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Household Income Dynamics in Two Transition Economies

Listed author(s):
  • Lokshin Michael

    ()

    (World Bank)

  • Ravallion Martin

    ()

    (World Bank)

We test for the existence of poverty traps and distribution-dependent growth using a nonlinear dynamic panel data model of household incomes allowing for endogenous attrition. Our estimates for Hungary and Russia in the 1990s reveal significant nonlinearity in the dynamics, consistent with the claim that income inequality attenuates growth in mean income. However, we do not find evidence of a threshold effect at low incomes, as postulated by models of dynamic poverty traps. Our results indicate that households generally bounce back from transient shocks, though we find that the adjustment process is slower for households who are poorer in steady state.

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Article provided by De Gruyter in its journal Studies in Nonlinear Dynamics & Econometrics.

Volume (Year): 8 (2004)
Issue (Month): 3 (September)
Pages: 1-33

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Handle: RePEc:bpj:sndecm:v:8:y:2004:i:3:n:4
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  1. Day, R H, 1992. "Complex Economic Dynamics: Obvious in History, Generic in Theory, Elusive in Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(S), pages 9-23, Suppl. De.
  2. Mroz, Thomas A., 1999. "Discrete factor approximations in simultaneous equation models: Estimating the impact of a dummy endogenous variable on a continuous outcome," Journal of Econometrics, Elsevier, vol. 92(2), pages 233-274, October.
  3. Alok Bhargava & J. D. Sargan, 2006. "Estimating Dynamic Random Effects Models From Panel Data Covering Short Time Periods," World Scientific Book Chapters,in: Econometrics, Statistics And Computational Approaches In Food And Health Sciences, chapter 1, pages 3-27 World Scientific Publishing Co. Pte. Ltd..
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  5. Mroz, Thomas A & Popkin, Barry M, 1995. "Poverty and the Economic Transition in the Russian Federation," Economic Development and Cultural Change, University of Chicago Press, vol. 44(1), pages 1-31, October.
  6. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, January.
  7. Simon Commander & Andrei Tolstopiatenko & Ruslan Yemtsov, 1999. "Channels of redistribution: Inequality and poverty in the Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 411-447, July.
  8. Martin Ravallion, 1997. "Famines and Economics," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1205-1242, September.
  9. Azariadis, Costas, 1996. "The Economics of Poverty Traps: Part One: Complete Markets," Journal of Economic Growth, Springer, vol. 1(4), pages 449-496, December.
  10. Richard Blundell & Stephen Bond & Frank Windmeijer, 2000. "Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator," IFS Working Papers W00/12, Institute for Fiscal Studies.
  11. Zsolt Sp├ęder, 1998. "Poverty dynamics in Hungary during the transformation," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 1-21, May.
  12. Varian, Hal R, 1979. "Catastrophe Theory and the Business Cycle," Economic Inquiry, Western Economic Association International, vol. 17(1), pages 14-28, January.
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