Testing Prediction Performance of Poverty Models: Empirical Evidence from Uganda

This paper examines the performance of a method of predicting poverty rates. Because most developing countries cannot justify the expense of frequent household budget surveys, additional low‐cost methods have been developed and used. The prediction method is based on a model linking the proportion of poor households to suitable explanatory variables (consumption proxies). These consumption proxies are variables that can be collected at much lower cost through smaller annual surveys. Several applications have shown that such models can produce poverty estimates with confidence intervals of a similar magnitude to the poverty estimates from the household budget surveys. There is, however, limited evidence of how well the methods perform out‐of‐sample. A series of seven household budget surveys conducted in Uganda in the period 1993–2005 allows us to test the prediction performance of the model. We test the poverty models by using data from one survey to predict the proportion of poor households in other surveys, and vice versa. The results are encouraging, as all models predict similar poverty trends. Although in most cases the predictions are precise, sometimes they differ significantly from the poverty level estimated from the survey directly.     

Eliciting,Applying And Exploring Multidimensional Welfare Weights: Evidence From The Field

By combining primary data on dimension importance collected in the field from three different samples and nationally representative survey data from the Dominican Republic, we offer a twofold contribution. The first one comes from an unincentivized questionnaire experiment, where the significance of the treatment effect shows that life domains are valued differently in a poverty vs a well‐being framework. This poses important questions on the anatomy of dimension importance and on the use of weights in empirical analyses, and opens the door to what we call a “concordance paradox” related to the very essence of the constructs of poverty and well‐being. As a second contribution, we employ the sets of weights collected in the field to assess the trend of multidimensional poverty and well‐being in the country. We find that the picking one set of weights or another is not a trivial choice, as they lead to opposite assessment results.     

The distributive impact of terms of trade shocks: The case of the oil price changes in Russia

The halving of oil prices, during a short period between 2014 and 2015, has generated major terms of trade losses for oil exporting countries. This terms of trade shock has economy‐wide effects and significant distributive impacts. This paper, using a macro‐micro simulation model, describes and quantifies the channels of transmission from the drop of oil prices, to changes in welfare distribution at the household level for the case of the Russian Federation. The oil price reduction generates a reverse Dutch disease impacting sectoral employment, factor returns and consumption prices. It causes a contraction of employment and wages in more skill‐intensive (non‐tradable) sectors, and a reduction in consumption prices that is more pronounced for non‐food than for food goods. When these shifts are mapped to changes in incomes at the micro level, all households are affected. Poverty rates increase by 1 to 4 percentage points, depending on the poverty line used. At the US$ 10 a day threshold, 4.1 million additional people fall into poverty. Along the consumption distribution, richer people are affected more than those in the bottom 40%. However, this minor progressive impact may be reversed due to increases in unemployment and cuts in social programmes.     

Assessment of the effects of targeted poverty alleviation policy on differently poverty-stricken households: A multi-propensity score weighting model

Eliminating poverty is a multifaceted global challenge and a focal point of global development governance. With the implementation of targeted poverty alleviation (TPA), China's poverty alleviation efforts have had significant achievements. This study provides a new perspective by classifying poverty-stricken households based on poverty root causes at the household level, a multi-propensity score weighting model based on counterfactual inference is employed to examine the poverty reduction effect and policy precision on six non-equivalent poverty-stricken household groups in a Chinese county. The results reveal that the poverty reduction effects differed among poverty-stricken households with different root causes of poverty. Specifically, households impoverished due to disability have the lowest income of the six groups. The assistance policy effects also vary significantly and are found to be poorly suited to poverty-stricken households a lack of labor force and funds. A robustness test confirms this conclusion and a more nuanced analysis reveals that these differences are reflected in the wage and transfer incomes. Therefore, to ensure the stability of poverty reduction and the sustainability of income for poverty-stricken households, relevant associated aid policies need to place different emphases based on their household characteristics.     

