Understanding Changes in Poverty
Gabriela Inchauste
Understanding Changes in Poverty
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Understanding Changes in Poverty brings
together different methods to decompose the contributions to
poverty reduction. A simple approach quantifies the
contribution of changes in demographics, employment,
earnings, public transfers, and remittances to poverty
reduction. A more complex approach quantifies the
contributions to poverty reduction from changes in
individual and household characteristics, including changes
in the sectoral, occupational, and educational structure of
the workforce, as well as changes in the returns to
individual and household characteristics. Understanding
Changes in Poverty implements these approaches and finds
that labor income growth that is, growth in income per
worker rather than an increase in the number of employed
workers was the largest contributor to moderate poverty
reduction in 21 countries experiencing substantial
reductions in poverty over the past decade. Changes in
demographics, public transfers, and remittances helped, but
made relatively smaller contributions to poverty reduction.
Further decompositions in three countries find that labor
income grew mainly because of higher returns to human
capital endowments, signaling increases in productivity,
higher relative price of labor, or both. Understanding
Changes in Poverty will be of particular relevance to
development practitioners interested in better understanding
distributional changes over time. The methods and tools
presented in this book can also be applied to better
understand changes in inequality or any other distributional change.

From the Open Knowledge Repository at the World Bank.

Language
English
ISBN
978-1-4648-0299-7
Front Cover
Contents
Acknowledgments
About the Authors
Abbreviations
Chapter 1 Opportunity Knocks: Deepening Our Understanding of Poverty Reduction
Introduction
Decomposing Poverty Reduction
Contributions of This Volume
Decompositions Can Inform Policy Priorities
Notes
Bibliography
Chapter 2 A Simple Approach to Understanding Changes in Poverty and Inequality
Introduction
The Size and Redistribution Effects
Accounting for the Contribution of Demographics and Income Components
Summary and Conclusions
Notes
Bibliography
Chapter 3 What Accounts for Changes in Poverty over the Past Decade?
Introduction
Growth and Poverty Reduction
Forces behind Poverty Reduction
Results
Summary and Conclusions
Annex 3A: Data Sources
Annex 3B: Complementary Tables
Notes
Bibliography
Chapter 4 Counterfactual Decomposition of Changes in Poverty Outcomes
Introduction
The Composition and Structural Effects
Accounting for Behavior
Concluding Summary and Remarks
Notes
Bibliography
Chapter 5 Why Has Labor Income Increased? An In-Depth Approach to Understanding Poverty Reduction
Introduction
Modeling Strategy
Decomposition Approach
Final Remarks
Annex 5A: Estimating the Residual Term in Multinomial Logit
Annex 5B: The Cumulative Decomposition Technique
Notes
Bibliography
Chapter 6 Understanding Poverty Reduction in Bangladesh, Peru, and Thailand
Introduction
Country Context
The Decomposition Approach
Decomposition Results
Final Remarks
Annex 6A: Regression and Simulation Results
Notes
Bibliography
Figures
Figure 1.1 Decomposition of Changes in Moderate Poverty, by Income Level, in Selected Developing Countries, 2000s
Figure 1.2 Cumulative Contributions to Moderate Poverty Reduction in Bangladesh, Peru, and Thailand, 2000s
Figure 2.1 Determinants of Consumption per Capita
Figure 3.1 Average Real GDP Growth in Selected Developing Countries, 2000s
Figure 3.2 Contribution of Growth and Redistribution to Poverty Reduction in Selected Developing Countries, by Poverty Line, 2000s
Figure 3.3 Change in Age-Dependency Ratio of Selected Developing Countries, 2000s
Figure 3.4 Change in Subsidies and Other Social Transfers in Selected Developing Countries, 2000s
