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Convergence, Shocks and Poverty

Author

Listed:
  • Chris Elbers
  • Jan Willem Gunning
  • Bill Kinsey

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

Abstract

Using a unique panel data set for rural households in Zimbabwe we estimate amicroeconomic model of growth under uncertainty, a stochastic version of the Ramsey modelwith livestock as the single asset. We use the estimation results in simulation experiments(over a 20-year period) to quantify the importance of convergence, household fixed effectsand shocks. First, we find powerful convergence. In the absence of shocks and withouthousehold fixed effects there is rapid growth over the period (5.6% growth p.a. in percapita assets) even though there is no technical progress. The process of adjusting thecapital stock (livestock) to its steady state value is - as expected - strongly equalising:the coefficient of variation (across households) of livestock ownership falls from 78% to6%. Secondly, when we allow for household fixed effects - the case of conditionalconvergence - the aggregate growth rate is very similar but inequality remains highthroughout the period.Finally, we find that shocks have strong and persistent effects. In this model shocksaffect aggregate growth both ex ante and ex post. These effects are strong: shocks reduceaggregate growth over the period by a fifth and increase inequality substantially.

Suggested Citation

  • Chris Elbers & Jan Willem Gunning & Bill Kinsey, 2002. "Convergence, Shocks and Poverty," Tinbergen Institute Discussion Papers 02-035/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20020035
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    Citations

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    Cited by:

    1. Michael Carter & Christopher Barrett, 2006. "The economics of poverty traps and persistent poverty: An asset-based approach," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 178-199.
    2. Chris Elbers & Jan Willem Gunning, 2002. "Growth Regression and Economic Theory," Tinbergen Institute Discussion Papers 02-034/2, Tinbergen Institute.
    3. Barrett, Christopher B. & Swallow, Brent M., 2006. "Fractal poverty traps," World Development, Elsevier, vol. 34(1), pages 1-15, January.
    4. Christopher Barrett & Michael Carter & Peter Little, 2006. "Understanding and reducing persistent poverty in Africa: Introduction to a special issue," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 167-177.
    5. Christopher B. Barrett, 2005. "Rural poverty dynamics: development policy implications," Agricultural Economics, International Association of Agricultural Economists, vol. 32(s1), pages 45-60, January.
    6. Clarke, Daniel J. & Hill, Ruth Vargas, 2013. "Cost-benefit analysis of the african risk capacity facility:," IFPRI discussion papers 1292, International Food Policy Research Institute (IFPRI).

    More about this item

    Keywords

    convergence; poverty dynamics; growth under uncertainty;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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