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Chronic Poverty and Poverty Dynamics: Resolving a Paradox in the Normative Basis for Intertemporal Poverty Measures

Research on Economic Inequality

ISBN: 978-1-78714-522-1, eISBN: 978-1-78714-521-4

ISSN: 1049-2585

Publication date: 10 October 2017

Abstract

There is a paradox in the normative foundations for chronic and intertemporal poverty measurement. Measures that reflect particular aversion to chronicity of poverty cannot also reflect particular aversion to fluctuations in the level of poverty when poverty is intense, yet good arguments are made in favour of each of these properties. I argue that the paradox may be explained if the poverty analyst implicitly predicts that an individual observed to experience persistent poverty will continue to experience poverty when unobserved. The paradox may then be resolved by separating the normative exercise of evaluation, applying a measure that reflects particular aversion to fluctuations, from a positive exercise of modelling and prediction. This proposal is illustrated by application to panel data from rural Ethiopia, covering the period 1994–2004. Several dynamic models are estimated, and a simple model with household-specific trends is found to give the best predictions of future wellbeing levels. Appropriately normalised measures of intertemporal poverty are applied to the predicted and observed trajectories of wellbeing, and results are found to differ substantially from naïve application of the measures to observed periods only. While similar results are obtained by naïve application of the measures that embody particular aversion to chronicity, separation of the normative and positive exercises maintains conceptual clarity.

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Acknowledgements

Acknowledgments

The data used in the study are from the ERHS, conducted by the IFPRI in collaboration with the Economics/AAU and the CSAE, University of Oxford. The funding for the survey was provided by the UK Economic and Social Research Council (ESRC); Swedish International Development Agency (SIDA); United States Agency for International Development (USAID); and the World Bank. The PA-specific poverty lines and the household consumption aggregates used in this study were constructed by Stefan Dercon, University of Oxford, and extended by Catherine Porter, Heriot-Watt University. I am grateful to them for helpful discussions as well as the use of these data. The editor and an anonymous referee gave very helpful comments. Any errors are entirely my own responsibility.

Citation

Quinn, N.N. (2017), "Chronic Poverty and Poverty Dynamics: Resolving a Paradox in the Normative Basis for Intertemporal Poverty Measures", Bandyopadhyay, S. (Ed.) Research on Economic Inequality (Research on Economic Inequality, Vol. 25), Emerald Publishing Limited, Bingley, pp. 103-135. https://doi.org/10.1108/S1049-258520170000025004

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Emerald Publishing Limited

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