Measuring Chronic Poverty

Abstract

A new class of chronic poverty measures is constructed that builds upon Jalan and Ravallion (1998) but does not require resources in different periods to be perfect substitutes when identifying the chronically poor. We use a general mean to combine the resources of a person into a permanent income standard that is then compared to a poverty line to determine when a person is chronically poor. The parameter β ≤1 of the general mean allows for varying degrees of substitutability over time, from perfect substitutes at β = 1 to perfect complements as β tends to -∞. The decomposable Clark, Hemming and Ulph (1981) poverty measure with the same parameter β is applied to the distribution of permanent income standards to measure overall chronic poverty. Each measure has a convenient expression in terms of a censored matrix and satisfies a host of properties including decomposability. We provide an empirical application of the new measures using panel data from urban areas in Argentina.

Keywords: chronic poverty, intertemporal poverty, poverty measurement, identification, income standards, CHU indices, decomposability

JEL Classification: I31, I32, D31, D63