• Selected
• Entire List

Abstract:
While the incidence of extreme poverty in China fell dramatically over 1980-2001, progress was uneven over time and across provinces. Rural areas accounted for the bulk of the gains to the poor, though migration to urban areas helped. The pattern of growth mattered. Rural economic growth was far more important to national poverty reduction than urban economic growth. Agriculture played a far more important role than the secondary or tertiary sources of GDP. Rising inequality within the rural sector greatly slowed poverty reduction. Provinces starting with relatively high inequality saw slower progress against poverty, due both to lower growth and a lower growth elasticity of poverty reduction. Taxation of farmers and inflation hurt the poor. External trade had little short-term impact.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to understand the causes of country success in poverty reduction.

China, poverty, inequality, economic growth, policies

Abstract:
Nonfarm economic growth in India had very different effects on poverty in different states. Nonfarm growth was least effective at reducing poverty in states where initial conditions were poor in terms of rural development and human resources. Among initial conditions conducive to pro-poor growth, literacy plays a notably positive role. Ravallion and Datt use 20 household surveys for India's 15 major states, spanning 1960-94, to study how initial conditions and the sectoral composition of economic growth interact to influence how much economic growth reduced poverty.

The elasticities of measured poverty to farm yields and development spending did not differ significantly across states. But the elasticities of poverty to (urban and rural) nonfarm output varied appreciably, and the differences were quantitatively important to the overall rate of poverty reduction. States with initially lower farm productivity, lower rural living standards relative to those in urban areas, and lower literacy experienced a less pro-poor growth process.

This paper - a joint product of Poverty and Human Resources, Development Research Group, and the Poverty Reduction and Economic Management Sector Unit, South Asia Region - is part of a larger effort in the Bank to better understand the conditions required for pro-poor growth.

Poverty, economic growth, rural development, human development, India

Abstract:
Economists have relied heavily on household incomes or expenditures normalized for differences in household specific prices and demographics in their research and policy advice related to poverty and inequality. Recognizing the conceptual and empirical problems that confound such measures does not mean that they should be ignored. Instead, it indicates the need for supplementary measures to capture the missing items. Implementing a genuinely multidimensional approach will often make the welfare rankings of social states more difficult, but that fact points to the nonrobustness of low-dimensional rankings. This may have its own policy ramifications, with the possibility of correspondence between policy instruments and welfare objectives. The model types used to understand the poverty and inequity determination processes will be affected. Not only will there be more dependent variables to consider, but variables will have potentially complex relationships. These relationships will often be hard to empirically disentangle, despite richer integrated and longitudinal data sets. Such data open rich and relevant agenda for research into the dynamics of poverty along multiple dimensions. A simultaneous attack on these issues from all three fronts - measurement, modeling, and data - offers hope of establishing a credible empirical foundation for public action in fighting poverty.

Abstract:
January 1996

There is no intrinsic tradeoff between long-run aggregate economic growth and overall equity. Policies aimed at helping the poor accumulate productive assets --- especially policies to improve schooling, health, and nutrition --- when adopted in a relatively nondistorted framework, are important instruments for achieving higher growth.

The stylized fact that distribution must get worse with economic growth in poor countries before it can get better turns out not to be a fact at all. Growth's effects on inequality can go either way and are contingent on several other factors.

Bruno, Ravallion, and Squire found no sign in the new cross-country data they assembled that growth has any systematic impact on inequality. Possibly measurement errors confound the true relationship, but they think it more likely that the relationship between growth and distribution is not as simple as some theories have held.

Since distribution does not worsen, growth reduces absolute poverty. Indeed, absolute poverty measures typically respond quite elastically to growth, and the benefits are certainly not confined to those near typical poverty lines.

Of course, one cannot say that growth always benefits the poor or that none of the poor lose from pro-growth policy reform. Only aggregate effects are studied. But for 17 of the 20 countries for which they assemble quite good data (from at least two surveys since the mid-1980s), the mean and the proportion of people living below $1 a day moved in opposite directions.

The gains to poor people from a distribution-neutral growth process will tend to be lower, the higher the extent of initial inequality. A smaller share of total income must imply a smaller absolute gain from a given increment to total income. Compensatory direct interventions can be important, provided they are integrated into a framework of fiscal and monetary discipline.

The evidence does not suggest that growth is always distribution-neutral, and it would be wrong to conclude that changes in distribution are of little consequence. The point is not that distribution is irrelevant or that it never changes, but that its changes are roughly uncorrelated with economic growth.

There is no intrinsic tradeoff between long-run aggregate efficiency and overall equity. Policies aimed at helping the poor accumulate productive assets --- especially policies to improve schooling, health, and nutrition --- when adopted in a relatively nondistorted framework, are important instruments for achieving higher growth.

This paper --- a product of the Office of the Vice President, Development Economics, and the Poverty and Human Resources Division and Office of the Director, Policy Research Department --- was prepared for the IMF Conference on Income Distribution and Sustainable Growth, June 1-2, 1995.

Abstract:
The author critically reviews the methods available for the ex-post counterfactual analysis of programs that are assigned exclusively to individuals, households, or locations. The discussion covers both experimental and non-experimental methods (including propensity-score matching, discontinuity designs, double and triple differences, and instrumental variables). Two main lessons emerge. First, despite the claims of advocates, no single method dominates; rigorous, policy-relevant evaluations should be open-minded about methodology. Second, future efforts to draw more useful lessons from evaluations will call for more policy-relevant measures and deeper explanations of measured impacts than are possible from the classic ("black box") assessment of mean impact.

Poverty Monitoring & Analysis, Rural Poverty Reduction, Scientific Research & Science Parks, Science Education, Poverty Impact Evaluation

Abstract:
The paper critically reviews the methods available for the ex-post counterfactual analysis of programs that are assigned exclusively to individuals, households or locations. The discussion covers both experimental and nonexperimental methods (including propensity-score matching, discontinuity designs, double and triple differences and instrumental variables). Two main lessons emerge: Firstly, despite the claims of advocates, no single method dominates; rigorous, policy-relevant evaluations should be open-minded about methodology. Secondly, future efforts to draw more useful lessons from evaluations will call for more policy-relevant measures and deeper explanations of measured impacts than are possible from the classic ("black box") assessment of mean impact.

Abstract:
This entertaining introduction to the concepts and methods of impact evaluation - as seen through the eyes of Ms. Speedy Analyst - assumes readers are familiar with basic statistics up to regression analysis (as covered in an introductory text on econometrics). The setting for this good-natured training guide for impact evaluation is the fictional developing country Labas.

Twelve months ago the government introduced an antipoverty program in Northwest Labas with support from the World Bank. The program aims to provide cash transfers to poor families with school-age children. To be eligible to receive the transfer, households must have observable characteristics that suggest they are poor. To continue receiving the transfer, they must keep their children in school until 18 years of age. The program is called PROSCOL.

The government wants to assess PROSCOL's impact on poverty, to help decide whether the program should be expanded or dropped. The Finance Minister asks the undersecretary, and the under-secretary calls in Ms. Speedy Analyst. Ms. Speedy Analyst's on-the-job training in how to assess the impact of a social program provides the vehicle through which this paper explains: Methods of evaluating a program's impact - randomizing, matching, reflexive comparisons, double difference (or difference in difference) methods, and instrumental variables methods. The types of data used for impact evaluation, typical problems with and uses of data, control variables, instrumental variables, regressions, and so on.

How to form and match comparison groups.

Sources of bias.

The value of baseline surveys.

Measures of poverty (headcount index, poverty gap index, and squared poverty gap).

How to compare poverty with and without the program.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to provide useful training tools for Bank staff.

Abstract:
A member of a collective-action household may or may not share the benefits of literacy with others in that household; the shared gains from doing so may well be offset by a shift in the balance of power within the family. Using household survey data for Bangladesh we find strong external effects of education on individual earnings. Holding a range of personal attributes constant, an illiterate adult earns significantly more in the non-farm economy when living in a family with at least one literate member. These effects are strongest, and most robust, for women. Omitted-variable bias cannot be ruled out, but would also be consistent with an intra-household externality of literacy.

Household behavior, literacy, externalities, earnings, Bangladesh

Abstract:
These days it seems that almost everyone in the development community is talking about "pro-poor growth." What exactly is it, and how can we measure it? Is ordinary economic growth always "pro-poor growth" or is that some special kind of growth? And if it is something special, what makes it happen? Ravallion first reviews alternative approaches to defining and measuring "pro-poor growth." He then analyzes evidence on whether growth is pro-poor, what factors make it more pro-poor (including the role played by both initial inequality and changing inequality), and whether the factors that make the distribution of the gains from growth pro-poor come at a cost to growth. The author identifies some priorities for future research.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to contribute to knowledge about the link between economic growth and poverty reduction.

Abstract:
The authors provide new evidence on the extent to which absolute poverty has urbanized in the developing world, and the role that population urbanization has played in overall poverty reduction. They find that one-quarter of the world's consumption poor live in urban areas and that the proportion has been rising over time. By fostering economic growth, urbanization helped reduce absolute poverty in the aggregate but did little for urban poverty. Over 1993-2002, the count of the"$1 a day"poor fell by 150 million in rural areas but rose by 50 million in urban areas. The poor have been urbanizing even more rapidly than the population as a whole. Looking forward, the recent pace of urbanization and current forecasts for urban population growth imply that a majority of the poor will still live in rural areas for many decades to come. There are marked regional differences: Latin America has the most urbanized poverty problem, East Asia has the least; there has been a"ruralization"of poverty in Eastern Europe and Central Asia; in marked contrast to other regions, Africa's urbanization process has not been associated with falling overall poverty.

Rural Poverty Reduction, Population Policies, Pro-Poor Growth and Inequality, City Development Strategies

Abstract:
The paper presents a major overhaul to the World Bank's past estimates of global poverty, incorporating new and better data. Extreme poverty-as judged by what"poverty"means in the world's poorest countries-is found to be more pervasive than we thought. Yet the data also provide robust evidence of continually declining poverty incidence and depth since the early 1980s. For 2005 we estimate that 1.4 billion people, or one quarter of the population of the developing world, lived below our international line of $1.25 a day in 2005 prices; 25 years earlier there were 1.9 billion poor, or one half of the population. Progress was uneven across regions. The poverty rate in East Asia fell from almost 80 percent to under 20 percent over this period. By contrast it stayed at around 50 percent in Sub-Saharan Africa, though with signs of progress since the mid 1990s. Because of lags in survey data availability, these estimates do not yet reflect the sharp rise in food prices since 2005.

Rural Poverty Reduction, Population Policies, Achieving Shared Growth, Services & Transfers to Poor

Abstract:
Higher agricultural yields reduced absolute poverty in rural India, both by raising smallholder productivity and by increasing real agricultural wages. But gains to the poor were far smaller in the short run than in the long run.

Unlike most developing countries, consistent poverty measures for India can be tracked over a long time. Ravallion and Datt used 20 household surveys for rural India for the years 1958-90 to measure the effects of agricultural growth on rural poverty and on the rural labor market and to find out how long it takes for the effects to be felt.

They found that measures of absolute rural poverty responded elastically to changes in mean consumption. But agricultural growth had no discernible impact - either positive or negative - on the share of total consumption going to the poor.

For the rural poor, Ravallion and Datt attribute the long-run gains from growth to higher average farm yields, which benefited poor people both directly and through higher real agricultural wages. And the benefits from higher yields were not confined to those near the poverty line - the poorest also benefited.

The process through which India's rural poor participate in the gains from agricultural growth takes time, although about half of the long-run impact comes within three years.

The long-run elasticity of the head-count index to farm yield was over 2 - of which 40 percent came through wages. Short-run elasticities were far smaller.

Inflation adversely affected the rural poor by eroding their real wages in the short run.

This paper - a product of the Office of the Vice President, Development Economics - is one in a series of background papers prepared for World Development Report 1995 on labor. The study was funded by the Bank's Research Support Budget under the research project Poverty in India, 1950­90 (RPO 677-82). The authors may be contacted at mravallion@worldbank.org or gdatt@worldbank.org.

Abstract:
Is it true that the poor have lost ground, even as average living standards have risen? No. Poor people typically share in rising average living standards. It has been claimed that in recent times the poor have lost ground, both relatively and absolutely, even as average standards of living were rising. Ravallion and Chen test that claim, using more than 100 household surveys for more than 40 countries.

