Poverty traps and nonlinear income dynamics with measurement error and individual heterogeneity

By Francisca M. Antman, David J. McKenzie. 2005

139 citations recorded by the source corpus.

Abstract 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 nonlinear income dynamics and testing of the presence of poverty traps. The paper explicitly allows for 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 labour earnings, income and expenditure in urban 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, we find no evidence for the existence of a poverty trap for any group in our sample.

Subfields: Safety Research, Sociology and Political Science, Soil Science

View Paper: https://www.semanticscholar.org/paper/7fe46b14ace046a1f336aa33eed0e90a2742f328

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Citations in the corpus

Poverty Reduction and Growth: Virtuous and Vicious Circles (2006, background): “Paraphrased from Antman and McKenzie (2005), written for this report.”
Well-Being Dynamics and Poverty Traps (2016, unknown): “Antman & McKenzie (2007), using a pseudopanel of income data from urban Mexico and allowing for individual heterogeneity, find no evidence of a poverty trap.”
Middle-Income Traps: A Conceptual and Empirical Survey (2015, unknown): “See, for example, Antman and McKenzie, 2007.”
The Economics of Poverty Traps and Persistent Poverty: Empirical and Policy Implications (2013, unknown): “The most commonplace tests for poverty traps (for example, Adato , Carter & May, 2006; Antman & McKenzie, 2007; Barrett et al., 2006a; Carter, Little, Mogues, & Negatu, 2007; Jalan & Ravallion, 2005; Lokshin & Ravallion, 2004; Lybbert, Barrett, Desta, & Coppock, 2004; McKenzie & Woodruff, 2006; Van…”
Why do people stay poor? (2020, methodology): “For more details, see Fan and Gijbels (1996) 24This specification is similar to those in Antman and McKenzie (2007), Jalan and Ravallion (2004), and Lokshin and Ravallion (2004).”
Assets, Shocks, and Poverty Traps in Rural Mozambique (2012, background): “2 For instance, Naschold (2005) for Pakistan, Naschold (2009) and Dercon and Outes (2009) for India, Quisumbing and Baulch (2009) for Bangladesh, Lokshin and Ravallion (2002) for Hungary and Russia, Jalan and Ravallion (2004) for rural China and Antman and McKenzie (2007) for urban Mexico. One excep”