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Determinants of transient and chronic poverty : evidence from rural China

  • Jalan, Jyotsna
  • Ravallion, Martin

Are the determinants of chronic and transient poverty different? Do policies that reduce transient poverty also reduce chronic poverty? The authors decompose measures of household poverty into chronic and transient components and use censored conditional quantile estimators to investigate the household and geographic determinants of both chronic and transient poverty, taking panel data for post-reform rural China. They find that a household's average wealth holding is an important determinant for both transient and chronic poverty. Although household demographics, levels of education, and the health status of members of the households are important for chronic poverty, they are not significant determinants of transient poverty. Both chronic and transient poverty are reduced by greater command over physical capital, and life-cycle effects for the two types of poverty are similar. But there the similarities end. Smaller and better-educated households have less chronic poverty, but household size and level of education matters little for transient poverty. Living in an area where health and education are better reduces chronic poverty but appears to be irrelevant to transient poverty. Nor are higher foodgrain yields a significant determinant of transient poverty, although they are highly significant in reducing chronic poverty. These findings suggest that China's poor-area development program may be appropriate for reducing chronic poverty but is likely to help reduce variations in consumption that households typically face in poor areas -- the exposure to uninsured income risk that underlies transient poverty will probably persist. Other policy instruments may be needed to deal with transient poverty, including seasonalpublic works, credit schemes, buffer stocks, and insurance options for the poor.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1936.

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Date of creation: 30 Jun 1998
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Handle: RePEc:wbk:wbrwps:1936
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  1. 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 223-44, April.
  2. William Gould, 1993. "Quantile regression with bootstrapped standard errors," Stata Technical Bulletin, StataCorp LP, vol. 2(9).
  3. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
  4. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, vol. 50(1), pages 43-61, January.
  5. Chen, Shaohua & Ravallion, Martin, 1996. "Data in transition: Assessing rural living standards in Southern China," China Economic Review, Elsevier, vol. 7(1), pages 23-56.
  6. Jalan, Jyotsna & Ravallion, Martin, 1998. "Are there dynamic gains from a poor-area development program?," Journal of Public Economics, Elsevier, vol. 67(1), pages 65-85, January.
  7. Lipton, Michael & Ravallion, Martin, 1993. "Poverty and policy," Policy Research Working Paper Series 1130, The World Bank.
  8. Pagan, Adrian & Vella, Frank, 1989. "Diagnostic Tests for Models Based on Individual Data: A Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S29-59, Supplemen.
  9. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
  10. Arabmazar, Abbas & Schmidt, Peter, 1982. "An Investigation of the Robustness of the Tobit Estimator to Non-Normality," Econometrica, Econometric Society, vol. 50(4), pages 1055-63, July.
  11. Jalan, Jyotsna & Ravallion, Martin, 1998. "Transient Poverty in Postreform Rural China," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 338-357, June.
  12. Foster, James E & Shorrocks, Anthony F, 1991. "Subgroup Consistent Poverty Indices," Econometrica, Econometric Society, vol. 59(3), pages 687-709, May.
  13. Jalan, Jyotsna & Ravallion, Martin, 1997. "Are the poor less well-insured? Evidence on vulnerability to income risk in rural China," Policy Research Working Paper Series 1863, The World Bank.
  14. Rosenzweig, Mark R & Binswanger, Hans P, 1993. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Economic Journal, Royal Economic Society, vol. 103(416), pages 56-78, January.
  15. Horowitz, Joel L., 1986. "A distribution-free least squares estimator for censored linear regression models," Journal of Econometrics, Elsevier, vol. 32(1), pages 59-84, June.
  16. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  17. Ravallion, Martin, 1988. "Expected Poverty under Risk-Induced Welfare Variability," Economic Journal, Royal Economic Society, vol. 98(393), pages 1171-82, December.
  18. Newey, Whitney K., 1987. "Specification tests for distributional assumptions in the Tobit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 125-145.
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