Overall there was a small decrease in poverty incidence in 1987-93, though experiences differed across regions and countries. There was no general tendency for inequality or polarization to increase with growth. Distribution improves as often as it worsens in growing economies, and negative growth often appears to be highly detrimental to distribution. Poor people typically do share in rising average living standards. This holds in all regions.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to monitor progress in reducing poverty in the world.

Abstract:
The idea that developing countries face a trade-off between poverty and inequality has had considerable influence on thinking about development policy. The experience of developing countries in the 1990s does not, however, reveal any sign of a systematic trade-off between measures of absolute poverty and relative inequality. Indeed, falling inequality tends to come with falling poverty incidence. And rising inequality appears more likely to be putting a brake on poverty reduction than to be facilitating it. However, there is evidence of a trade-off for absolute inequality, suggesting that those who want a lower absolute gap between the rich and the poor must in general be willing to see lower absolute levels of living for poor people.

Inequality, poverty, growth

Abstract:
It has been argued that inequality should be of little concern in poor countries on the grounds that (1) absolute poverty in terms of consumption (or income) is the overriding issue in poor countries, and (2) the only thing that really matters to reducing absolute income poverty is the rate of economic growth. The author takes (1) as given but questions (2). He argues that there are a number of ways in which the extent of inequality in a society, and how it evolves over time, influences the extent of poverty today and the prospects for rapid poverty reduction in the future.

Abstract:
A new assessment is made of the developing world's progress against poverty. By the frugal $1 a day standard there were 1.1 billion poor people in 2001 - almost 400 million fewer than 20 years earlier. During that period the number of poor people declined by more than 400 million in China, though half the decline was in the early 1980s and the number outside China rose slightly. At the same time the number of people in the world living on less than $2 a day rose, so that there has been a marked bunching up of people living between $1 and $2 a day. Sub-Saharan Africa has become the region with the highest incidence of extreme poverty and the greatest depth of poverty. If these trends continue, the 1990 aggregate $1 a day poverty rate will be halved by 2015, meeting the Millennium Development Goal, though only East and South Asia will reach this goal.

Abstract:
Chen and Ravallion present new estimates of the extent of the developing world's progress against poverty. By the frugal $1 a day standard, they find that there were 1.1 billion poor in 2001 - almost 400 million fewer than 20 years earlier. Over the same period, the number of poor declined by more than 400 million in China, though half of this decline was in the first few years of the 1980s. The number of poor outside China rose slightly over the period. A marked bunching up of people between $1 and $2 a day has also emerged. Sub-Saharan Africa has become the region with the highest incidence of extreme poverty and the greatest depth of poverty. If these trends continue, then the aggregate $1 a day poverty rate for 1990 will be halved by 2015, though only East and South Asia will reach this goal.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to monitor progress against poverty in the world.

Abstract:
The authors report new estimates of measures of absolute poverty for the developing world over 1981-2004. A clear trend decline in the percentage of people who are absolutely poor is evident, although with uneven progress across regions. They find more mixed success in reducing the total number of poor. Indeed, the developing world outside China has seen little or no sustained progress in reducing the number of poor, with rising poverty counts in some regions, notably Sub-Saharan Africa. There are encouraging signs of progress in reducing the incidence of poverty in all regions after 2000, although it is too early to say if this is a new trend.

Rural Poverty Reduction, Population Policies, Pro-Poor Growth and Inequality, Services & Transfers to Poor

Abstract:
One side in the current debate about who benefits from growth has focused solely on average impacts on poverty and inequality, while the other side has focused on the diverse welfare impacts found beneath the averages. Both sides have a point. The evidence is compelling that the poor in developing countries do typically share in the gains from rising aggregate affluence and in the losses from aggregate contraction. But how much do poor people share in growth? Do they gain more in some settings than others? Do some gain while others lose? Does pro-poor growth mean more or less aggregate growth?

Recent theories and evidence suggest some answers, but deeper microeconomic empirical work is needed on growth and distributional change. Only then will we have a firm basis for identifying the specific policies and programs needed to complement and possibly modify growth-oriented policies.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to better inform development policy debates.

Economic growth, inequality, poverty

Abstract:
There has been much debate about how much India's poor have shared in the economic growth unleashed by economic reforms in the 1990s. Datt and Ravallion argue that India has probably maintained its 1980s rate of poverty reduction in the 1990s. However, there is considerable diversity in performance across states. This holds some important clues for understanding why economic growth has not done more for India's poor.

India's economic growth in the 1990s has not been occurring in the states where it would have the most impact on poverty nationally. If not for the sectoral and geographic imbalance of growth, the national rate of growth would have generated a rate of poverty reduction that was double India's historical trend rate. States with relatively low levels of initial rural development and human capital development were not well-suited to reduce poverty in response to economic growth.

The study's results are consistent with the view that achieving higher aggregate economic growth is only one element of an effective strategy for poverty reduction in India. The sectoral and geographic composition of growth is also important, as is the need to redress existing inequalities in human resource development and between rural and urban areas.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the department to better understand the relationship between economic growth and poverty.

Abstract:
Differing value judgments in measuring inequality underlie the conflicting factual claims about how much poor people have shared in the economic gains from globalization. Opponents in the debate differ in the extent to which they care about relative inequality versus absolute inequality, vertical inequalities versus horizontal inequalities, and whether they are consistently individualistic in assessing the extent of inequality. The value judgments on these issues made by both sides need greater scrutiny if the globalization debate is to move forward.

This paper - product of the Poverty Team, Development Research Group - is part of a larger effort in the group to contribute to the ongoing debate on globalization.

Globalization, inequality, poverty, value judgments

Abstract:
The benefits of financial development and globalization have come with continuing fragility in financial sectors. Periodic crises have had real but heterogeneous welfare impacts and not just for poor people; indeed, some of the conditions that foster deep and persistent poverty, such as lack of connectivity to markets, have provided a degree of protection for the poor. Past crises have also had longer-term impacts for some of those affected, most notably through the nutrition and schooling of children in poor families. As in other areas of policy, effective responses to a crisis require sound data and must take account of incentives and behavior. An important lesson from past experience is that the short-term responses to a crisis - macroeconomic stabilization, trade policies, financial sector policies and social protection - cannot ignore longer-term implications for both economic development and vulnerability to future crises.

Debt Markets, Safety Nets and Transfers, Emerging Markets, Access to Finance

Abstract:
In the last year or so, markedly different claims have been heard within the development community about just how much progress is being made against poverty and inequality in the current period of "globalization." Ravallion provides a nontechnical overview of the conceptual and methodological issues underlying these conflicting claims. He argues that the dramatically differing positions taken in this debate often stem from differences in the concepts and definitions used and differences in data sources and measurement assumptions. These differences are often hidden from view in the debate, but they need to be considered carefully if one is to properly interpret the evidence. The author argues that the best available evidence suggests that if the rate of progress against absolute poverty in the developing world in the 1990s is maintained, then the Millennium Development Goal of halving the 1990 aggregate poverty rate by 2015 will be achieved on time in the aggregate, though not in all regions. He concludes with some observations on the implications for the more policy-oriented debates on globalization and pro-poor growth.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to throw light on current development debates.

Abstract:
Both chronic and transient poverty are reduced by greater command over physical capital, and life-cycle effects for the two types of poverty are similar. But there the similarities end. Most policies aimed at reducing chronic poverty may have little or no effect on transient poverty. Are the determinants of chronic and transient poverty different? Do policies that reduce transient poverty also reduce chronic poverty?

Jalan and Ravallion decompose measures of household poverty into chronic and transient components and use censored conditional quantile estimators to investigate the household and geographic determinants of both chronic and transient poverty, taking panel data for post-reform rural China. They find that a household's average wealth holding is an important determinant for both transient and chronic poverty. Although household demographics, levels of education, and the health status of members of the household are important for chronic poverty, they are not significant determinants of transient poverty.

Both chronic and transient poverty are reduced by greater command over physical capital, and life-cycle effects for the two types of poverty are similar. But there the similarities end. Smaller and better-educated households have less chronic poverty, but household size and level of education matters little for transient poverty. Living in an area where health and education are better reduces chronic poverty but appears to be irrelevant to transient poverty. Nor are higher foodgrain yields a significant determinant of transient poverty, although they are highly significant in reducing chronic poverty.

These findings suggest that China's poor-area development program may be appropriate for reducing chronic poverty but is unlikely to help reduce variations in consumption that households typically face in poor areas - the exposure to uninsured income risk that underlies transient poverty will probably persist. Other policy instruments may be needed to deal with transient poverty, including seasonal public works, credit schemes, buffer stocks, and insurance options for the poor.

This paper - a product of Poverty and Human Resources, Development Research Group- is part of a larger effort in the group to reexamine the role of the informal sector.

Abstract:
Subjective poverty lines - based on the self-assessed adequacy of a family's food, housing, and clothing - accord closely on average with independent objective poverty lines. There are notable differences, however, when geographic and demographic poverty profiles are constructed. Pradhan and Ravallion show how subjective poverty lines can be derived using simple qualitative assessments of perceived consumption adequacy, based on a household survey. Respondents were asked whether their consumption of food, housing, and clothing was adequate for their family's needs.

Pradhan and Ravallion's approach, by identifying the subjective poverty line without the usual minimum-income question, offers wide applications in developing country settings. They implement it using survey data for Jamaica and Nepal.

The implied subjective poverty lines are robust to alternative methods of dealing with other components of consumption, for which the subjective adequacy question was not asked.

The aggregate poverty rates based on subjective poverty lines come close to those based on independent objective poverty lines.

There are notable differences, however, when geographic and demographic poverty profiles are constructed.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the department to improve methods of poverty measurement. Martin Ravallion may be contacted at mravallion@worldbank.org.

Abstract:
To minimize the harmful impact on poor people of macroeconomic shocks, sound policies for dealing with crises - and an adequate public safety net - should be in place before a crisis starts. Many developing countries faced macroeconomic shocks in the 1980s and 1990s. The impact of the shocks on welfare depended on the nature of the shock, on initial household and community conditions, and on policy responses.

To avoid severe and lasting losses to poor and vulnerable groups, governments and civil society need to be prepared for a flexible response well ahead of the crisis. A key component of a flexibly responsive system is an effective permanent safety net, which will typically combine a workfare program with targeted transfers and credit. Once a crisis has happened, several things should be done:

Macroeconomic policies should aim to achieve stabilization goals at the least cost to the poor. Typically, a temporary reduction in aggregate demand is inevitable but as soon as a sustainable external balance has been reached and inflationary pressures have been contained, macroeconomic policy should be eased (interest rates reduced and efficient public spending restored, to help offset the worst effects of the recession on the poor). A fiscal stimulus directed at labor-intensive activities (such as building rural roads) can combine the benefits of growth with those of income support for poor groups, for example.

Key areas of public spending should be protected, especially investments in health care, education, rural infrastructure, urban sanitation, and microfinance.

Efforts should be made to preserve the social fabric and build social capital.

Sound information should be generated on the welfare impacts of the crisis.

This paper - a joint product of the Poverty Group, Poverty Reduction and Economic Management Network, and Poverty and Human Resources, Development Research Group - is part of a larger effort in the Bank to inform policy choices aimed at minimizing the social costs of macroeconomic shocks.

Abstract:
New tools allow one to study the incidence of economic growth by initial leveof income, and to measure the rate of pro-poor growth in an economy. An application is provided using data for China in the 1990s.

It is important to know how aggregate economic growth or contraction was distributed according to initial levels of living. In particular, to what extent can it be said that growth was pro-poor? There are problems with past methods of addressing this question, notably that the measures used are inconsistent with the properties that are considered desirable for a measure of the level of poverty.

The authors provide some new tools for assessing to what extent the aggregate growth process in an economy is pro-poor. The key measurement tools is the growth incidence curve, which gives growth rates by quantiles (such as percentiles) ranked by income. Taking the area under this curve up to the headcount index of poverty gives a measure of the rate of pro-poor growth consistent with the Watts index for the level of poverty.

The authors give examples using survey data for China during the 1990s. Over 1990-99, the ordinary growth rate of household income per capita in China was 7 percent a year. The growth rate by quantile varied from 3 percent for the poorest percentile to 11 percent for the richest, while the rate of pro-poor growth was around 4 percent. The pattern was reversed for a few years in the mid-1990s, when the rate of pro-poor growth rose to 10 percent a year - above the ordinary growth rate of 8 percent.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to improve the analytic tools used for monitoring poverty over time and studying the impacts of economywide changes.

