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

Author

Listed:
  • Neil McCulloch

    (Institute of Development Studies)

  • Bob Baulch

    (Institute of Development Studies)

Abstract

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.

Suggested Citation

  • Neil McCulloch & Bob Baulch, 2000. "Simulating the Impact of Policy upon Chronic and Transitory Poverty in Rural Pakistan," Econometrics 0004003, University Library of Munich, Germany.
  • 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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    References listed on IDEAS

    as
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    More about this item

    Keywords

    transitory poverty; policy targeting; measurement;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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