“When Life Gives You Lemons”: Using Cross-Sectional Surveys to Identify Chronic Poverty in the Absence of Panel Data

At the core of poverty eradication is the need to eliminate that poverty that is persistent over time (chronic poverty). Unfortunately, traditional approaches to identifying chronic poverty require longitudinal data that is rarely available. In its absence, this paper proposes an alternative approach that only requires 1 year of cross-sectional data on monetary and non-monetary poverty. It puts forth two conjectures and contends that the combined profile of a household as both income poor and multidimensionally poor can be used as a proxy of that household being chronically income poor. To explore the viability of this approach, we use a probit model and longitudinal data for three Latin American countries to estimate households’ probabilities of remaining in income poverty based on their past income and multidimensional poverty statuses. We find empirical support for the approach that is significant, consistent across countries, and robust to various controls and periods of analysis.     

Explaining variation in child labor statistics

Child labor statistics are critical for assessing the extent and nature of child labor activities in developing countries. In practice, widespread variation exists in how child labor is measured. Questionnaire modules vary across countries and within countries over time along several dimensions, including respondent type and the structure of the questionnaire. Little is known about the effect of these differences on child labor statistics. This paper presents the results from a randomized survey experiment in Tanzania focusing on two survey design choices: different questionnaire design to classify children work and proxy response versus self-reporting. Use of a short module compared with a more detailed questionnaire has a statistically significant effect, especially on child labor force participation rates, and, to a lesser extent, on working hours. Proxy reports do not differ significantly from a child's self-report. Further analysis demonstrates that survey design choices affect the coefficient estimates of some determinants of child labor in a child labor supply equation. The results suggest that low-cost changes to questionnaire design will potentially clarify the concept of work for respondents.     

Poverty Reduction and Economic Structure: Comparative Path Analysis for Mozambique and Vietnam

While economic growth generally reduces income poverty, there are pronounced differences in the strength of this relationship across countries. Typical explanations for this variation include measurement errors in growth–poverty accounting and different compositions of economic growth. We explore the additional influence of economic structure in determining a country's growth–poverty relationship and performance. Using structural path analysis, we compare the experiences of Mozambique and Vietnam—two countries with similar levels and compositions of economic growth but divergent poverty outcomes. We find that the structure of the Vietnamese economy more naturally lends itself to generating broad‐based growth. A given agricultural demand expansion in Mozambique will, ceteris paribus, achieve much less rural income growth than in Vietnam. Inadequate education, trade and transport systems are found to be more severe structural constraints to poverty reduction in Mozambique than in Vietnam. Investing in these areas can significantly enhance the effectiveness of Mozambican growth to reduce poverty.     

HETEROGENEITY OR TRUE STATE DEPENDENCE IN POVERTY: THE TALE TOLD BY TWINS

The purpose of this study is to distinguish between two different reasons that poverty could persist on an individual level. This study takes advantage of the similarity within pairs of identical twins to separate family‐specific heterogeneity from true state dependence, where the experience of poverty leads to a higher risk of future poverty. The results, based on a four‐variate probit model, show the importance of true state dependence in poverty. When using a poverty measure based on disposable income, family‐specific heterogeneity explains between 21 and 25 percent of poverty persistence in the Swedish sample of twins.     

中国城市中的三种贫困类型

我们课题组在 1 999年进行了一次覆盖六省市的住户调查。本文利用这次调查数据对中国城市贫困的性质和特点进行了考察。通过综合考虑收入标准和消费标准 ,我们把中国城镇贫困分为三种类型 ,即持久性贫困、暂时性性贫困和选择性贫困。在贫困人口中 ,有一大部分是属于选择性贫困 ,即他们的收入高于贫困线而消费低于贫困线。我们对贫困户的消费函数进行了估计 ,其结果显示以下几个因素对贫困状况产生重要的影响 :修匀收入的效应 ;人们防备外部环境不确定性的心理 ;人们为将来投资而进行储蓄的行为 ;家庭对子女教育和医疗服务的特别需要。我们还对三种贫困类型进行了比较分析 ,从中发现预测的金融资产和预测的收入 ,以及教育和医疗的特殊需要都对不同类型的贫困户的消费行为起到重要的影响作用     

The Hunger of Old Women in Rural Tanzania: Can Subjective Data Improve Poverty Measurement?