Abstract:
Drawing on a compilation of data from household surveys representing 130 countries, many over a period of 25 years, this paper reviews the evidence on levels and recent trends in global povertyand income inequality. It documents the negative correlations between both poverty and inequality indices, on the one hand, and mean income per capita on the other. It points to the dominant role of Asia in accounting for the bulk of the world's poverty reduction since 1981. The evolution of global inequality in the last decades is also described, with special emphasis on the different trends of inequality within and between countries. The statistical relationships between growth, inequality and poverty are discussed, as is the correlation between inequality and the growth elasticity of poverty reduction. Some of the recent literature on the drivers of distributional change in developing countries is also reviewed.

Inequality, Achieving Shared Growth, Services & Transfers to Poor, Population Policies, Poverty Impact Evaluation

Abstract:
Minimum wages are generally thought to be unenforceable in developing rural economies. But there is one solution - a workfare scheme in which the government acts as the employer of last resort. Is this a cost-effective policy against poverty? Using a microeconometric model of the casual labor market in rural India, the authors find that a guaranteed wage rate sufficient for a typical poor family to reach the poverty line would bring the annual poverty rate down from 34 percent to 25 percent at a fiscal cost representing 3-4 percent of GDP when run for the whole year. Confining the scheme to the lean season (three months) would bring the annual poverty rate down to 31 percent at a cost of 1.3 percent of GDP. While the gains from a guaranteed wage rate would be better targeted than a uniform (untargeted) cash transfer, the extra costs of the wage policy imply that it would have less impact on poverty.

Abstract:
At the outset of China's reform period, the country had a far higher poverty rate than for Africa as a whole. Within five years that was no longer true. This paper tries to explain how China escaped from a situation in which extreme poverty persisted due to failed and unpopular policies. While acknowledging that Africa faces constraints that China did not, and that context matters, two lessons stand out. The first is the importance of productivity growth in small holder agriculture, which will require both market-based incentives and public support. The second is the role played by strong leadership and a capable public administration at all levels of government.

Rural Poverty Reduction, Population Policies, Achieving Shared Growth, Services & Transfers to Poor

Abstract:
By the widely used difference-in-difference method, the Southwest China Poverty Reduction Project had little impact on the proportion of people in beneficiary villages consuming less than $1 a day - despite a public outlay of $400 million. Is that right, or is the true impact being hidden somehow? Chen and Ravallion find that impact estimates are quite sensitive to the choice of outcome indicator, the poverty line, and the matching method. There are larger poverty impacts at lower poverty lines. And there are much larger impacts on incomes than consumptions. Uncertainty about the impact probably made it hard for participants to infer the gain in permanent income, so they saved a high proportion of the short-term gain.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the impact on poverty of World Bank lending. The study was funded by the Bank's Research Support Budget under the research project Looking Beyond Averages: A Research Program on Poverty and Inequality (RPO 681-39).

Poverty, poor-area development projects, evaluation, savings, China

Abstract:
The paper presents the first major update of the international $1 a day poverty line, first proposed in 1990 for measuring absolute poverty by the standards of the world's poorest countries. In a new data set of national poverty lines we find that a marked economic gradient only emerges when consumption per person is above about $2.00 a day at 2005 purchasing power parity. Below this, the average poverty line is $1.25, which we propose as the new international poverty line. Relative poverty appears to matter more to developing countries than has been thought. The authors' proposed schedule of relative poverty lines is bounded below by $1.25, and rises at a gradient of $1 in $3 when mean consumption is above $2.00 a day.

Rural Poverty Reduction, Population Policies, Achieving Shared Growth, Urban Partnerships & Poverty

Abstract:
The paper examines the ways in which recent economic growth has been uneven in China and India and what this has meant for inequality and poverty. Drawing on analyses based on existing household survey data and aggregate data from official sources, the authors show that growth has indeed been uneven - geographically, sectorally, and at the household level - and that this has meant uneven progress against poverty, less poverty reduction than might have been achieved had growth been more balanced, and an increase in income inequality. The paper then examines why growth was uneven and why this should be of concern. The discussion is structured around the idea that there are both good and bad inequalities - drivers and dimensions of inequality and uneven growth that are good or bad in terms of what they imply for both equity and long-term growth and development. The authors argue that the development paths of both China and India have been influenced by, and have generated, both types of inequalities and that while good inequalities - most notably those that reflect the role of economic incentives - have been critical to the growth experience thus far, there is a risk that bad inequalities - those that prevent individuals from connecting to markets and limit investment and accumulation of human capital and physical capital - may undermine the sustainability of growth in the coming years. The authors argue that policies are needed that preserve the good inequalities - continued incentives for innovation and investment - but reduce the scope for bad ones, notably through investments in human capital and rural infrastructure that help the poor connect to markets.

Rural Poverty Reduction, Pro-Poor Growth and Inequality, Inequality, Population Policies

Abstract:
The poor urbanize faster than the population as a whole. But experience across countries suggests that a majority of the poor will still live in rural areas long after most people in the developing world live in urban areas.

Ravallion identifies conditions under which the urban sector's share of the poor population in a developing country will be a strictly increasing and strictly convex function of its share of the total population.
Cross-sectional data for 39 countries and time-series data for India are consistent with the expected theoretical relationship.

The empirical results imply that the poor urbanize faster than the population as a whole. But the experience across developing countries suggests that a majority of the poor will still live in rural areas long after most people in the developing world live in urban areas.

This paper - a product of Poverty, Development Research Group - is part of a larger effort in the group to monitor overall trends in poverty in developing countries. The author may be contacted at mravallion@worldbank.org.

Abstract:
Can location make the difference between growth and contraction in living standards for otherwise identical households? Apparently so. Evidence of spatial poverty traps strengthens the case for investing in the geographic capital of poor people. Can place of residence make the difference between growth and contraction in living standards for otherwise identical households? Jalan and Ravallion test for the existence of spatial poverty traps, using a micro model of consumption growth incorporating geographic externalities, whereby neighborhood endowments of physical and human capital influence the productivity of a household's own capital. By allowing for nonstationary but unobserved individual effects on growth rates, they are able to deal with latent heterogeneity (whereby hidden factors entail that seemingly identical households see different consumption gains over time), yet identify the effects of stationary geographic variables. They estimate the model using farm-household panel data from post-reform rural China. They find strong evidence of spatial poverty traps. Their results strengthen the case - both for efficiency and equity - for investing in the geographic capital of poor people. This paper - a product of the Development Research Group - is part of a larger effort in the group to understand the geographic determinants of poverty and the implications for policy. The study was funded by the Bank's Research Support Budget under the research project Policies for Poor Areas (RPO 681-39).

Abstract:
Experience in India suggests that reducing rural poverty requires both economic growth (farm and nonfarm) and human resource development.

The unevenness of the rise in rural living standards in the various states of India since the 1950s allowed Datt and Ravallion to study the causes of poverty.

They modeled the evolution of average consumption and various poverty measures using pooled state-level data for 1957 - 91.

They found that poverty was reduced by higher agricultural yields, above-trend growth in nonfarm output, and lower inflation rates. But these factors only partly explain relative success and failure in reducing poverty.

Initial conditions also mattered. States that started the period with better infrastructure and human resources - with more intense irrigation, greater literacy, and lower infant mortality rates - had significantly greater long-term rates of consumption growth and poverty reduction.

By and large, the same variables that promoted growth in average consumption also helped reduce poverty. The effects on poverty measures were partly redistributive in nature. After controlling for inflation, Datt and Ravallion found that some of the factors that helped reduce absolute poverty also improved distribution, and none of the factors that reduced absolute poverty had adverse impacts on distribution.

In other words, there was no sign of tradeoffs between growth and pro-poor distribution.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to understand the causes of poverty in developing countries and the implications for public policy. The study was funded by the Bank's Research Support Budget under research project Poverty in India: 1951 - 92 (RPO 677-82).

Abstract:
Standard methods of impact evaluation often leave significant gaps between what we know about development effectiveness and what we want to know-gaps that stem from distortions in the market for knowledge. The author discusses how evaluations might better address these knowledge gaps and so be more relevant to the needs of practitioners. It is argued that more attention needs to be given to identifying policy-relevant questions (including the case for intervention), that a broader approach should be taken to the problems of internal validity (including heterogeneity and spillover effects), and that the problems of external validity (including scaling up) merit more attention by researchers.

H43, O22

Abstract:
Knowledge about development effectiveness is constrained by two factors. First, the project staff in governments and international agencies who decide how much to invest in research on specific interventions are often not well informed about the returns to rigorous evaluation and (even when they are) cannot be expected to take full account of the external benefits to others from new knowledge. This leads to under-investment in evaluative research. Second, while standard methods of impact evaluation are useful, they often leave many questions about development effectiveness unanswered. The paper proposes ten steps for making evaluations more relevant to the needs of practitioners. It is argued that more attention needs to be given to identifying policy-relevant questions (including the case for intervention)' that a broader approach should be taken to the problems of internal validity' and that the problems of external validity (including scaling up) merit more attention.

Poverty Monitoring & Analysis, Science Education, Scientific Research & Science Parks, Population Policies, Tertiary Education

Abstract:
Two tradeoffs have been widely seen to severely constrain the scope for attacking poverty using redistributive transfers in poor countries: An equity-efficiency tradeoff and an insurance-efficiency tradeoff. Ravallion provides a critical overview of recent theoretical and empirical work that has called into question the extent of these tradeoffs in poor countries. He argues that these aggregate tradeoffs are often exaggerated. Indeed, they may not even be binding constraints in practice, given market failures. There appears to be scope for using carefully designed transfer schemes as an effective tool against both transient and chronic poverty. However, the same factors that weaken the tradeoffs also suggest that efficient redistributive policies might look rather different to the programs often found in practice.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to better understand the tradeoffs faced in development policymaking.

Abstract:
Galasso and Ravallion assess the impact of Argentina's main social policy response to the severe economic crisis of 2002. The program aimed to provide direct income support for families with dependents for whom the head had become unemployed due to the crisis. Counterfactual comparisons are based on a matched subset of applicants not yet receiving the program. Panel data spanning the crisis are also used. The authors find that the program reduced aggregate unemployment, though it attracted as many people into the workforce from inactivity as it did people who would have been otherwise unemployed. While there was substantial leakage to formally ineligible families, and incomplete coverage of those eligible, the program did partially compensate many losers from the crisis and reduced extreme poverty.

This paper is a product of the Poverty Team, Development Research Group. The work reported is part of the ex-post evaluation of the World Bank's Social Protection IV Project in Argentina.

Abstract:
While the 2008 financial crisis is global in nature, it is likely to have heterogeneous welfare impacts within the developing world, with some countries, and some people, more vulnerable than others. It also threatens to have lasting impacts for some of those affected, notably through the nutrition and schooling of children in poor families. These features point to the need for a differentiated social policy response, aiming to provide rapid income support to those in most need, while preserving the key physical and human assets of poor people and their communities. The paper points out some mistakes in past crisis responses and identifies key design features for safety net programs that can help compensate for the likely welfare losses in the short-term while also promoting longer-term recovery.

Safety Nets and Transfers, Rural Poverty Reduction, Population Policies, Services & Transfers to Poor

Abstract:
Factors that increase vulnerability to famine include poverty, weak social and physical infrastructure, a weak and unprepared government, and a relatively closed political regime. The author observes that famine, defined as widespread hunger or starvation, has occurred in most parts of the world in the twentieth century. Famines are more avoidable now than ever before.

Famines defy simple explanations and geographic boundaries. They have occurred under both socialist and capitalist economic systems, with and without wars, or unusual political or social instability. Economic analysis can help explain famines. Under certain conditions, the threat of mass starvation can emerge from seemingly small economic shocks, or from a steady decline in average living standards. Similar shocks in similar settings can have very different consequences. Market and nonmarket institutions can fail under unusual stresses, making poor people highly vulnerable.

Famine can be viewed as a tragic magnification of normal market and governmental failure. The factors that transform a shock into mass starvation seem to be intrinsic features of normal economies rather than peculiar features of highly distorted or badly managed economies. Normally hidden from view, they can surface in a number of ways. Certain elements increase a region`s vulnerability to famine: Poverty; weak social and physical infrastructure; weak and unprepared government; and a relatively closed political regime. Arguably the same factors constrain longer term economic development.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to better understand the economic and political factors that can make poor people vulnerable to aggregate shocks.

