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Chronic Poverty and All That: The Measurement of Poverty over Time

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  • Cesar Calvo
  • Stefan Dercon

Abstract

We explore how to measure poverty over time, by focusing on trajectories of poverty rather than poverty at a particular point in time. We consider welfare outcomes over a period in time, consisting of a number of spells. We offer a characterization of desirable properties for measuring poverty across these spells, as well as an explicit discussion of three issues. First, should there be scope for compensation so that a poor spell can be compensated for by a non-poor spell? Second, is there scope for discounting or should all spells be equally valued? Third, does the actual sequence of poor spells matter, for example whether they are consecutive or not? We offer a number of measures that implicitly offer different answers to these questions, in a world of certainty. Finally, we also offer an extension towards a forward-looking measure of vulnerability, defined as the threat of poverty over time, that incorporates risk. An application to data from Ethiopia shows that especially the assumption of compensation results in different inference on poverty.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2007-04.

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Date of creation: 01 Mar 2007
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Handle: RePEc:oxf:wpaper:wps/2007-04

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Keywords: Poverty; Chronic Poverty; Poverty Dynamics; Ethiopia;

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References

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  1. François Bourguignon & Satya Chakravarty, 2003. "The Measurement of Multidimensional Poverty," Journal of Economic Inequality, Springer, Springer, vol. 1(1), pages 25-49, April.
  2. Ligon, Ethan & Laura Schechter, 2002. "Measuring Vulnerability," Royal Economic Society Annual Conference 2002, Royal Economic Society 128, Royal Economic Society.
  3. James E. Foster, 2007. "A Class of Chronic Poverty Measures," Vanderbilt University Department of Economics Working Papers 0701, Vanderbilt University Department of Economics.
  4. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, Econometric Society, vol. 52(3), pages 761-66, May.
  5. Anand, Sudhir & Hanson, Kara, 1997. "Disability-adjusted life years: a critical review," Journal of Health Economics, Elsevier, Elsevier, vol. 16(6), pages 685-702, December.
  6. Bob Baulch & John Hoddinott, 2000. "Economic mobility and poverty dynamics in developing countries," Journal of Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(6), pages 1-24.
  7. Stefan Dercon & Cesar Calvo, 2007. "Vulnerability to Poverty," Economics Series Working Papers WPS/2007-03, University of Oxford, Department of Economics.
  8. Hans Binswanger, 1981. "Attitudes toward risk: Theoretical implications of an experiment in rural india," Artefactual Field Experiments, The Field Experiments Website 00010, The Field Experiments Website.
  9. Kai-yuen Tsui, 2002. "Multidimensional poverty indices," Social Choice and Welfare, Springer, Springer, vol. 19(1), pages 69-93.
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