Figure 3.5 Change in International Remittances to Selected Developing Countries, 2000s
Figure 3.6 Decomposition of Changes in Moderate Poverty, by Level, in Selected Developing Countries, 2000s
Figure 5.1 Model of Contributors to Poverty Reduction, by Stage Sequence
Figure 6.1 Change in Moderate Poverty Rates in Bangladesh, Peru, and Thailand, 2000s
Figure 6.2 GDP in Bangladesh, Peru, and Thailand, 2000–10
Figure 6.3 Population Growth in Bangladesh, Peru, and Thailand, 2000–10
Figure 6.4 Growth Incidence Curves of Labor Income in Bangladesh, Peru, and Thailand, 2000s
Figure 6.5 Nonlabor Income Growth, by Source, in Bangladesh, Peru, and Thailand, 2000s
Figure 6.6 Change in Household Consumption-to-Income Ratio in Bangladesh, Peru, and Thailand, 2000s
Tables
Table 2.1 Shapley Allocations for a Three-Player Game
Table 2.2 Application of Barros Methodology to Measure Contributions of Variables to Change in Poverty
Table 2.3 Proposed Methodology to Decompose Change in Poverty along One Possible Path
Table 3.1 Poverty Headcount Rates, by Benchmark, in Selected Developing Countries, 2000s
Table 3.2 Share of Adults per Household, by Poverty Level, Selected Developing Countries, 2000s
Table 3.3 Share of Working Adults per Household, by Poverty Level, in Selected Developing Countries, 2000s
Table 3.4 Share of Transfers in Total Household Income, by Poverty Level, in Selected Developing Countries, 2000s
Table 3.5 Change in Household Consumption-to-Income Ratio in Selected Developing Countries, 2000s
Table 3.6 Contributions to Declines in Moderate Poverty, by Level, in Selected Developing Countries, 2000s
Table 3A.1 Survey Sources of Data for Poverty Reduction Analysis in Selected Developing Countries, 2000
Table 3B.1 Contributions to the Decline in the $1.25-a-Day (PPP) Poverty Headcount in Selected Developing Countries, 2000s
Table 3B.2 Contributions to the Decline in the $2.50-a-Day (PPP) Poverty Headcount in Selected Developing Countries, 2000s
Table 3B.3 Contributions to the Decline in the $4.00–$5.00-a-Day (PPP) Poverty Headcount in Selected Developing Countries, 2000s
Table 6.1 Change in Poverty Rates, by Level, in Bangladesh, Peru, and Thailand, 2000s
Table 6.2 Growth and Redistribution Decomposition of Moderate Poverty Rate Changes in Bangladesh, Peru, and Thailand, 2000s
Table 6.3 Population and Labor Force Characteristics in Bangladesh, Peru, and Thailand, 2000s
Table 6.4 Household Consumption-to-Income Ratio, by Income Decile, in Bangladesh, Peru, and Thailand, 2000s
Table 6.5 Marginal Contributions to Poverty Reduction in Bangladesh, Peru, and Thailand, 2000s
Table 6.6 Contributions to Poverty Reduction by Returns to Endowments in Bangladesh, Peru, and Thailand, 2000s
Table 6.7 Cumulative Contributions to Poverty Reduction in Bangladesh, Peru, and Thailand, 2000s
Table 6A.1 Simulating the Changing Characteristics of Households in Bangladesh, 2000–10
Table 6A.2 Simulating the Changing Characteristics of Households in Peru, 2005–09
Table 6A.3 Simulating the Changing Characteristics of Households in Thailand, 2000–09
Table 6A.4 Multinomial Logit on Occupational Choice of Working-Age Population, by Household Status, in Bangladesh, 2000 and 2010
Table 6A.5 Multinomial Logit on Occupational Choice of Working-Age Population, by Household Status, in Peru, 2004 and 2010
Table 6A.6 Multinomial Logit on Occupational Choice of Working-Age Population, by Household Status, in Thailand, 2000 and 2009
Table 6A.7 Earnings Regressions for Nonfarm Working-Age Population in Bangladesh, 2000 and 2010
Table 6A.8 Earnings Regressions for Nonfarm Working-Age Population in Peru, 2004 and 2010
Table 6A.9 Earnings Regressions for Nonfarm Working-Age Population in Thailand, 2000 and 2009
Table 6A.10 Net Revenue Regressions for Farm Households in Bangladesh, 2000 and 2010
Table 6A.11 Net Revenue Regressions for Farm Households in Peru, 2004 and 2010
Table 6A.12 Net Revenue Regressions for Farm Households in Thailand, 2000 and 2009
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