Abstract:
Is effective social protection an investment with long-term benefits? Does inequality impede growth? Household panel data on incomes in rural China offer some answers. Theoretical work has shown that nonlinear dynamics in household incomes can yield poverty traps and distribution-dependent growth. If this is true, the potential implications for policy are dramatic: Effective social protection from transient poverty would be an investment with lasting benefits, and pro-poor redistribution would promote aggregate economic growth.

Jalan and Ravallion test for nonlinearity in the dynamics of household incomes and expenditures using panel data for 6,000 households over six years in rural southwest China. While they find evidence of nonlinearity in the income and expenditure dynamics, there is no sign of a dynamic poverty trap.

The authors argue that existing private and social arrangements in this setting protect vulnerable households from the risk of destitution. However, their findings imply that the speed of recovery from an income shock is appreciably slower for the poor than for others. They also find that current inequality reduces future growth in mean incomes, though the "growth cost" of inequality appears to be small. The maximum contribution of inequality is estimated to be 4-7 percent of mean income and 2 percent of mean consumption.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to better understand the dynamic processes influencing household welfare in risk-prone environments.

Abstract:
Past approaches to correcting for unit nonresponse in sample surveys by re-weighting the data assume that the problem is ignorable within arbitrary subgroups of the population. Theory and evidence suggest that this assumption is unlikely to hold, and that household characteristics such as income systematically affect survey compliance. We show that this leaves a bias in the re-weighted data and we propose a method of correcting for this bias. The geographic structure of nonresponse rates allows us to identify a micro compliance function, which is then used to re-weight the unit-record data. An example is given for the US Current Population Surveys, 1998 - 2004. We find, and correct for, a strong household income effect on response probabilities.

Sample surveys, selective unit nonresponse bias

Abstract:
There has been much debate about how much poor people in developing countries gain from trade openness, as one aspect of globalization. Ravallion views the issue through both macro and micro empirical lenses. The macro lens uses cross-country comparisons and aggregate time series data. The micro lens uses household-level data combined with structural modeling of the impacts of specific trade reforms. The author presents case studies for China and Morocco. Both the macro and micro approaches cast doubt on some wide generalizations from both sides of the globalization debate. Additionally the micro lens indicates considerable heterogeneity in the welfare impacts of trade openness, with both gainers and losers among the poor. The author identifies a number of covariates of the individual gains. The results point to the importance of combining trade reforms with well-designed social protection policies.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the distributional impacts of economywide policies.

Trade, globalization, poverty, inequality, China, Morocco

Abstract:
Brazil's slow pace of poverty reduction over the last two decades reflects both low growth and a low growth elasticity of poverty reduction. Using GDP data disaggregated by state and sector for a twenty-year period, this paper finds considerable variation in the poverty-reducing effectiveness of growth - across sectors, across space, and over time. Growth in the services sector was substantially more poverty-reducing than was growth in either agriculture or industry. Growth in industry had very different effects on poverty across different states and its impact varied with initial conditions related to human development and worker empowerment. The determinants of poverty reduction changed around 1994: positive growth rates and a greater (absolute) elasticity with respect to agricultural growth contributed to faster poverty reduction. But because there was so little of it, economic growth played a relatively small role in accounting for Brazil's poverty reduction between 1985 and 2004. The taming of hyperinflation (in 1994) and substantial expansions in social security and social assistance transfers, beginning in 1988, accounted for a larger share of the overall reduction in poverty.

Rural Poverty Reduction, Achieving Shared Growth, Population Policies, Inequality

Abstract:
Bangladesh's Food-for-Education program, offering a stipend considerably less than the mean child wage, was enough to ensure nearly full school attendance among participants. The enrollment subsidy also reduced the incidence of child labor, but that effect accounted for only a small proportion of the increase in school enrollment.

Ravallion and Wodon try to determine whether children sent to work in rural Bangladesh are caught in a poverty trap, with the extra income to poor families from child labor coming at the expense of the children's longer-term prospects of escaping poverty through education.

The poverty trap argument depends on children's work being substitutable for schooling. Casual observations and the descriptive statistics available from surveys seem to offer little support for the argument. To explore the question more deeply, Ravallion and Wodon use a targeted school stipend to identify how much child labor substitutes for schooling. They find that Bangladesh's Food-for-Education program is a strong incentive for school attendance. A stipend with a value considerably less than the mean child wage was enough to ensure nearly full school attendance among participants.

The enrollment subsidy also reduced the incidence of child labor, an effect that accounted for only a small proportion of the increase in school enrollment. The reduction in the incidence of child labor among boys (girls) represents about one-quarter (one-eighth) of the increase in their school enrollment rate. Parents are clearly substituting other uses of their children's time to secure the current income gain from access to the program, with modest impact on earnings from their children's work. The authors' tests were limited. Work may well displace time for doing homework or attending after-school tutorials, for example. Ravallion and Quentin were unable to identify such effects from the data available. There may also be other welfare losses to children from work (such as exposure to an unsafe working environment) as well as welfare gains (such as skills learned from working that enhance returns to schooling). But their results do lead them to question the seemingly common view that child labor is a major factor perpetuating poverty in Bangladesh by keeping children from poor families out of school.

This paper - a joint product of Poverty and Human Resources, Development Research Group, and Poverty Reduction and Economic Management Sector Unit, Latin America and the Caribbean Region - is part of a larger effort in the Bank to study behavioral responses to social programs. The authors may be contacted at mravallion@worldbank.org or qwodon@worldbank.org.

Abstract:
Household survey data show income inequality increasing in post-reform rural China - but this may reflect methods used to process data rather than the real effect of structural changes on China's rural economy.

Official tabulations from household survey data suggest rising income inequality in post-reform rural China, a trend of public concern. But the structural changes in China's rural economy have not been properly reflected in the methods used to process raw survey data.

Using micro data for four provinces, Ravallion and Chen find that two-thirds of the conventionally measured increase in inequality in 1985-90 vanishes when market-based valuation methods are used and allowances are made for regional cost-of-living differences.

The data revisions also suggest somewhat different explanations for rising inequality. Nonfarm income was secondary to grain production. While access to farm land was relatively equal, higher returns to land over time were inequality-increasing. But holding other factors constant, lower returns to physical capital reduced inequality over time, as did private transfers.

This paper - a product of the Development Research Group - is part of a larger effort in the group to improve data on poverty and inequality in developing countries. The study was funded by the Bank's Research Support Budget under the research project Dynamics of Poverty in Rural China.

Abstract:
Chen and Ravallion use China's national household surveys for rural and urban areas to measure and explain the welfare impacts of the changes in goods and factor prices attributed to WTO accession. Price changes are estimated separately using a general equilibrium model to capture both direct and indirect effects of the initial tariff changes. The welfare impacts are first-order approximations based on a household model incorporating own-production activities and are calibrated to the household-level data imposing minimum aggregation. The authors find negligible impacts on inequality and poverty in the aggregate. However, diverse impacts emerge across household types and regions associated with heterogeneity in consumption behavior and income sources, with possible implications for compensatory policy responses.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the household.

Abstract:
Time-series data for Argentina suggest that action to support propoor social spending is warranted at times of fiscal contraction. Social spending in general - and social spending targeted to the poor in particular - took a heavy hit at times of fiscal austerity.

Adjustment programs often emphasize protecting social spending - especially propoor spending - from cuts. Yet the incidence of fiscal contraction - and hence the case for action to protect public spending on the poor at a time of overall fiscal austerity - is an empirical question, which Ravallion addresses using data from Argentina.

Aggregate budget cuts in Argentina in the 1980s and 1990s typically brought proportionately greater cuts in social spending. Nonsocial spending was protected. But proportionate cuts for types of social spending that matter more to the poor were about the same as the cuts for those that tend to favor the nonpoor. Absolute cuts were in fact greater for social insurance that matters more to the nonpoor.

But spending on targeted social assistance and employment programs was more vulnerable to aggregate spending cuts than were more universal social services. Social spending was clearly exposed to fiscal contraction, but this was somewhat less true of propoor spending on things that also benefited the nonpoor.

So fine targeting may be a mixed blessing for the poor, bringing greater vulnerability to cuts, possibly when help is most needed. There is a strong case for action to protect propoor social spending at such times.

An externally financed workfare scheme in Argentina was far better targeted than other social spending but still had to ensure that a small but relatively well-protected share of the benefits went to the nonpoor.

The program was clearly subject to the same political economy constraints that influenced the incidence of past fiscal contractions in Argentina. The program expanded into poor areas when the budget increased but retreated from poor areas when the program was cut. It was the program's disbursements to nonpoor areas that were protected. Still, given the low wage rate offered, the direct benefits from the program were still likely to have favored the poor, even after the cuts.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to better understand the incidence of social spending. The study was funded by the Bank's Research Support Budget under the research project Policies for Poor Areas (RPO 681-39). The author may be contacted at mravallion@worldbank.org.

Abstract:
Theories of relative deprivation predict negative welfare effects when friends and neighbors become better-off. Other theories point to likely positive benefits. The authors encompass both views within a single model, which motivates their tests using a survey for Malawi that collected data on satisfaction with life, own economic welfare, and the perceived welfare of friends and neighbors. Their methods help address likely biases in past tests found in the literature. In marked contrast to research for industrial countries, the authors find that relative deprivation is generally not a concern for most of their sample, although it does appear to matter to the comparatively well off. Their results provide a welfarist explanation for the priority given to absolute poverty in poor countries. The pattern of externalities also suggests that there will be too much poverty and inequality in this economy, even judged solely from the point of view of aggregate efficiency.

Poverty, relative deprivation, risk-sharing, externalities, subjective welfare

Abstract:
Between 1987 and 1998, the incidence of poverty fell in Asia and the Middle East and North Africa, changed little in Latin America and Sub-Saharan Africa, and rose in Eastern Europe and Central Asia. Too little economic growth in the poorest countries and persistent inequalities (in income and other measures) are the main reasons for the disappointing rate of poverty reduction.

Drawing on data from 265 national sample surveys spanning 83 countries, Chen and Ravallion find that there was a net decrease in the total incidence of consumption poverty between 1987 and 1998. But it was not enough to reduce the total number of poor people, by various definitions. The incidence of poverty fell in Asia and the Middle East and North Africa, changed little in Latin America and Sub-Saharan Africa, and rose in Eastern Europe and Central Asia.

The two main proximate causes of the disappointing rate of poverty reduction: Too little economic growth in many of the poorest countries, and persistent inequalities (in both income and other essential measures) that kept the poor from participating in the growth that did occur.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to monitor progress against poverty in the developing world.

Abstract:
In Bangladesh, Grameen Bank puts banks in areas where gains from switching from farming to nonfarm enterprises favor the poor. Other banks put more weight on potential gains to the nonpoor. Ravallion and Wodon assess whether the placement of bank branches in Bangladesh responds to unexploited potential for nonfarm rural development. They compare the branch location choices of a large new private nonprofit bank, the famous Grameen Bank, with those of more traditional government banks. They allow for heterogeneity in household characteristics conducive to success in nonfarm activities when measuring the potential gains from switching out of farming.

Farmers are both poor and poorly equipped for success at nonfarm enterprises. Even so, seemingly feasible, but unrealized gains from switching are evident. Grameen Bank is attracted to areas where those gains favor the poor. Other banks put more weight on potential gains to the nonpoor.

This paper - a product of the Development Research Group - is part of a larger effort in the group to assess how well both governmental and nongovernmental financial institutions respond to the needs of the poor. The study was funded by the Bank's Research Support Budget under the research project Policies for Poor Areas (RPO 681-39).

Non-farm rural development, Grameen Bank, poverty, Bangladesh

Abstract:
This paper shows how differences in aggregate human development outcomes over time and space can be additively decomposed into a pure economic-growth component, a component attributed to differences in the distribution of income, and components attributed to "non-income" factors and differences in the model linking outcomes to income or non-income characteristics. The income effect at the micro level is modeled non-parametrically, so as to flexibly reflect distributional changes. The paper illustrates the decomposition using data for Morocco and Vietnam, and the results offer some surprising insights into the observed aggregate gains in schooling attainments. A user friendly STATA program is available to implement the method in other settings.

Primary Education, Education For All, Population Policies, Rural Poverty Reduction, Inequality

Abstract:
In the decollectivization of agriculture in Vietnam, local allocation of land use rights reduced overall inequality - thanks to initial conditions at the time of reform and actions by the center to curtail the power of local elites.

