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

Listed author(s):
  • 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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File URL: http://econwpa.repec.org/eps/em/papers/0004/0004003.pdf
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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
Handle: RePEc:wpa:wuwpem:0004003
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on HP; pages: 46 ; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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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.
  4. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
  5. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
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  8. Alderman, Harold, 1996. "Saving and economic shocks in rural Pakistan," Journal of Development Economics, Elsevier, vol. 51(2), pages 343-365, December.
  9. Ravallion, Martin, 1988. "Expected Poverty under Risk-Induced Welfare Variability," Economic Journal, Royal Economic Society, vol. 98(393), pages 1171-1182, December.
  10. 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).
  11. Kinsey, Bill & Burger, Kees & Gunning, Jan Willem, 1998. "Coping with drought in Zimbabwe: Survey evidence on responses of rural households to risk," World Development, Elsevier, vol. 26(1), pages 89-110, January.
  12. Joseph G. Altonji & Aloysius Siow, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 293-328.
  13. Eswaran, Mukesh & Kotwal, Ashok, 1990. "Implications of Credit Constraints for Risk Behaviour in Less Developed Economies," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 473-482, April.
  14. Mohammad, Irfan & Amjad, Rashid, 1994. "Poverty in rural Pakistan," MPRA Paper 38335, University Library of Munich, Germany.
  15. Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-114, Summer.
  16. Timothy Besley, 1995. "Nonmarket Institutions for Credit and Risk Sharing in Low-Income Countries," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 115-127, Summer.
  17. Kochar, Anjini, 1995. "Explaining Household Vulnerability to Idiosyncratic Income Shocks," American Economic Review, American Economic Association, vol. 85(2), pages 159-164, May.
  18. Jalan, Jyotsna & Ravallion, Martin, 1998. "Determinants of transient and chronic poverty : evidence from rural China," Policy Research Working Paper Series 1936, The World Bank.
  19. Alderman, Harold & Garcia, Marito, 1993. "Poverty, household food security, and nutrition in rural Pakistan:," Research reports 96, International Food Policy Research Institute (IFPRI).
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