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Simulating the impact of policy upon chronic and transitory poverty in rural Pakistan

Listed author(s):
  • Neil McCulloch
  • Bob Baulch

Anti-poverty programmes often seek to improve their impact by targeting households for assistance according to welfare measures in a single time period. However, a growing literature shows the importance to poor households of fluctuations in their welfare from month to month and year to year. This study uses a five-year panel of 686 households from rural Pakistan to investigate the magnitude of chronic or transitory poverty making an explicit adjustment for measurement error. The impact of two types of policies (those designed to 'smooth' incomes and those designed to promote income growth) on the severity of chronic and transitory poverty is examined. Since the largest part of the squared poverty gap 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 requires large and sustained growth in household incomes. The level and variability of incomes is then modelled as a function of household characteristics, education and assets. The resulting model of the income generation process is used to simulate the impact that a range of transfer and investment policies would have upon chronic and transitory poverty.

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Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

Volume (Year): 36 (2000)
Issue (Month): 6 ()
Pages: 100-130

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Handle: RePEc:taf:jdevst:v:36:y:2000:i:6:p:100-130
DOI: 10.1080/00220380008422656
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  1. Morduch, Jonathan, 1994. "Poverty and Vulnerability," American Economic Review, American Economic Association, vol. 84(2), pages 221-225, May.
  2. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
  3. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
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