The decollectivization of agriculture in Vietnam was a crucial step in the country's transition to a market economy. But the assignment of land use rights had to be decentralized, and local cadres ostensibly had the power to corrupt this process.

The authors assess the realized land allocation against explicit counterfactuals, including the simulated allocation implied by a competitive market-based privatization. The authors find that 95-99 percent of maximum aggregate consumption (depending on the region) was realized by a land allocation that reduced overall inequality, with the poorest absolutely better off. They attribute this outcome to initial conditions at the time of reform and actions by the center to curtail the power of local elites.

This paper - a product of the Poverty Team and the Public Services Team, Development Research Group - is part of a larger effort in the group to undertake ex-post assessments of the efficiency and equity implications of policy reforms.

Abstract:
The paper examines the distributional implications of selective compliance in sample surveys, whereby households with different incomes are not equally likely to participate. Poverty and inequality measurement implications are discussed for monotonically decreasing and inverted-U compliance-income relationships. We demonstrate that the latent income effect on the probability of compliance can be estimated from information on response rates across geographic areas. On implementing the method on the Current Population Survey for the United States we find that the compliance probability falls monotonically as income rises. Correcting for nonresponse appreciably increases mean income and inequality, but has only a small impact on poverty incidence up to poverty lines common in the United States.

Survey nonresponse, income distribution, poverty and inequality measurement

Abstract:
Ravallion tests for external effects of local economic activity on consumption and income growth at the farm-household level using panel data from four provinces of post-reform rural China. The tests allow for nonstationary fixed effects in the consumption growth process. Evidence is found of geographic externalities, stemming from spillover effects of the level and composition of local economic activity and private returns to local human and physical infrastructure endowments. The results suggest an explanation for rural underdevelopment arising from underinvestment in certain externality-generating activities, of which agricultural development emerges as the most important.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to better understand the causes of poverty.

Abstract:
In rural China, those in the poorest wealth decile are the least well-insured, with 40 percent of an income shock being passed on to current consumption. By contrast, consumption by the richest third of households is protected from almost 90 percent of an income shock.

Jalan and Ravallion test how well consumption is insured against income risk in a panel of sampled households in rural China. They estimate the risk insurance models by Generalized Method of Moments, treating income and household size as endogenous.

Insurance exists for all wealth groups, although the hypothesis of perfect insurance is universally rejected.

Those in the poorest wealth decile are the least well-insured, with 40 percent of an income shock being passed on to current consumption.
By contrast, consumption by the richest third of households is protected from almost 90 percent of an income shock.

The extent of insurance in a given wealth stratum varies little between poor and nonpoor areas.

This paper - a product of the Development Research Group - is part of a larger effort in the group to understand private insurance arrangements in poor rural economies. The study was funded by the Bank's Research Support Budget under the research project Dynamics of Poverty in Rural China (RPO 678-69).

Abstract:
August 2001
Children's health improves on average as a result of policy interventions that expand access to piped water. However, the gains largely bypass children in poor and poorly educated families.

The effects of public investments aimed at directly improving children's health are theoretically ambiguous, since the outcomes also depend on indirect effects through parental inputs. Jalan and Ravallion investigate the role of such inputs in influencing the incidence of child health gains from access to piped water in rural India.

Using propensity score matching methods, they find that the prevalence and duration of diarrhea among children under five are significantly less on average for families with piped water than for families without it. But health gains largely bypass children in poor families, particularly when the mother is poorly educated. The authors' findings point to the importance of combining infrastructure investments with effective public action to promote health knowledge and income poverty reduction.

This paper - a product of Poverty, Development Research Group - is part of a larger effort in the group to better measure and understand the welfare impacts of development projects. The study was funded by the Bank's Research Support Budget under the research project "Policies for Poor Areas" (RPO 681-39). The authors may be contacted at jjalan@worldbank.org or mravallion@worldbank.org.

Abstract:
Can self-assessed health be relied on to identify the true socioeconomic gradients in health status? The self-assessed health of Russian adults in 2002 shows remarkably little gradient with respect to economic welfare. The authors document this finding and assess its robustness to the assumptions routinely made in measuring health and welfare. They find that the expected economic gradient only emerges once one focuses on the component of self-assessed health that is explicable in terms of age and more objective health indicators and one allows for broader dimensions of economic welfare than captured by standard income-based measures. The results point to the need for caution in analyzing and interpreting self-assessed health data.

Health Monitoring&Evaluation Agricultural Knowledge&Information Systems Health Economics&Finance Rural Development Knowledge&Information Systems Health Systems Development&Reform

Abstract:
Can self-assessed health (SAH) be relied upon to identify the true socioeconomic gradients in health status? The self-assessed health of Russian adults in 2002 shows remarkably little gradient with respect to economic welfare. We document this finding and assess its robustness to the assumptions routinely made in measuring health and welfare. We find that the expected economic gradient only emerges once one focuses on the component of SAH that is explicable in terms of age and more objective health indicators and one allows for broader dimensions of economic welfare than captured by standard income-based measures. Our results point to the need for caution in analyzing and interpreting SAH data.

Self-assessed health, economic welfare, gradient, Russia

Abstract:
The authors study transient poverty in a six-year panel dataset for a sample of 5,000 households in post-reform rural China. Half of the mean squared poverty gap is transient, in that it is directly attributable to fluctuations in consumption over time. There is enough transient poverty to treble the cost of eliminating chronic poverty when targeting solely according to current consumption - and to title the balance in favor of untargeted transfers. Transient poverty is low among the chronically poorest, and tends to be high among those near the poverty line. Using censored quantile regression techniques, the authors find that systemic factors determine transient poverty, although they are generally congruent with the determinants of chronic poverty. There is little to suggest that the two types of poverty are created by fundamentally different processes. It appears that the same things that would help reduce chronic poverty - higher and more secure farm yield and higher levels of physical and human capital - would also help reduce transient poverty.

Abstract:
The paper revisits the site of a large, World Bank-financed, rural development program in China 10 years after it began and four years after disbursements ended. The program emphasized community participation in multi-sectoral interventions (including farming, animal husbandry, infrastructure and social services). Data were collected on 2,000 households in project and nonproject areas, spanning 10 years. A double-differenceestimator of the program&apos's impact (on top of pre-existing governmental programs) reveals sizeable short-term income gains that were mostly saved. Only modest gains to mean consumption emerged in the longer term-in rough accord with the gain to permanent income. Certain types of households gained more than others. The educated poor were under-covered by the community-based selection process-greatly reducing overall impact. The main results are robust to corrections for various sources of selection bias, including village targeting and interference due to spillover effects generated by the response of local governments to the external aid.

Rural Poverty Reduction, Access to Finance, Poverty Monitoring &Analysis, Economic Theory &Research

Abstract:
As conventionally measured, current household income relative to a poverty line can only partially explain how Russian adults perceive their economic welfare. Other factors include past incomes, individual incomes, household consumption, current unemployment, risk of unemployment, health status, education, and relative income in the area of residence.

Paradoxically, when economists analyze a policy's impact on welfare they typically assume that people are the best judges of their own welfare, yet resist directly asking them if they are better off. Early ideas of utility were explicitly subjective, but modern economists generally ignore people's expressed views about their own welfare. Even using a broad set of conventional socioeconomic data may not reflect well people's subjective perceptions of their poverty.

Ravallion and Lokshin examine the determinants of subjective economic welfare in Russia, including its relationship to conventional objective indicators. For data on subjective perceptions, they use survey responses in which respondents rate their level of welfare from poor to rich on a nine-point ladder.

As an objective indicator of economic welfare, they use the most common poverty indicator in Russia today, in which household incomes are deflated by household-specific poverty lines.

They find that Russian adults with higher family income per equivalent adult are less likely to place themselves on the lowest rungs of the subjective ladder and more likely to put themselves on the upper rungs.
But current household income does not explain well self-reported assessments of whether someone is poor or rich. Expanding the set of variables to include incomes at different dates, expenditures, educational attainment, health status, employment, and average income in the area of residence doubles explanatory power.

Healthier and better educated adults with jobs perceive themselves to be better off, controlling for income.

The unemployed view their welfare as lower, even with full income replacement.

Individual income matters independent of per capita household income.
Relative income also matters. Living in a richer area lowers perceived economic welfare, controlling for income and other factors.

This paper-a product of Poverty and Human Resources, Development Research Group-is part of a larger effort in the group to better understand the relationship between objective and subjective economic welfare. The study was funded by the Bank's Research Support Budget under the research project Policies for Poor Areas (RPO 681-39).

Abstract:
In 2005, China participated for the first time in the International Comparison Program (ICP), which collects primary data across countries on the prices for an internationally comparable list of goods and services. This paper examines the implications of the new Purchasing Power Parity (PPP) rate (derived by the ICP) for China's poverty rate (by international standards) and how it has changed over time. We provide estimates with and without adjustment for a likely sampling bias in the ICP data. Using an international poverty line of USD 1.25 at 2005 PPP, we find a substantially higher poverty rate for China than past estimates, with about 15% of the population living in consumption poverty, implying about 130 million more poor by this standard. The income poverty rate in 2005 is 10%, implying about 65 million more people living in poverty. However, the new ICP data suggest an even larger reduction in the number of poor since 1981.

Rural Poverty Reduction, Population Policies, Achieving Shared Growth, ICT Applications

Abstract:
Community-level targeting of antipoverty programs is now common. Do local community organizations target the poor better than the central government? In one program in Bangladesh, the answer tends to be yes, but performance varies from village to village. The authors try to explain why.

It is common for central governments to delegate authority over the targeting of welfare programs to local community organizations - which may be better informed about who is poor, though possibly less accountable for getting the money to the local poor - while the center retains control over how much goes to each local region.

Galasso and Ravallion outline a theoretical model of the interconnected behavior of the various actors in such a setting. The model's information structure provides scope for econometric identification.

Applying data for a specific program in Bangladesh, they find that overall targeting was mildly pro-poor, mostly because of successful targeting within villages. But this varied across villages. Although some village characteristics promoted better targeting, these were generally not the same characteristics that attracted resources from the center.

Galasso and Ravallion observe that the center's desire for broad geographic coverage appears to have severely constrained the scope for pro-poor village targeting. However, poor villages tended not to be better at reaching their poor.

They find some evidence that local institutions matter. The presence of cooperatives for farmers and the landless appears to be associated with more pro-poor program targeting. The presence of recreational clubs has the opposite effect.

Sometimes the benefits of decentralized social programs are captured by local elites, depending on the type of spending being decentralized. When public spending is on a private (excludable) good, and there is no self-targeting mechanism to ensure that only the poor participate, there is ample scope for local mistargeting.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to assess the performance of alternative means of reaching the poor through public programs. The study was funded by the Bank's Research Support Budget under the research project "Policies for Poor Areas" (RPO 681-39). The authors may be contacted at egalasso@worldbank.org or mravallion@worldbank.org.

Abstract:
Policy-oriented discussions often assume that “better targeting” implies larger impacts on poverty or more cost-effective interventions for fighting poverty. The literature on the economics of targeting warns against that assumption, but evidence has been scarce and the lessons from the literature have often been ignored by practitioners. This paper shows that standard measures of targeting performance are uninformative or even deceptive about the impacts on poverty, and cost-effectiveness in reducing poverty, of a large cash transfer program in China. The results suggest that in program design and evaluation, it would be better to focus directly on the program's outcomes for poor people than to rely on prevailing measures of targeting.

Abstract:
Policy-oriented discussions often assume that "better targeting" implies larger impacts on poverty or more cost-effective interventions. The literature on the economics of targeting warns against that assumption, but evidence has been scarce. The paper begins with a critical review of the strengths and weaknesses of the targeting measures found in practice. It then exploits an unusually large micro data set for China to estimate aggregate and local-level poverty impacts of the country's main urban antipoverty program. Standard measures of targeting are found to be uninformative, or even deceptive, about impacts on poverty and cost-effectiveness in reducing poverty. In program design and evaluation, it would be better to focus directly on the program's outcomes for poor people than to rely on prevailing measures of targeting.

