Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy

In theory, it is possible that the persistent poverty that has emerged in many transition economies, is attributable to underlying, non-convexities in the dynamics of household incomes - such that a vulnerable household will never recover from a sufficiently large, but short-lived shock to its incom...

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Main Authors:	Lokshin, Michael, Ravallion, Martin
Format:	Publications & Research
Language:	en_US
Published:	World Bank, Washington, DC 2015
Subjects:	absolute poverty adjustment process Agriculture autoregression business cycle capital accumulation Cd central planning chronic poverty cumulative distribution function data model data set distribution function distribution functions dynamic panel econometric issues econometric model econometric models Econometrics Economic Development economic dynamics Economic Growth Economic Review Economic Studies Economic theory Endogenous Variable Endogenous variables equations equilibrium equilibrium level exogenous variables explanatory variables famine functional forms General Equilibrium Model GNP growth models household composition household income household incomes household members household size human capital income components income distribution income equation income increase Income Inequality income level income shocks Income Study Inequality insurance Labor market Labor Markets labor productivity LDCs linear Model linear relationship liquidity living standards low incomes macroeconomics Maximum Likelihood method median income multiple equilibria negative impact negative shocks normal distribution optimization POLICY RESEARCH poor poverty dynamics poverty incidence private transfers random effects rapid increase real income real wages Relative poverty serial correlation serial dependence Series Data significant effect Social Policies Social Policy social safety social security surplus labor theoretical models time series transition economies unemployment urban areas Economic shocks Household income Transition economies Economic impact Poverty incidence Panel analysis Nonlinear programming models Multiplier (economics)
Online Access:	http://hdl.handle.net/10986/21298

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spelling	okr-10986-212982021-04-23T14:04:01Z Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy Lokshin, Michael Ravallion, Martin absolute poverty adjustment process Agriculture autoregression business cycle capital accumulation Cd central planning chronic poverty cumulative distribution function data model data set distribution function distribution functions dynamic panel econometric issues econometric model econometric models Econometrics Economic Development economic dynamics Economic Growth Economic Review Economic Studies Economic theory Endogenous Variable Endogenous variables equations equilibrium equilibrium level exogenous variables explanatory variables famine functional forms General Equilibrium Model GNP growth models household composition household income household incomes household members household size human capital income components income distribution income equation income increase Income Inequality income level income shocks Income Study Inequality insurance Labor market Labor Markets labor productivity LDCs linear Model linear relationship liquidity living standards low incomes macroeconomics Maximum Likelihood method median income multiple equilibria negative impact negative shocks normal distribution optimization POLICY RESEARCH poor poverty dynamics poverty incidence private transfers random effects rapid increase real income real wages Relative poverty serial correlation serial dependence Series Data significant effect Social Policies Social Policy social safety social security surplus labor theoretical models time series transition economies unemployment urban areas Economic shocks Household income Transition economies Economic impact Poverty incidence Panel analysis Nonlinear programming models Endogenous variables Multiplier (economics) In theory, it is possible that the persistent poverty that has emerged in many transition economies, is attributable to underlying, non-convexities in the dynamics of household incomes - such that a vulnerable household will never recover from a sufficiently large, but short-lived shock to its income. This happens when there are multiple equilibria in household incomes, such that two households with the same characteristics, can have different incomes in the long run. To test the theory, the authors estimate a dynamic, panel data model of household incomes, with non-linear dynamics, and endogenous attrition. Their estimates, using data for Hungary in the 1990s, exhibit non-linearity in the income dynamics. The authors find no evidence of multiple equilibria. In general, households bounce back from transient shocks, although the process is not rapid. 2015-01-20T17:03:26Z 2015-01-20T17:03:26Z 2000-10 http://hdl.handle.net/10986/21298 en_US Policy Research Working Paper;No. 2459 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank, Washington, DC Publications & Research Hungary
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	en_US
topic	absolute poverty adjustment process Agriculture autoregression business cycle capital accumulation Cd central planning chronic poverty cumulative distribution function data model data set distribution function distribution functions dynamic panel econometric issues econometric model econometric models Econometrics Economic Development economic dynamics Economic Growth Economic Review Economic Studies Economic theory Endogenous Variable Endogenous variables equations equilibrium equilibrium level exogenous variables explanatory variables famine functional forms General Equilibrium Model GNP growth models household composition household income household incomes household members household size human capital income components income distribution income equation income increase Income Inequality income level income shocks Income Study Inequality insurance Labor market Labor Markets labor productivity LDCs linear Model linear relationship liquidity living standards low incomes macroeconomics Maximum Likelihood method median income multiple equilibria negative impact negative shocks normal distribution optimization POLICY RESEARCH poor poverty dynamics poverty incidence private transfers random effects rapid increase real income real wages Relative poverty serial correlation serial dependence Series Data significant effect Social Policies Social Policy social safety social security surplus labor theoretical models time series transition economies unemployment urban areas Economic shocks Household income Transition economies Economic impact Poverty incidence Panel analysis Nonlinear programming models Endogenous variables Multiplier (economics)
spellingShingle	absolute poverty adjustment process Agriculture autoregression business cycle capital accumulation Cd central planning chronic poverty cumulative distribution function data model data set distribution function distribution functions dynamic panel econometric issues econometric model econometric models Econometrics Economic Development economic dynamics Economic Growth Economic Review Economic Studies Economic theory Endogenous Variable Endogenous variables equations equilibrium equilibrium level exogenous variables explanatory variables famine functional forms General Equilibrium Model GNP growth models household composition household income household incomes household members household size human capital income components income distribution income equation income increase Income Inequality income level income shocks Income Study Inequality insurance Labor market Labor Markets labor productivity LDCs linear Model linear relationship liquidity living standards low incomes macroeconomics Maximum Likelihood method median income multiple equilibria negative impact negative shocks normal distribution optimization POLICY RESEARCH poor poverty dynamics poverty incidence private transfers random effects rapid increase real income real wages Relative poverty serial correlation serial dependence Series Data significant effect Social Policies Social Policy social safety social security surplus labor theoretical models time series transition economies unemployment urban areas Economic shocks Household income Transition economies Economic impact Poverty incidence Panel analysis Nonlinear programming models Endogenous variables Multiplier (economics) Lokshin, Michael Ravallion, Martin Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy
geographic_facet	Hungary
relation	Policy Research Working Paper;No. 2459
description	In theory, it is possible that the persistent poverty that has emerged in many transition economies, is attributable to underlying, non-convexities in the dynamics of household incomes - such that a vulnerable household will never recover from a sufficiently large, but short-lived shock to its income. This happens when there are multiple equilibria in household incomes, such that two households with the same characteristics, can have different incomes in the long run. To test the theory, the authors estimate a dynamic, panel data model of household incomes, with non-linear dynamics, and endogenous attrition. Their estimates, using data for Hungary in the 1990s, exhibit non-linearity in the income dynamics. The authors find no evidence of multiple equilibria. In general, households bounce back from transient shocks, although the process is not rapid.
format	Publications & Research
author	Lokshin, Michael Ravallion, Martin
author_facet	Lokshin, Michael Ravallion, Martin
author_sort	Lokshin, Michael
title	Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy
title_short	Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy
title_full	Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy
title_fullStr	Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy
title_full_unstemmed	Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy
title_sort	short-lived shocks with long-lived impacts? household income dynamics in a transition economy
publisher	World Bank, Washington, DC
publishDate	2015
url	http://hdl.handle.net/10986/21298
_version_	1764447864395661312

Short-Lived Shocks with Long-Lived Impacts? Household Income Dynamics in a Transition Economy

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