On average, women in Tanzania are slightly less likely than men to say that they are “always/often without enough food to eat”—but this masks a much higher rate of self‐reported food deprivation among elderly rural women. Official Tanzanian poverty statistics are, however, based on a methodology which presumes equal sharing per equivalent adult within the household. This paper combines subjective and objective micro‐data from Tanzania's 2007 Household Budget Survey and 2007 Views of the People Survey. By imputing individual consumption based on the relative probability of self‐reported food deprivation, it provides an example of the possible importance of one type of intra‐household inequality—i.e., the hunger of old women—for poverty measurement. Implications include the complexity of gendered intra‐household inequality and the importance of “technical” poverty measurement choices for public policy priorities, such as old age pensions.     

A NON‐PARAMETRIC MEASURE OF POVERTY ELASTICITY

We estimate the growth elasticity of poverty (GEP) using recently developed non‐parametric panel methods and the most up‐to‐date and extensive poverty data from the World Bank, which exceeds 500 observations in size and represents more than 96 percent of the developing world's population. Unlike previous studies which rely on parametric models, we employ a non‐parametric approach which captures the non‐linearity in the relationship between growth, inequality, and poverty. We find that the growth elasticity of poverty is higher for countries with fairly equal income distributions, and declines in nations with greater income disparities. Moreover, when controlling for differences in estimation technique, we find that the reported values of the GEP in the literature (based on the World Bank's now‐defunct 1993‐PPP based poverty data) are systematically larger in magnitude than estimates based on the latest 2005‐PPP based data.     

Poverty is a Public Bad: Panel Evidence From Subjective Well‐Being Data

Previous research has found that subjective well‐being (SWB) is lower for individuals classified as being in poverty. We extend the poverty‐SWB literature by focusing on aggregate poverty. Using panel data for 39,239 individuals living in Germany from 2005–2013, we show that people's SWB is negatively correlated with the regional (state‐level) poverty ratio while controlling for individual poverty status and poverty intensity. This suggests that poverty is a public bad. The negative relationship between aggregate poverty and SWB is more salient in the upper segments of the income distribution and is robust to controlling for the rate of unemployment and per capita GDP. The character of poverty as a public bad suggests that poverty alleviation is a matter not only of distributive justice, but of allocative efficiency.     

Decomposing Poverty Change: Deciphering Change in Total Population and Beyond

In the understanding of decomposing poverty change, the growth effect of mean income is replaced with the growth effect of total income and the impact of change in total population. These two, along with changes in inequality, form the three broader effects that can be computed in multiple ways depending upon the base period and the sequence of calculation. Changing the base does not alter the broader effects while specific attributions within each effect get interchanged. For a given base, there will be six possible sequences and we take an average of these to compute the three broad effects. Finally, poverty change on account of the three broad effects comprising growth of total income, change in inequality, and change in total population are shown as part of the within‐group effect while change in population shares, which is different from change in total population, is a between‐group effect. We provide empirical illustrations with data from India.     

Fuzzy Chronic Poverty: A Proposed Response to Measurement Error for Intertemporal Poverty Measurement

A number of chronic poverty measures are now empirically applied to quantify the prevalence and intensity of chronic poverty, vis‐à‐vis transient experiences, using panel data. Welfare trajectories over time are assessed in order to identify the chronically poor and distinguish them from the non‐poor, or the transiently poor, and assess the extent and intensity of intertemporal poverty. We examine the implications of measurement error in the welfare outcome for some popular discontinuous chronic poverty measures, and propose corrections to these measures that seeks to minimize the consequences of measurement error. The approach is based on a novel criterion for the identification of chronic poverty that draws on fuzzy set theory. We illustrate the empirical relevance of the approach with a panel dataset from rural Ethiopia and some simulations.     

Robust Poverty and Inequality Measurement in Egypt: Correcting for Spatial-price Variation and Sample Design Effects

The paper estimates inequality and absolute poverty in Egypt for 1997 with measures that are robust to sample design effects and corrected for spatial variation in price levels. Standard errors for inequality indices are calculated using a bootstrap approach which replicates the sample design. Standard errors for poverty indices are corrected for the design effects resulting from sample stratification and clustering. The authors use data from the Egypt Integrated Household Survey and follow the cost‐of‐basic‐needs methodology to construct region‐specific poverty lines. It is found that 15.7 million people were poor in Egypt in 1997, or 26.5% of the population. The estimates indicate a sharp sectoral difference with rural areas being significantly poorer, but significant differences in poverty were not found between Upper and Lower Egypt. This finding differs substantially from the conventional wisdom that Upper Egypt is poorer than Lower Egypt and results from the correction for spatial‐price variation.     