Services & Transfers to Poor, Poverty Monitoring & Analysis, Population Policies, Poverty Impact Evaluation, Poverty Reduction Strategies

Abstract:
Ravallion and Lokshin use Morocco's national survey of living standards to measure the short-term welfare impacts of prior estimates of the price changes attributed to various trade policy reforms for cereals - the country's main foodstaple. They find small impacts on mean consumption and inequality in the aggregate. There are both gainers and losers and (contrary to past claims) the rural poor are worse off on average after trade policy reforms. The authors decompose the aggregate impact on inequality into a "vertical" component (between people at different pre-reform welfare levels) and a "horizontal" component (between people at the same pre-reform welfare level). There is a large horizontal component which dominates the vertical impact of full de-protection. The diverse impacts reflect a degree of observable heterogeneity in consumption behavior and income sources, with implications for social protection policies.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the distributional impact of economywide policy reforms.

Abstract:
The central governments of many developing countries have chosen to decentralize their anti-poverty programs, in the expectation that local agents are better informed about local needs. The paper shows that this potential advantage of decentralized eligibility criteria can come at a large cost, to the extent that the induced geographic inequities undermine performance in reaching the income-poor nationally. These issues are studied empirically for (probably) the largest transfer-based poverty program in the world, namely China's Di Bao program, which aims to assure a minimum income through means-tested transfers. Poor municipalities are found to adopt systematically lower eligibility thresholds, reducing the program's ability to reach poor areas, and generating considerable horizontal inequity.

Inequality, Services & Transfers to Poor, Poverty Monitoring & Analysis, Economic Theory & Research

Abstract:
Concerns about incentives and targeting naturally arise when cash transfers are used to fight poverty. The authors address these concerns in the context of China's Di Bao program, which uses means-tested transfers to try to assure that no registered urban resident has an income below a stipulated poverty line. There is little sign in the data of poverty traps due to high benefit withdrawal rates. Targeting performance is excellent by various measures. Di Bao appears to be better targeted than any other program in the developing world. However, all but one measure of targeting performance is found to be uninformative, or even deceptive, about impacts on poverty. The authors find that the majority of the poor are not receiving help, even with a generous allowance for measurement errors. While on paper, Di Bao would eliminate urban poverty, it falls well short of that ideal in practice.

Urban poverty, cash transfers, behavioral responses, targeting, China

Abstract:
At any positive rate of growth, the higher the initial inequality, the lower the rate at which income-poverty falls. It is possible for inequality to be high enough to lead to rising poverty, despite good underlying growth prospects.

Do the poor face the same prospects for escaping poverty in high-inequality developing countries as in low-inequality countries? Is it possible for inequality to be so great as to stifle prospects of reducing absolute poverty, even when other initial conditions and policies are favorable to growth?

Household survey data for developing countries suggest that initial distribution does affect how much the poor share in rising average incomes. Higher initial inequality tends to reduce growth's impact on absolute poverty. By the same token, higher inequality diminishes the adverse impact on the poor of general economic contraction.

Combining this evidence with that from recent investigations of inequality's effect on growth, Ravallion finds that, if inequality is high enough, countries that would have very good growth prospects at low levels of inequality may see little or no overall growth and little progress in reducing poverty - or even a worsening on both counts. (By the same token, factoring in the growth effects magnifies the estimated handicap the poor face in contracting low-inequality countries.)

The data Ravallion uses suggest that such cases do occur. The precision with which key parameters have been estimated makes it difficult to say with confidence how common such cases are, but they appear to be in the minority. What appear to be the best available estimates suggest that about one-fifth of the spells between surveys he analyzed were cases in which poverty was rising, yet positive growth in the mean (and hence falling poverty) is predicted at zero inequality. Inequality can be high enough to result in rising poverty despite good underlying growth prospects.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to understand why some economies do better than others in reducing poverty.

Abstract:
The theory and evidence supporting a relativist approach to poverty measurement are critically reviewed. Various sources of welfare interdependence are identified, including the idea of relative deprivation as well other (positive and negative) welfare effects for poor people of belonging to a better-off group. An economic model combines informal risk sharing with the idea of a positional good, and conditions are derived in which the relative deprivation effect dominates, implying a relative poverty measure. The paper then reviews the problems encountered in testing for welfare effects of relative deprivation and discusses the implications of micro evidence from Malawi. The results are consistent with the emphasis given to absolute level of living in development policy discussions. However, relative deprivation is still evident in the data from this poor but unequal country, and it is likely to become a more important factor as the country develops.

Rural Poverty Reduction, Economic Theory & Research, Inequality, Population Policies

Abstract:
While it is improbable that households with different incomes are equally likely to participate in sample surveys, the lack of data for nonrespondents has hindered efforts to correct for the bias in measures of poverty and inequality. Mistiaen and Ravallion demonstrate how the latent income effect on survey compliance can be estimated using readily available data on response rates across geographic areas. An application using the Current Population Survey for the United States indicates that compliance falls as income rises. Correcting for selective compliance appreciably increases mean income and inequality, but has only a small impact on poverty incidence up to commonly used poverty lines in the United States.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to develop better methods of measuring poverty and inequality from survey data.

Abstract:
Recent literature and new data help determine plausible bounds to some key demographic differences between the poor and non-poor in the developing world. The paper estimates that selective mortality - whereby poorer people tend to have higher death rates - accounts for 10-30% of the developing world's trend rate of $1 a day poverty reduction in the 1990s. However, in a neighborhood of plausible estimates, differential fertility - whereby poorer people tend also to have higher birth rates - has had a more than offsetting poverty-increasing effect. The net impact of differential natural population growth represents 10-50% of the trend rate of poverty reduction.

Abstract:
Cross-country comparisons of social indicators controlling for income and/or social spending have been widely used to measure and explain "social efficiency" analogously to "technical efficiency" in production. Ravallion argues that these methods are clouded in ambiguities about what exactly is being measured. Standard methods of measuring technical efficiency require assumptions that seem unlikely to hold for social indicators. In the context of a simple parametric model of life expectancy, conditions are identified under which there will be a systematic pattern of bias in estimates of efficient health spending.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the reliability of empirical methods used to inform policy debates.

Abstract:
A workfare program was introduced in response to high unemployment in Argentina. An ex-post evaluation using matching methods indicates that the program generated sizable net income gains to generally poor participants. Jalan and Ravallion use propensity-score matching methods to estimate the net income gains to families of workers participating in an Argentinian workfare program. The methods they propose are feasible for evaluating safety net interventions in settings in which many other methods are not feasible.

The average gain is about half the gross wage. Even allowing for forgone income, the distribution of gains is decidedly pro-poor. More than half the beneficiaries are in the poorest decile nationally and 80 percent of them are in the poorest quintile - reflecting the self-targeting feature of the program design. Average gains for men and women are similar, but gains are higher for younger workers. Women's greater participation would not enhance average income gains, and the distribution of gains would worsen. Greater participation by the young would raise average gains but would also worsen the distribution.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to improve methods for evaluating the poverty impact of Bank-supported programs.

Abstract:
Prevailing measures of relative poverty put an implausibly high weight on relative deprivation, such that measured poverty does not fall when all incomes grow at the same rate. This stems from the (implicit) assumption in past measures that very poor people incur a negligible cost of social inclusion. That assumption is inconsistent with evidence on the social roles of certain private expenditures in poor settings and with data on national poverty lines. The authors propose a new schedule of"weakly relative"lines that relax this assumption and estimate the implied poverty measures for 116 developing countries. The authors find that there is more relative poverty than past estimates have suggested. In 2005, one half of the population of the developing world lived in relative poverty, half of whom were absolutely poor. The total number of relatively poor rose over 1981-2005, despite falling numbers of absolutely poor. With sustained economic growth, the incidence of relative poverty becomes less responsive to further growth. Slower progress against relative poverty can thus be seen as the"other side of the coin"to success against absolute poverty.

Rural Poverty Reduction, Population Policies, Achieving Shared Growth, Services & Transfers to Poor

Abstract:
The immediate welfare costs of an economywide crisis can be high, but are there also lasting impacts? And are they greater in some geographic areas than others? Ravallion and Lokshin study Indonesia's severe financial crisis of 1998. They use 10 national surveys spanning 1993-2002, each covering 200,000 randomly sampled households, to estimate the impacts on mean consumption and the incidence of poverty across each of 260 districts. Counterfactual analyses indicate geographically diverse impacts years after the crisis. Proportionate impacts on the poverty rate were greater in initially better off and less unequal areas. In the aggregate, a large share - possibly the majority - of those Indonesians who were still poor in 2002 would not have been so without the 1998 crisis.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the social impacts of economywide crises.

Indonesia, financial crisis, poverty, inequality, geography

Abstract:
A social program that relies partly on geographic decentralization for placement provides indicators helpful for identifying the program's impact on welfare. An assessment of the welfare gains from a targeted social program can be seriously biased unless it takes proper account of the endogeneity of program participation. Bias comes from two sources of placement endogeneity: the purposive targeting of the geographic areas to receive the program, and the targeting of individual recipients within selected areas. Decentralization of program placement decisions is common, because of the administrative cost of centralized placement decisions and the fact that local groups and governments are likely to be better informed about who most needs help. But full decentralization is uncommon; the center typically retains control of broad geographic targeting. Ravallion and Wodon argue that partial decentralization of program placement decisions creates control and instrumental variables useful for identifying program benefits. The central allocation to a local level of government is presumably based on observable indicators. The central allocation will also influence the allocation to an individual but is unlikely to determine outcomes at the individual level conditional on individual program participation. So with suitable controls for the welfare-relevant geographic characteristics determining program placement decisions, the center's allocation across areas can be used as an instrumental variable for individual participation. The authors use Bangladesh's Food for Education program to illustrate their approach. A single post-intervention cross-sectional household survey was used to identify the impact of the program on school attendance, using geographic placement at the village level as an instrument for individual program placement. To deal with bias from the endogeneity of village selection, the authors used a detailed community survey coordinated with the household survey to control for likely sources of heterogeneity in geographic influences on school attendance, consistent with prior information on how the government targeted the program geographically. They found that the programs had significant and sizable impacts on school attendance. At mean points, the program's incentive increased attendance by 24 percent of the maximum feasible days of schooling. A regression estimator ignoring the purposive program placement was found to result in a substantial underestimation of the program's impact. Indeed, the simplest possible control group method-assuming that nonparticipants provide a valid counterfactual-performed much better than a regression method treating placement as exogenous. This paper - a product of the Development Research Group - is part of a larger effort in the group to evaluate the impact of social programs. The study was funded by the Bank's Research Support Budget under the research project Policies for Poor Areas (RPO 681-39). Martin Ravallion may be contacted at mravallion@worldbank.org.

Abstract:
Is income inequality tending to fall in countries with high inequality and to rise in those where inequality is low? Is there a process of convergence toward medium-level inequality? Comparing changes in inequality with initial levels, using new data, Ravallion finds that within-country inequality in income or per capita consumption is converging toward medium levels - a Gini index around 40 percent. The finding is robust to allow for serially independent measurement error in inequality data and for short-run dynamics around longer-term trends. However, the convergence process is neither rapid nor certain, and more observations over time are needed to be confident of the pattern. Ravallion offers an approach to modeling the determinants of inequality that may be a starting point for estimating richer models.

This paper - a product of Poverty, Development Research Group - is part of a larger effort in the group to better understand what is happening to income inequality within developing countries.

Abstract:
Program funding and design choices by the central government can greatly affect the targeting performance of decentralized social programs. The allocation to a province should depend on how successful it is at reaching the poor with the extra resources, rather than how poor it is. New measurement tools can help monitor performance with limited data.

National antipoverty programs often rely heavily on provincial governments. The center targets poor provinces in the hope that they will reach their own poor. Without successful intraprovincial targeting, however, even dramatic redistribution from rich to poor provinces can have little impact on poverty nationally.

However, data for assessing performance at provincial level are often far from ideal. Can a centralized government monitor the performance of decentralized social programs in reaching the poor when their benefit incidence is unobserved?

Ravallion shows that the poverty map and the corresponding spending allocation across geographic areas allow one to identify the latent differences in mean allocations to the poor versus the nonpoor. The national measure of targeting performance is also subgroup-decomposable.

Ravallion uses an application to an antipoverty program in Argentina (Trabajar II) to assess performance in reaching the poor and to measure the relative contributions to the program's performance - before and after reforms - of the center's provincial reallocation and decentralized targeting.

Funding and program design changes led to large gains for the poor, although with diverse performance across provinces.

Program funding and design choices by the central government can greatly affect the targeting performance of decentralized social programs. The allocation to a province should depend on how successful it is at reaching the poor with the extra resources, rather than how poor it is.

