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There is a paradox in the normative foundations for chronic and intertemporal poverty measurement. Measures that reflect particular aversion to chronicity of poverty cannot also reflect particular aversion to fluctuations in the level of poverty when poverty is intense, yet good arguments are made in favour of each of these properties. I argue that the paradox may be explained if the poverty analyst implicitly predicts that an individual observed to experience persistent poverty will continue to experience poverty when unobserved. The paradox may then be resolved by separating the normative exercise of evaluation, applying a measure that reflects particular aversion to fluctuations, from a positive exercise of modelling and prediction. This proposal is illustrated by application to panel data from rural Ethiopia, covering the period 1994–2004. Several dynamic models are estimated, and a simple model with household-specific trends is found to give the best predictions of future wellbeing levels. Appropriately normalised measures of intertemporal poverty are applied to the predicted and observed trajectories of wellbeing, and results are found to differ substantially from naïve application of the measures to observed periods only. While similar results are obtained by naïve application of the measures that embody particular aversion to chronicity, separation of the normative and positive exercises maintains conceptual clarity.

This paper deals with poverty decompositions into subgroups defined with respect to intervals of income and the robustness of comparisons of the absolute contribution of such groups to poverty. For instance, world poverty estimates by the World Bank often distinguish between the extreme poor whose incomes are lower than $1.25 a day (in PPP terms) and the other poor with incomes between $1.25 and $2.5 a day. Existing dominance conditions can tell whether overall poverty and extreme poverty have declined in a robust manner when comparing countries at two points of time, but they cannot say anything for the contribution of the non-extreme poor to overall poverty. In the present paper we propose stochastic generalized dominance criteria to perform robust poverty ordering when the focus is placed on some interval of the poverty domain. Using generated data based on grouped data from World Bank’s PovcalNet tool, the paper finally investigates whether the robust decline of extreme poverty around the world during the last decades was also accompanied by a decline of the contribution of non-extreme poverty.

Supposing that decisionmakers in any country and at any point in time tolerate a certain fixed level of perceived poverty, differences in poverty aversion are called for to explain observed international and intertemporal variations in poverty statistics. Under the Natural Rate of Subjective Poverty hypothesis advanced in this paper, variations in the degree of poverty aversion are estimable and can be explained by political and socioeconomic factors. The methodology is applied to US data from 1975 to 1998 and across nations using cross-section data from the mid-1990s. Factors such as the political affiliation of government officials, public expenditure, per capita income, and economic growth account for much of the variation in poverty aversion implied by our hypothesis. The relationship between inequality aversion and poverty aversion is also explored, with the aid of a parallel “natural rate” hypothesis for inequality (Lambert et al., 2003). Our findings provide a new framework in which to interpret observed correlations between poverty, inequality, and social welfare.

More than half of the Mexican population lives in poverty. While there are many studies about poverty in Mexico, there are very few about the dynamics of poverty. The purpose of this paper is to measure chronic and transient poverty in Mexico and to analyze its determinants.

Based on the spells approach, a transition matrix was estimated and a multinomial logistic regression analysis was conducted to investigate the effects of various socioeconomic and demographic variables upon the dynamics of poverty.

It was found that 36 percent of households are chronically poor and 64 percent are transiently poor. The results show that variables directly related to chronic poverty are belonging to an ethnic minority group, living in a rural area, a large family size, having a high percentage of older adults and children in the household and having a female household head. Having more education, having more assets, the age of the household head and having access to potable water and electricity in the household are variables positively related with the probability of escaping poverty.

To the authors knowledge, this is the first study on the dynamics of poverty using the spells approach for Mexico as a whole, not just for urban areas. The value of this work is that it estimates chronic and transitory poverty in Mexico as well as their possible determinants. The study findings can be used by the government to design and implement public policies to alleviate both chronic and transient poverty in Mexico.

We consider the link between poverty and subjective well-being, and focus in particular on the role of time. We use panel data on 49,000 individuals living in Germany from 1992 to 2012 to uncover three empirical relationships. First, life satisfaction falls with both the incidence and intensity of contemporaneous poverty. Second, poverty scars: those who have been poor in the past report lower life satisfaction today, even when out of poverty. Last, the order of poverty spells matters: for a given number of years in poverty, satisfaction is lower when the years are linked together. As such, poverty persistence reduces well-being. These effects differ by population subgroups.

Based on a multiple spells approach, this paper studies the extent and the composition of chronic poverty in Germany. The results indicate that about one-third of cross-sectional poverty in a given year is chronic. The characteristics that are most closely associated with long-term poverty are economic inactivity and pensioner status, while the number of children and the gender of the household head do not seem to have a systematic effect. This is in contrast to cross-sectional results where the biggest poverty risk is usually unemployment and a large number of children, while pensioners do not face particularly high poverty risks. Estimates from a multiple spells hazard model further suggest that 6% of the population have unobserved characteristics that lead to low poverty exit and high re-entry rates, making these individuals likely candidates for chronic poverty. A comparison with results for Great Britain and the United States suggests that poverty is less persistent in Germany.

This study aims to examine the consumption behaviour in Organization of Islamic Cooperation countries.

Using time series and panel data, this study estimates rational expectations permanent income hypothesis model and the intertemporal elasticity of substitution, and examines the response in consumption to expected and unexpected changes in income.

The evidence supports the phenomenon of loss aversion. The response of consumption to unexpected income changes is statistically significant in only one-third of the countries in the sample. Conversely, the response of consumption to expected income changes is statistically as well as economically significant in one-fourth of the countries in the sample. The intertemporal elasticity of substitution is also statistically insignificant in majority of OIC countries in the sample.

The evidence in support of loss aversion in preferences could help in explaining the low penetration of equity-based risk sharing instruments in Islamic finance.

The excess sensitivity of consumption to income suggests that redistribution efforts to enhance incomes of poor households could help in enhancing their consumption levels.

The study takes a comprehensive sample across time and space for OIC countries as compared to previous studies and also adjusts the budget constraint for Zakat.

In this paper, we provide an assessment of the intertemporal economic well-being of a representative sample of females who became new Social Security Disability Insurance (SSDI) beneficiaries in 1982. We compare their economic circumstances over the 1982 to 1991 period with those of both disabled men who became new SSDI beneficiaries in 1982, and a matched sample of nondisabled females who had sufficient work experience for benefit eligibility should they have become disabled. In 1982, the new SSDI women beneficiaries were a relatively poor segment of U.S. society. One quarter of them lived in poverty, and 48 percent had incomes below 150 percent of the poverty line. Over the subsequent decade, some of those married in 1982 lost husbands and the income contributed by their husbands. Yet, as of 1991, over one half of these disabled women lived in families with income below 150 percent of the poverty line. Social Security benefits to disabled women have played an important, and growing, role in sustaining economic status. Nevertheless, the level of well-being of these women lies substantially below that of the comparison groups, and for some groups of the women, well-being trends were negative both absolutely and relative to the comparison groups. We statistically relate the poverty status of these new female recipients to sociodemographic factors that would be expected to contribute to low well-being, and simulate the effect of Social Security benefits in reducing poverty and replacing earnings. We suggest a number of SSDI-related policy changes that could, at low cost, reduce poverty among those women with the highest incidence rates.