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Dynamics of Household Assets and Income Shocks in the Long-run Process of Economic Development: The Case of Rural Pakistan

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  • Kurosaki, Takashi
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    Abstract

    In this paper, we analyze the dynamics of assets held by low-income households facing various types of income shocks in pre- and post-independence Pakistan. Focusing on the province of Khyber Pakhtunkhwa (formerly known as the North-West Frontier Province, NWFP), we first investigate the long-run data at the district level beginning from 1902. The results show that the population of livestock, the major asset of rural households, experienced a persistent decline after crop shocks due to droughts, but did not respond much to the Great Depression. In the post-independence period, crop agriculture continued to be vulnerable to natural disasters, although less substantially, while the response of livestock to such shocks was indiscernible from district-level data. To examine microeconomic mechanisms underlying such asset dynamics, we analyze a panel dataset collected from approximately 300 households in three villages in the NWFP during the late 1990s. The results show that the dynamics of household landholding and livestock is associated with a single long-run equilibrium. When human capital is included, the dynamics curve changes its shape but is not sufficiently nonlinear to produce statistically significant multiple equilibriums. The size of livestock holding was reduced in all villages hit by macroeconomic stagnation, while land depletion was reported only in a village with inferior access to markets. The patterns of asset dynamics ascertained from historical and contemporary analyses are consistent with limited but improving access to consumption smoothing measures in the study region over the century.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/25598/3/No39_dp.pdf
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    Bibliographic Info

    Paper provided by Institute of Economic Research, Hitotsubashi University in its series PRIMCED Discussion Paper Series with number 39.

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    Length: 47 p.
    Date of creation: Apr 2013
    Date of revision:
    Handle: RePEc:hit:primdp:39

    Note: Previous versions: April 15, 2013; March 17, 2013
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    Keywords: asset dynamics; natural disaster; buffer stock; poverty trap; Pakistan;

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    1. Tewodaj Mogues, 2011. "Shocks and Asset Dynamics in Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 60(1), pages 91 - 120.
    2. Michelle Adato & Michael Carter & Julian May, 2006. "Exploring poverty traps and social exclusion in South Africa using qualitative and quantitative data," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 226-247.
    3. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
    4. Indranil Dutta & James Foster & Ajit Mishra, 2011. "On measuring vulnerability to poverty," Social Choice and Welfare, Springer, vol. 37(4), pages 743-761, October.
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