Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity

Theories of poverty traps stand in sharp contrast to the view that anybody can make it through hard work and thrift. However, empirical detection of poverty traps is complicated by the lack of long panels, measurement error, and attrition. This paper shows how dynamic pseudo-panel methods can overco...

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Main Authors:	Antman, Francisca, McKenzie, David J.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	CAPITAL MARKET CONDITIONAL CONVERGENCE CONSUMER PRICE INDEX DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DYNAMIC ADJUSTMENT ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC REVIEW ECONOMIC STUDIES EMPIRICAL LITERATURE EMPIRICAL STUDIES FUNCTIONAL FORM HOUSEHOLD INCOME HOUSEHOLD MEMBERS INCOME INCOME DISTRIBUTION INCOME LEVEL INCOME LEVELS INCOMES INCREASING FUNCTION INEQUALITY INSTRUMENTAL VARIABLES INSURANCE LABOR FORCE LAGGED DEPENDENT LINEAR MODEL LINEAR REGRESSION LOW INCOME MACROECONOMICS MARKET IMPERFECTIONS MEAN INCOME MEASUREMENT ERROR MEASUREMENT ERRORS MEASUREMENT ¡ ¢ ERROR MINIMUM LEVEL MORAL HAZARD NATIONAL INCOME NUTRITIONAL STATUS OLD AGE POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY RESEARCH POLITICAL ECONOMY POOR POSITIVE VALUE REMITTANCES RISK MANAGEMENT SAMPLE SIZE SERIAL CORRELATION TIME SERIES TRANSFER PROGRAMS TRANSITION ECONOMIES UNEMPLOYMENT WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2005/11/6399313/poverty-traps-nonlinear-income-dynamics-measurement-error-individual-heterogeneity http://hdl.handle.net/10986/8493

