Dynamic Poverty Decomposition Analysis: An Application to the Philippines

Abstract

This paper proposes a new method of poverty decomposition. The method remedies the shortcomings of existing methods and has some desirable properties such as time-reversion consistency and subperiod additivity. It integrates the existing methods of growth-redistribution decomposition and sector-based decomposition, because it allows poverty change to be decomposed into growth and redistribution components for each group (e.g., regions or sectors) in the economy. The method is extended to have six components and is empirically applied to the Philippines for the period 1985-2009.

Keywords: economic growth, Foster-Greer-Thorbecke (FGT) measure, inequality, inflation, poverty profile, watts measure

JEL Classification: I32, O10