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Improvement of Socio-economic Conditions and Distribution of Consumption Expenditures: Case Study of India's Poverty Decline over Two Decades


  • Takahiro Ito

    (Graduate School for International Development and Cooperation, Hiroshima University)


This paper examines how living standards in India have improved over two decades, focusing on the distribution of household-level consumption expenditures. The analysis is conducted using the DiNardo-Fortin-Lemieux (DFL) semi-parametric decomposition method. This method offers two desirable features, which enable us to avoid the traditional pitfalls of (semi-)macro-level poverty analysis. The estimation results indicate that regional heterogeneity in poverty decline is very large, and different regional factors contribute to the poverty decline at different stage of development. From 1983 to 1993/94, regional education (measured by literacy rate) is the main engine of the poverty decline. It accounts for 85% of the total poverty decline in this period. During the following 10 years, the labor market condition has a significant role in reducing poverty. Especially, wage and employment growth in the non-agricultural sector is the key to the improvement of living standards. In addition, agricultural wage employment is still important to reduce poverty in rural areas.

Suggested Citation

  • Takahiro Ito, 2012. "Improvement of Socio-economic Conditions and Distribution of Consumption Expenditures: Case Study of India's Poverty Decline over Two Decades," IDEC DP2 Series 2-9, Hiroshima University, Graduate School for International Development and Cooperation (IDEC).
  • Handle: RePEc:hir:idecdp:2-9

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    References listed on IDEAS

    1. Gaurav Datt & Martin Ravallion, 2002. "Is India's Economic Growth Leaving the Poor Behind?," Journal of Economic Perspectives, American Economic Association, vol. 16(3), pages 89-108, Summer.
    2. K. Sundaram, 2007. "Employment and Poverty in India: 2000-2005," Working Papers id:1100, eSocialSciences.
    3. Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
    4. Ravallion, Martin & Datt, Gaurav, 2002. "Why has economic growth been more pro-poor in some states of India than others?," Journal of Development Economics, Elsevier, vol. 68(2), pages 381-400, August.
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    More about this item


    Consumption expenditures; kernel density estimation; poverty; regional development;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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