Design choices should provide incentives for provincial governments to target resources to the poor. Finding feasible ways to monitor their performance and adjust central government's efforts accordingly are then crucial to better outcomes for poor people.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to provide better tools for monitoring the impact on poverty of World Bank projects. The study was funded by the Bank's Research Support Budget under research project Policies for Poor Areas (RPO 681-39).

Abstract:
We are not seeing faster progress against poverty amongst the poorest developing countries. Yet this is implied by widely accepted stylized facts about the development process. The paper tries to explain what is missing from those stylized facts. Consistently with models of economic growth incorporating borrowing constraints, the analysis of a new data set for 100 developing countries reveals an adverse effect on consumption growth of high initial poverty incidence at a given initial mean. A high incidence of poverty also entails a lower subsequent rate of progress against poverty at any given growth rate (and poor countries tend to experience less steep increases in poverty during recessions). Thus, for many poor countries, the growth advantage of starting out with a low mean (conditional convergence) is lost due to their high poverty rates. The size of the middle class -- measured by developing-country, not Western, standards -- appears to be an important channel linking current poverty to subsequent growth and poverty reduction. However, high current inequality is only a handicap if it entails a high incidence of poverty relative to mean consumption.

Achieving Shared Growth, Population Policies, Inequality, Rural Poverty Reduction, Services & Transfers to Poor

Abstract:
In the wake of reforms to establish a free market in land-use rights, Vietnam is experiencing a pronounced rise in rural landlessness. To some observers this is a harmless by-product of a more efficient economy, while to others it signals the return of the pre-socialist class-structure, with the rural landless at the bottom of the economic ladder. The authors`theoretical model suggests that removing restrictions on land markets will increase landlessness among the poor, but that there will be both gainers and losers, with uncertain impacts on aggregate poverty. Empirically, they find that landlessness is less likely for the poor and that the observed rise in landlessness is poverty reducing on balance. However, there are marked regional differences, notably between the north and the south.

Land Use and Policies, Rural Land Policies for Poverty Reduction, Rural Poverty Reduction, Rural Development Knowledge&Information Systems

Abstract:
Yes - and more efficiently by women than by men, according to this analysis of household survey data for Bangladesh. An illiterate adult earns significantly more in the nonfarm economy when living in a household with at least one literate member.

According to theory, a member of a collective-action household may or may not share knowledge with others in that household. Shared income gains from shared knowledge may well be offset by a shift in the balance of power within the family. But do literate members of the household share the benefits of literacy with other members of the household in practice?

Using household survey data for Bangladesh, Basu, Narayan, and Ravallion find that education has strong external effects on individual earnings.

When a range of personal attributes is held constant, an illiterate adult earns significantly more in the nonfarm economy when living in a household with at least one literate member. That is, a literate person is likely to share some of the benefits of his or her literacy with other members of the household. It is better to be an illiterate in a household where someone is literate than in a household of illiterates only.

It is widely noted that a literate mother confers greater benefits on her children than a literate father does. But what about differences between male and female recipients of knowledge? The empirical results suggest that women are more efficient recipients, too.

This paper - a joint product of the Office of the Senior Vice President and Chief Economist, Development Economics, and Poverty and Human Resources, Development Research Group - is part of a larger effort in the Bank to understand the relationship between literacy and balance of power in the household. This paper was funded by the Bank's Research Support Budget under the research project Intrahousehold Decisionmaking, Literacy, and Child Labor (RPO 683-07). The authors may be contacted at kb40@cornell.edu, anarayan@worldbank.org, or mravallion@worldbank.org.

Abstract:
In subjective surveys, people who become ill or lose their jobs report reduced well-being, even if they later get a job. Perhaps their exposure to uninsured risk outside the formal employment sector reduces their expectations about future income. Do potential biases cloud the inferences that can be drawn from subjective surveys?

Ravallion and Lokshin argue that the welfare inferences drawn from subjective answers to questions on qualitative surveys are clouded by concerns about the structure of measurement errors and how latent psychological factors influence observed respondent characteristics.

They propose a panel data model that allows more robust tests. In applying the model to high-quality panel data for Russia for 1994-96, they find that some results widely reported in past studies of subjective well-being appear to be robust but others do not.

Household income, for example, is a highly significant predictor of self-rated economic welfare; per capita income is a weaker predictor.

Ill health and loss of a job reduce self-reported economic welfare, but demographic effects are weak at a given current income.

And the effect of unemployment is not robust. Returning to work does not restore a sense of welfare unless there is an income gain. The results imply that even transient unemployment brings the feeling of a permanent welfare loss, suggesting that high unemployment benefits do not attract people out of work but do discourage a return to work.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to understand the relationship between subjective and objective economic welfare. The authors may be contacted at mravallion@worldbank.org and mlokshin@worldbank.org.

Abstract:
While liberalizing key factor markets is a crucial step in the transition from a socialist control-economy to a market economy, the process can be stalled by imperfect information, high transaction costs, and covert resistance from entrenched interests. Ravallion and van de Walle study land-market adjustment in the wake of Vietnam's reforms aiming to establish a free market in land-use rights following de-collectivization. Inefficiencies in the initial administrative allocation are measured against an explicit counterfactual market solution. The authors' tests using a farm-household panel data set spanning the reforms suggest that land allocation responded positively but slowly to the inefficiencies of the administrative allocation. They find no sign that the transition favored the land rich or that it was thwarted by the continuing power over land held by local officials.

This paper - a joint product of the Poverty Team and the Public Services Team, Development Research Group - is part of a larger effort in the group to understand the welfare impacts of major policy reforms.

Abstract:
August 2001
The two sources of data on aggregate economic welfare - household surveys and national accounts - can yield different results. How large is this divergence? How is it changing over time? And how does it vary by region?

In a data set for developing and transition economies, Ravallion finds that private consumption per capita based on national accounts deviates on average from mean household income or expenditure based on national sample surveys. Growth rates also differ systematically, so that the ratio of the survey mean to the national accounts mean tends to fall over time. But there are revealing exceptions to these general findings. The aggregate difference in the levels is due more to income surveys than to expenditure surveys. And there are strong regional effects; for example, the severe data problems in the transition economies of Eastern Europe and Central Asia mean that there is negligible correlation in that region between growth rates from national accounts and those from household surveys.

This paper - a product of Poverty, Development Research Group - is part of a larger effort in the group to investigate the strengths and weaknesses of currently used measures of economic welfare. The author may be contacted at mravallion@worldbank.org.

Abstract:
The 'developing world's middle class' is defined here as those who are not poor when judged by the median poverty line of developing countries, but are still poor by US standards. The 'Western middle class' is defined as those who are not poor by US standards. Although barely80 million people in the developing world entered the Western middle class over 1990-2002, economic growth and distributional shifts allowed an extra 1.2 billion people to join the developing world's middle class. Four-fifths came from Asia, and half from China. Most of the new entrants remained fairly close to poverty, with incomes now bunched up just above $2 a day. The vulnerability of this new middle class to aggregate economic contractions is evident in the fact that one in six people in the developing world live between $2 and $3 per day. Over time, the developing world has become more sharply divided between countries with a large middle class and those with a relatively small one, with Africa prominent in the latter group. Poor people in countries with smaller middle classes may well be more exposed to slowing economic growth.

Achieving Shared Growth, Inequality, Population Policies, Rural Poverty Reduction, Services & Transfers to Poor

Abstract:
Data on occupational choice among return migrants in Tunisia reveal that higher inequality of wealth reduces the level of new business activity. The effect is not large, however. Even dramatic redistributions of wealth would not provide much stimulus to entrepreneurship.

It is widely assumed that pervasive credit market failures mean that a person's current wealth is critical to whether or not that person takes up opportunities to start a new business.

Mesnard and Ravallion show that inequality in wealth can be either good or bad for the level of entrepreneurship in an economy, depending on how diminishing returns to capital interact with borrowing constraints at the microeconomic level.

They use nonparametric regression methods to study wealth effects on business start-ups among migrants returning to their home country, Tunisia. They include controls for heterogeneity, with specification tests for the nonseparable effects with wealth and for selection bias. There is no evidence of increasing returns at low wealth.

The aggregate number of business start-ups is an increasing function of aggregate wealth but a decreasing function of wealth inequality. In other words, at any given mean, the higher the initial inequality of wealth, the lower the rate of new business start-ups, through the existence of diminishing returns to capital given liquidity constraints. In this sense, the results suggest that inequality is bad for business - but the size of this effect is small.

The findings do not constitute a case for public redistribution of wealth as a means of stimulating business activity. There should probably be more research on interventions to reduce liquidity constraints.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to understand how the distribution of wealth in an economy influences macroeconomic activity and occupational structure. Martin Ravallion may be contacted at mravallion@worldbank.org.

Abstract:
Simple analytical tools can help appraise workfare programs when data and time are scarce. They can also help design better programs. Workfare programs aim to reduce poverty by providing low-wage work for those who need it. They are often turned to in a crisis when there is too little time for a rigorous evaluation. They are also relatively complex programs, and difficult to evaluate.

Ravallion offers some simple analytical tools for rapidly appraising workfare programs. For pedagogic purposes, the two programs are stylized versions of a range of programs found in actual practice. One is for a middle-income country (in which unemployment has risen sharply in the wake of macroeconomic stabilization and reform), the other for a low-income country (hit by severe drought). The sole objective of both programs is to reduce poverty.

By rough calculations, the cost of a $1 gain to the poor is $2.50 in both cases, though the same gain in current earnings would cost 50 to 100 percent more.

Benefits to the poor could be greatly enhanced by design changes - for example, switching to more labor-intensive production methods for subprojects (in the middle-income country); enhancing the indirect benefits within poor communities from the assets created; or striving for greater cost recovery from the nonpoor.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to provide practical guidelines for project and policy evaluation.

Abstract:
In theory it is possible that a vulnerable household will never recover from a sufficiently large but short-lived shock to its income - which could explain the persistent poverty that has emerged in many transition economies. But this study for Hungary shows that, in general, households bounce back from transient shocks, although not rapidly.

In theory it is possible that the persistent poverty that has emerged in many transition economies is attributable to underlying nonconvexities 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, Lokshin and Ravallion estimate a dynamic panel data model of household incomes with nonlinear dynamics and endogenous attrition. Their estimates using data for Hungary in the 1990s exhibit nonlinearity 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.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to understand household - level vulnerability to shocks. The authors may be contacted at mlokshin@worldbank.org or mravallion@worldbank.org.

Abstract:
A wage subsidy increased private sector employment among poor workers in a welfare-dependent region of Argentina, but extra skill training had no impact.

Randomly sampled workfare participants in a welfare-dependent region of Argentina were given a voucher that entitled an employer to a sizable wage subsidy. A second sample also received the option of skill training, while a third sample formed the control group.

Galasso, Ravallion, and Salvia analyze the effects of this scheme on participants' employment and income, using double-difference and instrumental-variables methods to deal with potential experimental biases, including selective compliance with the randomized assignment.

The authors find that compared with the control group, voucher recipients had a significantly higher probability of employment, though their current incomes were no higher. The impact was largely confined to women and younger workers. Labor supply effects appear to have been important. However, training had no significant impact.

The experiment was cost-effective in reducing the government's welfare spending, since take-up of the subsidy by employers was low.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the impact of social protection programs.

workfare, wage subsidies, training programs, randomization

Abstract:
Brazil, China and India have seen falling poverty in their reform periods, but to varying degrees and for different reasons. History left China with favorable initial conditions for rapid poverty reduction through market-led economic growth; at the outset of the reform process there were ample distortions to remove and relatively low inequality in access to the opportunities so created, though inequality has risen markedly since. By concentrating such opportunities in the hands of the better off, prior inequalities in various dimensions handicapped poverty reduction in both Brazil and India. Brazil’s recent success in complementing market-oriented reforms with progressive social policies has helped it achieve more rapid poverty reduction than India, although Brazil has been less successful in terms of economic growth. In the wake of its steep rise in inequality, China might learn from Brazil’s success with such policies. India needs to do more to assure that poor people are able to participate in both the country’s growth process and its social policies; here there are lessons from both China and Brazil. All three countries have learned how important macroeconomic stability is to poverty reduction.