id	okr-10986-8493
recordtype	oai_dc
spelling	okr-10986-84932021-04-23T14:02:43Z Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity Antman, Francisca McKenzie, David J. CAPITAL MARKET CONDITIONAL CONVERGENCE CONSUMER PRICE INDEX DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DYNAMIC ADJUSTMENT ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC REVIEW ECONOMIC STUDIES EMPIRICAL LITERATURE EMPIRICAL STUDIES FUNCTIONAL FORM HOUSEHOLD INCOME HOUSEHOLD MEMBERS INCOME INCOME DISTRIBUTION INCOME LEVEL INCOME LEVELS INCOMES INCREASING FUNCTION INEQUALITY INSTRUMENTAL VARIABLES INSURANCE LABOR FORCE LAGGED DEPENDENT LINEAR MODEL LINEAR REGRESSION LOW INCOME MACROECONOMICS MARKET IMPERFECTIONS MEAN INCOME MEASUREMENT ERROR MEASUREMENT ERRORS MEASUREMENT ¡ ¢ ERROR MINIMUM LEVEL MORAL HAZARD NATIONAL INCOME NUTRITIONAL STATUS OLD AGE POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY RESEARCH POLITICAL ECONOMY POOR POSITIVE VALUE REMITTANCES RISK MANAGEMENT SAMPLE SIZE SERIAL CORRELATION TIME SERIES TRANSFER PROGRAMS TRANSITION ECONOMIES UNEMPLOYMENT WEALTH Theories of poverty traps stand in sharp contrast to the view that anybody can make it through hard work and thrift. However, empirical detection of poverty traps is complicated by the lack of long panels, measurement error, and attrition. This paper shows how dynamic pseudo-panel methods can overcome these difficulties, allowing estimation of non-linear income dynamics and testing for the presence of poverty traps. The paper explicitly allows for individual heterogeneity in income dynamics to account for the possibility that particular groups of individuals may face traps, even if the average individual does not. These methods are used to examine the evidence for a poverty trap in labor earnings, income, and expenditure in Mexico and are compared to panel data estimates from a short rotating panel. The results do find evidence of nonlinearities in household income dynamics and demonstrate large bias in the panel data estimates. Nevertheless, even after allowing for heterogeneity and accounting for measurement error, the paper finds no evidence of the existence of a poverty trap for any group in the sample. 2012-06-19T21:40:54Z 2012-06-19T21:40:54Z 2005-11 http://documents.worldbank.org/curated/en/2005/11/6399313/poverty-traps-nonlinear-income-dynamics-measurement-error-individual-heterogeneity http://hdl.handle.net/10986/8493 English Policy Research Working Paper; No. 3764 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Mexico
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	CAPITAL MARKET CONDITIONAL CONVERGENCE CONSUMER PRICE INDEX DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DYNAMIC ADJUSTMENT ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC REVIEW ECONOMIC STUDIES EMPIRICAL LITERATURE EMPIRICAL STUDIES FUNCTIONAL FORM HOUSEHOLD INCOME HOUSEHOLD MEMBERS INCOME INCOME DISTRIBUTION INCOME LEVEL INCOME LEVELS INCOMES INCREASING FUNCTION INEQUALITY INSTRUMENTAL VARIABLES INSURANCE LABOR FORCE LAGGED DEPENDENT LINEAR MODEL LINEAR REGRESSION LOW INCOME MACROECONOMICS MARKET IMPERFECTIONS MEAN INCOME MEASUREMENT ERROR MEASUREMENT ERRORS MEASUREMENT ¡ ¢ ERROR MINIMUM LEVEL MORAL HAZARD NATIONAL INCOME NUTRITIONAL STATUS OLD AGE POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY RESEARCH POLITICAL ECONOMY POOR POSITIVE VALUE REMITTANCES RISK MANAGEMENT SAMPLE SIZE SERIAL CORRELATION TIME SERIES TRANSFER PROGRAMS TRANSITION ECONOMIES UNEMPLOYMENT WEALTH
spellingShingle	CAPITAL MARKET CONDITIONAL CONVERGENCE CONSUMER PRICE INDEX DATA SET DEPENDENT VARIABLE DEVELOPING COUNTRIES DYNAMIC ADJUSTMENT ECONOMETRICS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC PERFORMANCE ECONOMIC REVIEW ECONOMIC STUDIES EMPIRICAL LITERATURE EMPIRICAL STUDIES FUNCTIONAL FORM HOUSEHOLD INCOME HOUSEHOLD MEMBERS INCOME INCOME DISTRIBUTION INCOME LEVEL INCOME LEVELS INCOMES INCREASING FUNCTION INEQUALITY INSTRUMENTAL VARIABLES INSURANCE LABOR FORCE LAGGED DEPENDENT LINEAR MODEL LINEAR REGRESSION LOW INCOME MACROECONOMICS MARKET IMPERFECTIONS MEAN INCOME MEASUREMENT ERROR MEASUREMENT ERRORS MEASUREMENT ¡ ¢ ERROR MINIMUM LEVEL MORAL HAZARD NATIONAL INCOME NUTRITIONAL STATUS OLD AGE POLICY IMPLICATIONS POLICY INTERVENTIONS POLICY RESEARCH POLITICAL ECONOMY POOR POSITIVE VALUE REMITTANCES RISK MANAGEMENT SAMPLE SIZE SERIAL CORRELATION TIME SERIES TRANSFER PROGRAMS TRANSITION ECONOMIES UNEMPLOYMENT WEALTH Antman, Francisca McKenzie, David J. Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity
geographic_facet	Latin America & Caribbean Mexico
relation	Policy Research Working Paper; No. 3764
description	Theories of poverty traps stand in sharp contrast to the view that anybody can make it through hard work and thrift. However, empirical detection of poverty traps is complicated by the lack of long panels, measurement error, and attrition. This paper shows how dynamic pseudo-panel methods can overcome these difficulties, allowing estimation of non-linear income dynamics and testing for the presence of poverty traps. The paper explicitly allows for individual heterogeneity in income dynamics to account for the possibility that particular groups of individuals may face traps, even if the average individual does not. These methods are used to examine the evidence for a poverty trap in labor earnings, income, and expenditure in Mexico and are compared to panel data estimates from a short rotating panel. The results do find evidence of nonlinearities in household income dynamics and demonstrate large bias in the panel data estimates. Nevertheless, even after allowing for heterogeneity and accounting for measurement error, the paper finds no evidence of the existence of a poverty trap for any group in the sample.
format	Publications & Research :: Policy Research Working Paper
author	Antman, Francisca McKenzie, David J.
author_facet	Antman, Francisca McKenzie, David J.
author_sort	Antman, Francisca
title	Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity
title_short	Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity
title_full	Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity
title_fullStr	Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity
title_full_unstemmed	Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity
title_sort	poverty traps and nonlinear income dynamics with measurement error and individual heterogeneity
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2005/11/6399313/poverty-traps-nonlinear-income-dynamics-measurement-error-individual-heterogeneity http://hdl.handle.net/10986/8493
_version_	1764407935870435328

Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity

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