FGT Old‐Age Poverty Measures and the Mortality Paradox: Theory and Evidence

Income‐differentiated mortality, by reducing the share of poor persons in the population, leads to the “Mortality Paradox”: the worse the survival conditions of the poor are, the lower is the measured poverty. We show that FGT measures (Foster et al ., 1984 ) are, in general, not robust to variations in survival conditions. Then, following Kanbur and Mukherjee ( 2007 ), we propose to adjust FGT poverty measures by extending the income profiles of the prematurely dead, and we identify the condition under which so‐adjusted FGT measures are robust to mortality changes. Finally, we show, on the basis of data from 2007 on old‐age poverty in 11 European economies, that the effect of extending income profiles of the prematurely dead on poverty measurement varies with: (1) the fictitious income assigned to the prematurely dead; (2) the degree of poverty aversion; (3) the shape of the (unadjusted) income distribution; and (4) the strength of the income/mortality relationship.     

USING PSEUDO‐PANELS TO MEASURE INCOME MOBILITY IN LATIN AMERICA

This paper presents a comparative overview of mobility patterns in 14 Latin American countries between 1992 and 2003. Using three alternative econometric techniques on constructed pseudo‐panels, the paper provides a set of estimators for the traditional notion of income mobility as well as for mobility around extreme and moderate poverty lines. The estimates suggest very high levels of time‐dependent unconditional immobility for the Region. However, the introduction of socioeconomic and personal factors reduces the estimate of income immobility by around 30 percent. There are also large variations in country‐specific income mobility (estimated to explain some additional 10 percent of inter‐temporal income variation). Analyzing the determinants of changes in poverty incidence within cohorts revealed statistically significant roles for age, gender, and education of the household head, the latter subject to distinctive effects across levels of attainment and transition in and out of poverty.     

A Micro‐Econometric Analysis of the Antipoverty Effect of Social Cash Transfers in Italy

We analyze the anti‐poverty effect of social cash transfers using a micro‐econometric approach. Aggregate analyses, based on comparing average poverty indicators before and after public transfers, fail to address who receives the transfers and how the transfers are distributed among the poor. We consider three dichotomous outcome variables: (i) poverty status before the receipt of transfers; (ii) the receipt of transfers; and (iii) poverty status after the receipt of transfers. We use a trivariate probit model with sample selection, connecting the outcome variables to the characteristics of the household and its head. Our empirical results highlight that the Italian social transfers system overprotects certain household typologies at the expense of others, as social transfers are primarily awarded to employees with permanent positions and the elderly, while the system is not generous enough to large households with dependant children, the self‐employed, temporary contract workers, and the unemployed.     

Decomposing Vulnerability to Poverty

This paper applies the decomposition of the Foster–Greer–Thorbecke poverty index to the measurement of individual vulnerability to poverty. I highlight that poverty risk can be expressed as a function of expected incidence, expected intensity, and expected variability below the poverty line, three essential aspects for improving the design of appropriate risk‐management policies. An empirical illustration is provided using the British Household Panel Survey and the Italian Survey on Household Income and Wealth.     

Usury,Market Power and Poverty Traps: A Study of Rural Credit in 1930s’ China

This paper studies the cross-regional variation of interest rates in China in the 1930s. Based on county-level data from the Buck (1941) rural surveys, we examine factors that may have influenced rural interest rates in pre-1949 China. Since the quality of institutions that define property rights and facilitate contract enforcement is important for such transactions as land tenancy arrangements, we treat land tenancy rate (or percentage of owner-farmers) as a proxy for institutional quality. Contrary to the popular belief among historians and economists that usury or high interest rates caused persistent poverty, we find that while the monopoly-exploitation hypothesis has little explanatory power, a region’s institutional quality and income level are persistent and significant determinants of interest rates. Thus, poverty is a key driver of high rates of interest. Economic growth and the development of market institutions are crucial for lowering high interest rates and combating usury.