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Prices, Inequality, And Poverty: Methodology And Indian Evidence

Author

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  • ANKITA MISHRA
  • RANJAN RAY

Abstract

The contribution of this paper is both methodological and empirical. It proposes a methodology for evaluating the distributional implications of price movement for inequality and poverty measurement. The methodology is based on a distinction between inequalities in nominal expenditures, where the expenditures are either measured in nominal terms or a common price deflator is applied for all households, and that in real expenditures which takes into account the varying household preferences and differences in household composition in converting the nominal to real expenditures. Changes in relative prices will cause the inflation to affect different household groups differently depending on their household size and composition and their level of relative affluence. The empirical application to the Indian budget data sets shows the usefulness of the proposed procedures. The Indian empirical evidence is of particular interest since the period chosen (1993-2005) covered both first and second generation reforms in India. The results suggest that while rural poverty rates, in both nominal and real terms, fell sharply during this period, they were accompanied by an increase in both nominal and real expenditure inequality. In contrast, the urban poverty rates were mostly static or even increased over this period. Of further interest is the result that the price movement in both areas has been inequality reducing throughout much of this period. The study also contains a decomposition analysis of the movement in inequality and poverty rates. The decomposition is done both between family types and between social groups.
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Suggested Citation

  • Ankita Mishra & Ranjan Ray, 2011. "Prices, Inequality, And Poverty: Methodology And Indian Evidence," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(3), pages 428-448, September.
  • Handle: RePEc:bla:revinw:v:57:y:2011:i:3:p:428-448
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    References listed on IDEAS

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    1. Aaron Nicholas & Ranjan Ray & Ma. Rebecca Valenzuela, 2010. "Evaluating the Distributional Implications of Price Movements: Methodology, Application and Australian Evidence," The Economic Record, The Economic Society of Australia, vol. 86(274), pages 352-366, September.
    2. Meenakshi, J. V. & Ray, Ranjan, 2002. "Impact of household size and family composition on poverty in rural India," Journal of Policy Modeling, Elsevier, vol. 24(6), pages 539-559, October.
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    Citations

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    Cited by:

    1. Chalasani, Satvika, 2012. "Understanding wealth-based inequalities in child health in India: A decomposition approach," Social Science & Medicine, Elsevier, vol. 75(12), pages 2160-2169.
    2. repec:eee:wdevel:v:97:y:2017:i:c:p:102-121 is not listed on IDEAS
    3. Kaushik Basu & C Marks, 2011. "Understanding Inflation and Controlling It," Working Papers id:4481, eSocialSciences.
    4. Jifei Zhang & Wei Deng, 2016. "Multiscale Spatio-Temporal Dynamics of Economic Development in an Interprovincial Boundary Region: Junction Area of Tibetan Plateau, Hengduan Mountain, Yungui Plateau and Sichuan Basin, Southwestern C," Sustainability, MDPI, Open Access Journal, vol. 8(3), pages 1-18, February.
    5. Sripad Motiram & Karthikeya Naraparaju, 2013. "Growth and Deprivation in India: What Does Recent Data Say?," Working Papers 287, ECINEQ, Society for the Study of Economic Inequality.
    6. Ashima Goyal & Akash Kumar Baikar, 2014. "Psychology, Cyclicality or Social Programs: Rural Wage and Inflation Dynamics in India," Working Papers id:5812, eSocialSciences.
    7. Abhimanyu Dadu & Namrata Gulati, 2014. "Inequality, neighborhoods and variation in prices," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-001, Indira Gandhi Institute of Development Research, Mumbai, India.
    8. Ankita Mishra & Ranjan Ray, 2013. "Multi-Dimensional Deprivation in India During and After the Reforms: Do the Household Expenditure and the Family Health Surveys Present Consistent Evidence?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 110(2), pages 791-818, January.
    9. repec:gam:jsusta:v:8:y:2016:i:3:p:215:d:64718 is not listed on IDEAS
    10. Basu, Kaushik, 2013. "Shared prosperity and the mitigation of poverty : in practice and in precept," Policy Research Working Paper Series 6700, The World Bank.
    11. Manisha Chakrabarty & Amita Majumder & Ranjan Ray, 2015. "Preferences, Spatial Prices and Inequality," Journal of Development Studies, Taylor & Francis Journals, vol. 51(11), pages 1488-1501, November.
    12. repec:bla:ecorec:v:93:y:2017:i:301:p:314-332 is not listed on IDEAS

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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