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Simulating the Impact of Policy upon Chronic and Transitory Poverty in Rural Pakistan

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Author Info
Neil McCulloch (Institute of Development Studies)
Bob Baulch (Institute of Development Studies)

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Abstract

Anti-poverty programs often seek to improve their impact by targeting households for assistance according to one or more criteria. Since such targeting criteria are often based upon measurements of welfare in a single time period, they tend to be chosen to provide an indication of the long-run level of welfare. However a growing literature shows the importance to poor households of fluctuations in their welfare from month to month and year to year. This paper measures the extent to which poverty is caused by fluctuations in welfare as well as the long-run level of welfare, using the IFPRI household food security panel which tracked 686 households from rural Pakistan between 1986/76 to 1990/91. The article compares the poverty impact of policies designed to increase mean incomes ('growth' policies) and those designed to even out fluctuations of income over time ('smoothing policies') after making an explicit adjustment for measurement error. Since the majority of poverty in our sample is transitory, large reductions in poverty can be achieved by interventions designed to 'smooth' incomes, but reducing chronic poverty in the long-term will require large and sustained growth in household incomes. The income generation process is then modelled as a function of household characteristics and the resulting model is used to estimate the poverty impact of a range of interventions including transfer policies and measures designed to build human and physical capital.

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Paper provided by EconWPA in its series Econometrics with number 0004003.

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Length: 46 pages
Date of creation: 02 Aug 2000
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Handle: RePEc:wpa:wuwpem:0004003

Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 46 ; figures: included
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Related research
Keywords: transitory poverty; policy targeting; measurement;

Other versions of this item:

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Altonji, Joseph G & Siow, Aloysius, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 293-328, May. [Downloadable!] (restricted)
    Other versions:
  2. Alderman, Harold & Paxson, Christina H & DEC, 1992. "Do the poor insure? A synthesis of the literature on risk and consumption in developing countries," Policy Research Working Paper Series 1008, The World Bank. [Downloadable!]
    Other versions:
  3. Alderman, Harold, 1996. "Saving and economic shocks in rural Pakistan," Journal of Development Economics, Elsevier, vol. 51(2), pages 343-365, December. [Downloadable!] (restricted)
  4. Adams, Richard H. Jr. & He, Jane J., 1995. "Sources of income inequality and poverty in rural Pakistan:," Research reports 102, International Food Policy Research Institute (IFPRI). [Downloadable!]
  5. Alderman, Harold & Garcia, Marito, 1993. "Poverty, household food security, and nutrition in rural Pakistan:," Research reports 96, International Food Policy Research Institute (IFPRI). [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Dorosh, Paul A. & Malik, Sohail J., 2006. "Transitions Out of Poverty: Drivers of Real Income Growth for the Poor in Rural Pakistan," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25387, International Association of Agricultural Economists. [Downloadable!]
  2. Guillermo Cruces & Quentin T. Wodon, 2003. "Transient and chronic poverty in turbulent times: Argentina 1995-2002," Economics Bulletin, Economics Bulletin, vol. 9(3), pages 1-12. [Downloadable!]
  3. Paul Gamba & Elliot Mghenyi, 2005. "Rural Poverty Dynamics, Agricultural Productivity and Access to Resources," International Development Collaborative Working Papers KE-TEGEMEO-WP-21, Department of Agricultural Economics, Michigan State University. [Downloadable!]
  4. Shahin Yaqub, 2003. "Relating Severe Poverty and Chronic Poverty," Working Papers wpdea0307, Department of Applied Economics at Universitat Autonoma of Barcelona. [Downloadable!]
  5. Antman, Francisca & McKenzie, David J., 2005. "Earnings mobility and measurement error : a pseudo-panel approach," Policy Research Working Paper Series 3745, The World Bank. [Downloadable!]
    Other versions:
  6. Katsushi Imai & Raghav Gaiha, 2002. "Vulnerability, Shocks and Persistence of Poverty - Estimates for Semi-Arid Rural South India," Economics Series Working Papers 128, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  7. Katsushi Imai, 2003. "The Employment Guarantee Scheme as a Social Safety Net - Poverty Dynamics and Poverty Alleviation," Economics Series Working Papers 149, University of Oxford, Department of Economics. [Downloadable!]
  8. Frederico Finan & Elisabeth Sadoulet & Alain de Janvry, 2002. "Measuring the Poverty Reduction Potential of Land in Rural Mexico," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 983, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
  9. Paul MAKDISSI & Quentin WODON & Guillermo Cruces, 2003. "Poverty Measurement Under Risk Aversion Using Panel Data," Cahiers de recherche 03-06, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke. [Downloadable!]
    Other versions:
  10. Marco Stampini & Benjamin Davis, 2003. "Discerning Transient from Chronic Poverty in Nicaragua: Measurement with a two period panel data set," Working Papers 03-03, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA). [Downloadable!]
  11. McCulloch, Neil, 2003. "The impact of structural reforms on poverty : a simple methodology with extensions," Policy Research Working Paper Series 3124, The World Bank. [Downloadable!]
  12. Haddad, Lawrence James & Ahmed, Akhter U., 2002. "Avoiding chronic and transitory poverty," FCND discussion papers 133, International Food Policy Research Institute (IFPRI). [Downloadable!]
    Other versions:
  13. Stephan Klasen & David Lawson, 2007. "The Impact of Population Growth on Economic Growth and Poverty Reduction in Uganda," Departmental Discussion Papers 133, University of Goettingen, Department of Economics, revised 25 May 2007. [Downloadable!]
  14. Paul Shaffer, 2008. "New Thinking on Poverty: Implications for Globalisation and Poverty Reduction Strategies," Working Papers 65, United Nations, Department of Economics and Social Affairs. [Downloadable!]
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