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Determinants of transient and chronic poverty : evidence from rural China

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  • Jalan, Jyotsna
  • Ravallion, Martin

Abstract

Are the determinants of chronic and transient poverty different? Do policies that reduce transient poverty also reduce chronic poverty? The authors decompose measures of household poverty into chronic and transient components and use censored conditional quantile estimators to investigate the household and geographic determinants of both chronic and transient poverty, taking panel data for post-reform rural China. They find that a household's average wealth holding is an important determinant for both transient and chronic poverty. Although household demographics, levels of education, and the health status of members of the households are important for chronic poverty, they are not significant determinants of transient poverty. Both chronic and transient poverty are reduced by greater command over physical capital, and life-cycle effects for the two types of poverty are similar. But there the similarities end. Smaller and better-educated households have less chronic poverty, but household size and level of education matters little for transient poverty. Living in an area where health and education are better reduces chronic poverty but appears to be irrelevant to transient poverty. Nor are higher foodgrain yields a significant determinant of transient poverty, although they are highly significant in reducing chronic poverty. These findings suggest that China's poor-area development program may be appropriate for reducing chronic poverty but is likely to help reduce variations in consumption that households typically face in poor areas -- the exposure to uninsured income risk that underlies transient poverty will probably persist. Other policy instruments may be needed to deal with transient poverty, including seasonalpublic works, credit schemes, buffer stocks, and insurance options for the poor.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1936.

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Date of creation: 30 Jun 1998
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Handle: RePEc:wbk:wbrwps:1936

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Keywords: Poverty Reduction Strategies; Environmental Economics&Policies; Services&Transfers to Poor; Health Economics&Finance; Public Health Promotion; Safety Nets and Transfers; Poverty Assessment; Environmental Economics&Policies; Poverty Reduction Strategies; Rural Poverty Reduction;

References

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  1. Jalan, Jyotsna & Ravallion, Martin, 1998. "Are there dynamic gains from a poor-area development program?," Journal of Public Economics, Elsevier, Elsevier, vol. 67(1), pages 65-85, January.
  2. Rosenzweig, Mark R. & Binswanger, Hans P., 1989. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Bulletins, University of Minnesota, Economic Development Center 7455, University of Minnesota, Economic Development Center.
  3. Ravallion, Martin, 1988. "Expected Poverty under Risk-Induced Welfare Variability," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(393), pages 1171-82, December.
  4. William Gould, 1993. "Quantile regression with bootstrapped standard errors," Stata Technical Bulletin, StataCorp LP, StataCorp LP, vol. 2(9).
  5. Pagan, Adrian & Vella, Frank, 1989. "Diagnostic Tests for Models Based on Individual Data: A Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 4(S), pages S29-59, Supplemen.
  6. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 43-61, January.
  7. Rosenzweig, Mark R. & Wolpin, Kenneth I., 1989. "Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India," Bulletins, University of Minnesota, Economic Development Center 7487, University of Minnesota, Economic Development Center.
  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. Newey, Whitney K., 1987. "Specification tests for distributional assumptions in the Tobit model," Journal of Econometrics, Elsevier, Elsevier, vol. 34(1-2), pages 125-145.
  10. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, Elsevier, vol. 32(1), pages 143-155, June.
  11. Chen, Shaohua & Ravallion, Martin, 1996. "Data in transition: Assessing rural living standards in Southern China," China Economic Review, Elsevier, Elsevier, vol. 7(1), pages 23-56.
  12. Jalan, Jyotsna & Ravallion, Martin, 1997. "Are the poor less well-insured? Evidence on vulnerability to income risk in rural China," Policy Research Working Paper Series 1863, The World Bank.
  13. Arabmazar, Abbas & Schmidt, Peter, 1982. "An Investigation of the Robustness of the Tobit Estimator to Non-Normality," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1055-63, July.
  14. Foster, James E & Shorrocks, Anthony F, 1991. "Subgroup Consistent Poverty Indices," Econometrica, Econometric Society, Econometric Society, vol. 59(3), pages 687-709, May.
  15. 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.
  16. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, Elsevier, vol. 25(3), pages 303-325, July.
  17. Lipton, Michael & Ravallion, Martin, 1993. "Poverty and policy," Policy Research Working Paper Series 1130, The World Bank.
  18. Horowitz, Joel L., 1986. "A distribution-free least squares estimator for censored linear regression models," Journal of Econometrics, Elsevier, Elsevier, vol. 32(1), pages 59-84, June.
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Citations

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Cited by:
  1. Joshi, Niraj Prakash & Maharjan, Keshav Lall & Piya, Luni, 2012. "Poverty dynamics in Far-western Rural Hills of Nepal: Evidences from panel data," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 125785, International Association of Agricultural Economists.
  2. World Bank, 2003. "China - Promoting Growth with Equity : Country Economic Memorandum," World Bank Other Operational Studies 14643, The World Bank.
  3. Thorbecke, Erik, 2004. "Conceptual and Measurement Issues in Poverty Analysis," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  4. McCulloch, Neil, 2003. "The impact of structural reforms on poverty : a simple methodology with extensions," Policy Research Working Paper Series 3124, The World Bank.
  5. Warr, Peter G., 2006. "Roads and Poverty in Rural Laos," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia, Australian Agricultural and Resource Economics Society 139926, Australian Agricultural and Resource Economics Society.
  6. Mohiburrahman Iqbal, 2013. "Vulnerability to expected poverty in Afghanistan," ASARC Working Papers, The Australian National University, Australia South Asia Research Centre 2013-14, The Australian National University, Australia South Asia Research Centre.
  7. RĂ³mulo A.Chumacero & Ricardo D.Paredes, 2005. "Characterizing income distribution for poverty and inequality analysis," Estudios de Economia, University of Chile, Department of Economics, University of Chile, Department of Economics, vol. 32(1 Year 20), pages 97-117, June.
  8. Michael Hoy & Buhong Zheng, 2008. "Measuring Lifetime Poverty," Working Papers, University of Guelph, Department of Economics and Finance 0814, University of Guelph, Department of Economics and Finance.
  9. Celidoni, Martina, 2011. "Vulnerability to poverty: An empirical comparison of alternative measures," MPRA Paper 33002, University Library of Munich, Germany.

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