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Simulating the Impact of Policy upon Chronic and Transitory Poverty in Rural Pakistan

  • Neil McCulloch

    (Institute of Development Studies)

  • Bob Baulch

    (Institute of Development Studies)

Anti-poverty programs often seek to improve their impact by targeting households for assistance according to one or more criteria. Since such targeting criteria are often based upon measurements of welfare in a single time period, they tend to be chosen to provide an indication of the long-run level of welfare. However a growing literature shows the importance to poor households of fluctuations in their welfare from month to month and year to year. This paper measures the extent to which poverty is caused by fluctuations in welfare as well as the long-run level of welfare, using the IFPRI household food security panel which tracked 686 households from rural Pakistan between 1986/76 to 1990/91. The article compares the poverty impact of policies designed to increase mean incomes ('growth' policies) and those designed to even out fluctuations of income over time ('smoothing policies') after making an explicit adjustment for measurement error. Since the majority of poverty 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 will require large and sustained growth in household incomes. The income generation process is then modelled as a function of household characteristics and the resulting model is used to estimate the poverty impact of a range of interventions including transfer policies and measures designed to build human and physical capital.

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Paper provided by EconWPA in its series Econometrics with number 0004003.

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Length: 46 pages
Date of creation: 02 Aug 2000
Date of revision:
Handle: RePEc:wpa:wuwpem:0004003
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 46 ; figures: included
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  1. Alderman, Harold & Paxson, Christina H & DEC, 1992. "Do the poor insure? A synthesis of the literature on risk and consumption in developing countries," Policy Research Working Paper Series 1008, The World Bank.
  2. Altonji, Joseph G & Siow, Aloysius, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 293-328, May.
  3. Alderman, Harold & Garcia, Marito, 1993. "Poverty, household food security, and nutrition in rural Pakistan:," Research reports 96, International Food Policy Research Institute (IFPRI).
  4. Alderman, Harold, 1996. "Saving and economic shocks in rural Pakistan," Journal of Development Economics, Elsevier, vol. 51(2), pages 343-365, December.
  5. Adams, Richard H. Jr. & He, Jane J., 1995. "Sources of income inequality and poverty in rural Pakistan:," Research reports 102, International Food Policy Research Institute (IFPRI).
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