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Abstract

Vol. 54, No. 4, pp. 353-374 (2003)

“Dynamic Analysis of Poverty -Review and Application to Pakistan-”
Takashi Kurosaki (The Institute of Economic Research, Hitotsubashi University)

This paper investigates how to measure poverty for a region or group and for individuals when income and consumption at the individual level fluctuate stochastically. First, the literature on this subject is surveyed with a focus on decomposition and vulnerability measures. The existing measures are examined based on a theoretical household model of dynamic optimization under risk. Second, several of the measures are applied to a two-period panel dataset from rural Pakistan in order to investigate empirical characteristics of these measures. The theoretical inverstigation shows that the existing measures have both pros and cons in terms of theoretical appeals, intuitive meanings, and computational demands. The application to Pakistan shows that these measures are complementary in the sense that each of them has information not included in others. Therefore, in empirical application, different methodologies need to be combined, Considering the nature of study regions, datasets, and research objectives.