic and transient poverty, by defining as chronically poor those households whose level of consumption sustainable in the long term lies below the poverty line. This definition of chronic poverty represents a change with respect to previous works on the subject, in which chronic poverty is defined with reference to the average level of consumption (or income) observed at the family level along the temporal interval of the panel. The innovation of our proposal lies in the fact that all the information from the panel data set, relative to all households, is exploited in order to identify which level of consumption each family is tending toward through time. Furthermore, our definition of chronic poverty allows one to identify four different groups of families that differ by level of observed consumption and by potential to generate income for consumption. The four groups are characterized by different incidences of chronic and transient poverty, and hence require different kinds of anti-poverty policies and public support. Data from two Living Standards Measurement Surveys (LSMS) carried out by the World Bank in Nicaragua in 1998 and 2001 are used, while accounting for potential problems of attrition.

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Bibliographic Info

Paper provided by Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA) in its series Working Papers with number 03-03.

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Length: 23 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:fao:wpaper:0303

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Related research

Keywords: Agricultural economics; Consumer expenditure; Consumer surveys; Data analysis; Econometric models; Economics; Education; Food security; Household consumption; Living standards; Nicaragua; Poverty; Rural population; Urban population;

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References

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  1. Jyotsna Jalan & Martin Ravallion, 2000. "Is transient poverty different? Evidence for rural China," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 82-99.
  2. Maria Elena Bontempi, 2002. "The dynamic specification of the modified pecking order theory: Its relevance to Italy," Empirical Economics, Springer, vol. 27(1), pages 1-22.
  3. Ravallion, Martin, 1996. "Issues in measuring and modeling poverty," Policy Research Working Paper Series 1615, The World Bank.
  4. Joan R. Rodgers & John L. Rodgers, 1993. "Chronic Poverty in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 25-54.
  5. Neil McCulloch & Bob Baulch, 2000. "Simulating the Impact of Policy upon Chronic and Transitory Poverty in Rural Pakistan," Econometrics 0004003, EconWPA.
  6. Harold Alderman & Jere R. Behrman & Hans-Peter Kohler & John A. Maluccio & Susan Watkins, 2001. "Attrition in Longitudinal Household Survey Data," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 5(4), pages 79-124, November.
  7. Sean Becketti & William Gould & Lee Lillard & Finis Welch, 1985. "The Panel Study of Income Dynamics After Fourteen Years: An Evaluation," UCLA Economics Working Papers 361, UCLA Department of Economics.
  8. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June.
  9. Ravallion, Martin, 1988. "Expected Poverty under Risk-Induced Welfare Variability," Economic Journal, Royal Economic Society, vol. 98(393), pages 1171-82, December.
  10. Neil McCulloch & Bob Baulch, 2000. "Simulating the impact of policy upon chronic and transitory poverty in rural Pakistan," Journal of Development Studies, Taylor & Francis Journals, vol. 36(6), pages 100-130.
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Cited by:
  1. R. Bruno & M. Stampini, 2007. "Joining Panel Data with Cross-Sections for Efficiency Gains: an Application to a Consumption Equation for Nicaragua," Working Papers 619, Dipartimento Scienze Economiche, Universita' di Bologna.

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