Rural Poverty Reduction, Achieving Shared Growth, Regional Economic Development, Services & Transfers to Poor

Abstract:
Does "empowerment" come hand-in-hand with higher economic welfare? In theory, higher income is likely to raise both power and welfare, but heterogeneity in other characteristics and household formation can either strengthen or weaken the relationship. Survey data on Russian adults indicate that higher individual and household incomes raise both self-rated power and welfare. The individual income effect is primarily direct, rather than through higher household income. There are diminishing returns to income, though income inequality emerges as only a minor factor reducing either aggregate power or welfare. At given income, the identified covariates have strikingly similar effects on power and welfare. There are some notable differences between men and women in perceived power.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to explore broader measures of well-being. The authors may be contacted at mlokshin@worldbank.org or mravallion@worldbank.org.

Abstract:
This case study for India finds an explanation for the drop in average household consumption in rural areas occurring in the year after the 1991 stabilization program instigated to deal with a macroeconomic crisis. A number of factors contributed to falling average living standards, including inflation, a drop in agricultural yields, and contraction in the non-farm sector. The same factors resulted in high poverty measures, although there was also a sizable unexplained shift in distribution.

Despite their having an unusually rich data base, the authors nevertheless are unable to account for a large share of the increase in measured poverty, and cannot rule out the possibility that it was the result of sampling and non-sampling errors. Only about one-tenth of the measured increase in poverty is explicable in terms of the variables that would be expected to transmit shocks to the household level. Soon after, the poverty measures returned to their previous level. The study cautions users of survey-based welfare indicators not to read too much into a single survey, particularly when (as here) its results are difficult to explain in terms of other data on hand. However, the usefulness of objective socioeconomic survey data for longer-term poverty monitoring should not be thrown into doubt by these results.

Abstract:
Although poverty lines are widely used as deflators for intergroup welfare comparisons, their internal consistency is rarely given close scrutiny. A priori considerations suggest that commonly used methods cannot be relied on to yield poverty lines that are consistent in terms of utility, or for capabilities more generally. The theory of revealed preference offers testable implications of utility consistency for "poverty baskets" under homogeneous preferences. A case study of Russia's official poverty lines reveals numerous violations of revealed preference criteria - violations that are not solely attributable to heterogeneity in preferences associated with climatic differences.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to improve poverty measurement methodology.

Abstract:
Attitudes toward redistribution of wealth in Russia tend to reflect expectations of future mobility, in both directions. Few Russians expected rising living standards in the 1990s, and most expected a decline in living standards, so there was strong demand for redistribution, even among those currently well off but fearful of the future.

It seems natural to expect the rich to oppose policies to redistribute income from the rich to the poor, and the poor to favor such policies. But this may be too simple a model, say Ravallion and Lokshin. Expectations of future welfare may come into play. Well-off people on a downward trajectory may well favor such policies and poor people on a rising trajectory may not.

This resistance of upwardly mobile poor people to lasting redistribution is analogous to Hirshman's tunnel effect, as applied to traffic stuck on a congested two-lane road in a tunnel: People's spirits lift when traffic starts moving again; but when another lane starts moving and theirs doesn't, they might grow furious and want to correct things by crossing the double line separating the two lanes.

Using Russia in the 1990s as the setting, Ravallion and Lokshin analyze why some people favor governmental redistribution and others do not and whether there is a tunnel effect. They find that:
° Some 72 percent of the 7,000 adults surveyed in October 1996 favor government action to reduce incomes of the rich. But the other 28 percent were not only the currently rich.
° About 85 percent of those in the poorest consumption decile favor redistribution. But among those who expect their welfare to decline, support for redistribution is high, even among the currently rich. There is little support for redistribution among the well-off who expect to become even better off. Resistance is greatest among those on a rising consumption path who expect it to continue.
° Women tend to favor redistribution more than men.
° Those who favor redistribution include people who voted communist and people who are vulnerable: the old, women, poorly educated adults, people who live in rural areas, people who expect to lose their jobs, and people who do not think the government cares about them.

This paper - a product Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to understand the political economy of redistributive policies. Martin Ravallion may be contacted at mravallion@worldbank.org.

Abstract:
Concern about how cuts in public spending affect the poor has led to recommendations that cuts be combined with better targeting to the poor. That should not be difficult if there is broad political support for protecting the poor from cuts. But is it possible to target more, while spending less, when the political support of the nonpoor is crucial - and cannot be counted on?

Economists often advise governments to target their spending better when cuts are called for. Ravallion asks whether that advice is consistent with a political economy constraint that limits the welfare losses to the nonpoor from spending cuts.

A simple theoretical model shows that the answer is unclear on a priori grounds and so will depend on the specifics of program design and financing.

A case study for a World Bank-supported social program in Argentina illustrates how cuts can come with worse targeting performance: The allocation to the poor falls faster than that to the nonpoor.

Ravallion draws some lessons for how the poor might be better protected from cuts.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to better understand how the benefits from public spending are distributed. The study was funded by the Bank's Research Support Budget under research project Policies for Poor Areas (RPO 681-39). The author may be contacted at mravallion@worldbank.org.

Abstract:
September 2001
A lot can be learned about the impact of an antipoverty program by studying income replacement for those observed to leave the program after its retrenchment. A Bank-supported workfare program in Argentina is found to have had a sizable impact on participants' incomes.

What happens to participants in a workfare program - a program that imposes work requirements on welfare recipients - when that program is cut? Ravallion, Galasso, Lazo, and Philipp compare the incomes of workfare participants in Argentina to those of nonparticipants and past participants after a severe contraction in aggregate outlays on the program. The authors find evidence of partial income replacement, such that those who left the program were able to make up one quarter of the gross workfare wage within six months. This rises to half in 12 months. The estimates are unbiased in the presence of time-invariant errors from mismatching in the selection of the comparison group. Fully removing selection bias would probably yield even lower income replacement. Test results based on a second follow-up survey suggest that valid inferences can be drawn about program impacts from the authors' measures of income replacement.

This paper - a product of the Poverty Team, Development Research Group - is part of a larger effort in the group to assess the impact of Bank-supported antipoverty programs. The study was funded by the Bank's Research Support Budget under the research project "Policies for Poor Areas" (RPO 681-39). The authors may be contacted at mravallion@worldbank.org or egalasso@worldbank.org.

Abstract:
Development aid and policy discussions often assume that poorer countries have less internal capacity for redistribution in favor of their poorest citizens. The assumption is tested using data for 90 developing countries. The capacity for redistribution is measured by the marginal tax rate on those who are not poor by rich-country standards that is needed to cover the poverty gap or to provide a poverty-level of basic income, judged by developing-country standards. For most (but not all) countries with annual consumption per capita under $2,000 (at 2005 purchasing power parity) the required tax burdens are found to be prohibitive-often calling for marginal tax rates of 100 percent or more. By contrast, the required tax rates are quite low (1 percent on average) among all countries with consumption per capita over $4,000, as well as some poorer countries. Most countries fall into one of two groups: those with little or no realistic prospect of addressing extreme poverty through redistribution from the rich and those that would appear to have ample scope for such redistribution. Economic growth tends to move countries from the first group to the second. Thus the appropriate balance between growth and redistribution strategies can be seen to depend on the level economic development.

Achieving Shared Growth, Rural Poverty Reduction, Population Policies, Debt Markets, Inequality

Abstract:
China has seen a huge reduction in the incidence of extreme poverty since the economic reforms that started in the late 1970s. Yet, the growth process has been highly uneven across sectors and regions. The paper tests whether the pattern of China´s growth mattered to poverty reduction using a new provincial panel data set constructed for this purpose. The econometric tests support the view that the primary sector (mainly agriculture) has been the main driving force in poverty reduction over the period since 1980. It was the sectoral unevenness in the growth process, rather than its geographic unevenness, that handicapped poverty reduction. Yes, China has had great success in reducing poverty through economic growth, but this happened despite the unevenness in its sectoral pattern of growth. The idea of a trade-off between these sectors in terms of overall progress against poverty in China turns out to be a moot point, given how little evidence there is of any poverty impact of non-primary sector growth, controlling for primary-sector growth. While the non-primary sectors were key drivers of aggregate growth, it was the primary sector that did the heavy lifting against poverty.

Rural Poverty Reduction, Achieving Shared Growth, Regional Economic Development, Subnational Economic Development

Abstract:
Benefits from schooling and antipoverty programs in rural India were captured early by the nonpoor. The poor tend to benefit from program expansion, and lose from contraction. Conventional methods of assessing benefit incidence hide this fact.

Survey-based estimates of average program participation conditional on income are often used in assessing the distributional impacts of public spending reforms.

But program participation could well be nonhomogeneous, so that marginal impacts of program expansion or contraction differ greatly from average impacts.

Using the geographic variation found in sample survey data for rural India for 1993-94, Lanjouw and Ravallion estimate the marginal odds of participating in schooling and antipoverty programs. Their results suggest early capture of these programs by the nonpoor.

Thus, conventional methods of assessing benefit incidence underestimate the gains to India's rural poor from higher public outlays, and their loss from program cuts.

This paper - a product of Poverty and Human Resources, Development Research Group - was prepared as a background paper for the Bank's 1998 Poverty Assessment for India. The authors may be contacted at planjouw@worldbank.org or mravallion@worldbank.org.

Abstract:
Are development programs targeted to poor areas merely short-term palliatives, or do they yield longer-term gains? Poor-area development programs - in which the government transfers extra resources to unusually poor areas - have been widely used to fight poverty. There has been some research on such programs, but little is known about their impact on household living standards over time.

The authors address the issue for a sizable poor-area development program in rural China. China's program had a significant impact on rural living standards in the targeted areas of the sample. The consumption-growth model suggests that households living in the targeted areas had a higher rate of consumption growth than one would have otherwise expected. Nonetheless the authors found that while the gains in growth were enough to prevent an absolute decline in average living standards, they were not enough to reverse the strong underlying divergent tendencies in the rural economy.

This paper - a product of the Poverty and Human Resources Division, Policy Research Department - is part of a larger effort in the department to evaluate the welfare impact of public programs. The study was funded by the Bank's Research Support Budget under the research project Policies for Poor Areas (RPO 678-79).

Abstract:
Is public safety of less concern to poor people? What about people in poor areas? How is demand for public safety affected by income inequality? Is there a self-correcting mechanism whereby higher crime increases demand for public safety?

Is public safety of less concern to poor people? What about people in poor areas? How is demand for public safety affected by income inequality? Is there a self-correcting mechanism whereby higher crime increases demand for public safety?

Pradhan and Ravallion study subjective assessments of public safety using a comprehensive socioeconomic survey of living standards in Brazil. They find public safety to be a normal good at the household level. Marginal income effects are higher for the poor, so inequality reduces aggregate demand for public safety. Less public safety generates higher demand for improving it.

Living in a poor area increases demand at given own-income. So does living in an area with higher average education.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to assess demand for public goods. The study was funded by the Bank's Research Support Budget under research project Policies for Poor Areas (RPO 681-39). Martin Ravallion may be contacted at mravallion@worldbank.org.

Abstract:
The extent to which India's poor have benefited from the country’s economic growth has long been debated. This paper revisits the issues using a new series of consumption-based poverty measures spanning 50 years, and including a 15-year period after economic reforms began in earnest in the early 1990s. Growth has tended to reduce poverty, including in the post-reform period. There is no robust evidence that the responsiveness of poverty to growth has increased, or decreased, since the reforms began, although there are signs of rising inequality. The impact of growth is higher for poverty measures that reflect distribution below the poverty line, and it is higher using growth rates calculated from household surveys than national accounts. The urban-rural pattern of growth matters to the pace of poverty reduction. However, in marked contrast to the pre-reform period, the post-reform process of urban economic growth has brought significant gains to the rural poor as well as the urban poor.

Rural Poverty Reduction, Achieving Shared Growth, Services & Transfers to Poor, Inequality

Abstract:
Existing methods for assessing latent country or institutional performance can yield deceptive results.There have been many attempts to infer latent performance attributes of governments (or other institutions) from conditional comparisons that control for observed variables. Success in doing so could greatly improve government performance. Ravallion critically reviews the econometric foundations of the methods used. He argues that latent heterogeneity remains a fundamental but unresolved problem. Locating a benchmark for measuring performance adds a further problem. Current methods do not yield a consistent estimate of even the mean latent performance attribute. An assessment of country performance by these methods could well be wildly wrong.

This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to assess and improve methods for monitoring and assessing country performance. The study was funded by the Bank's Research Support Budget under the research project Policies for Poor Areas (RPO 681-39). The author may be contacted at mravallion@worldbank.org.