Why Did Poverty Decline in India? : A Nonparametric Decomposition Exercise

This paper uses panel data to analyze factors that contributed to the rapid decline in poverty in India between 2005 and 2012. The analysis employs a nonparametric decomposition method that measures the relative contributions of different component...

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Bibliographic Details
Main Authors:	Balcazar, Carlos Felipe, Desai, Sonal, Murgai, Rinku, Narayan, Ambar
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2016
Subjects:	PER CAPITA CONSUMPTION STRUCTURAL TRANSFORMATION HOUSEHOLD SIZE POVERTY LINE ECONOMIC GROWTH SIGNIFICANT EFFECT OLD AGE FARMER INCOME POVERTY RATES POVERTY ESTIMATES NATIONAL POVERTY LINE COUNTERFACTUAL LABOR FORCE DEVELOPING COUNTRIES INCOME SOURCE INCOME SOURCES HOUSING POVERTY CHANGES FOOD POLICY POVERTY HEADCOUNT SELF- EMPLOYMENT MEASUREMENT ERRORS NATIONAL POVERTY POLICY DISCUSSIONS ANNUAL GROWTH CONSUMPTION AGGREGATE CONSUMPTION GROWTH SOCIAL PROGRAMS RURAL POOR DISTRIBUTIONAL MEASURES MEASURES POVERTY MEASURES OBSERVED CHANGES WELFARE INDICATOR ECONOMIC SHOCK POVERTY REDUCTION AGRICULTURAL WAGE LABOR MARKET RESIDUAL COMPONENT POVERTY OUTCOMES SAVINGS RURAL HOUSEHOLD PER CAPITA INCOME RURAL HOUSEHOLDS RURAL HOUSEHOLD INCOME DEVELOPMENT ECONOMICS MEDIAN INCOME CAPITAL GAINS OBSERVED VALUE POVERTY REDUCING INCOME GROWTH POVERTY CHANGE DESCRIPTIVE STATISTICS INEQUALITY MEASURES AVERAGE INCOME RELATIVE IMPORTANCE LABOR PRODUCTIVITY TRANSFERS AGRICULTURAL WAGES HOUSEHOLD COMPOSITION HOUSEHOLD INCOME MEASUREMENT ERROR POVERTY STATUS CHRONIC POVERTY FEMALE WORKFORCE PRODUCT POOR GROWTH FARMERS CHANGES IN POVERTY HOUSEHOLD MEMBERS POVERTY HEADCOUNT RATE DECOMPOSITION RESULTS POVERTY LINES CONSUMPTION AGRICULTURAL LABORERS EMPLOYMENT GUARANTEE SCHEME REDUCING POVERTY RELATIVE CONTRIBUTIONS REDUCTION IN POVERTY POOR GROUPS CROSS- SECTION DATA AGGREGATE POVERTY CHRONICALLY POOR INCOME DISTRIBUTIONS AGRICULTURAL SELF- EMPLOYMENT PUBLIC PROGRAMS FEMALE WORKERS MEAN INCOME AGRICULTURAL WAGE EMPLOYMENT AGRICULTURAL EMPLOYMENT RURAL POVERTY AGRICULTURAL SECTOR DAILY EARNINGS INCOMES DISADVANTAGED GROUPS RURAL DISTRIBUTIONAL CHANGE FOOD TRANSFERS RURAL EMPLOYMENT AGRICULTURAL ACTIVITIES DIVERSIFICATION EMPLOYMENT IN AGRICULTURE ECONOMIC INEQUALITY AVERAGE SHARE CONSTANT PRICES SOCIAL CAPITAL DEMOGRAPHIC CHANGES GROSS INCOME FALLING POVERTY WELFARE MEASURES RURAL AREAS POVERTY AVERAGE ANNUAL HOUSEHOLD CONSUMPTION DECLINE IN POVERTY CHILD LABOR POVERTY DYNAMICS HOUSEHOLD WELFARE POLICY RESEARCH POVERTY RATE ANNUAL RATE POOR WELFARE IMPROVEMENTS CONSUMPTION PER CAPITA SELF-EMPLOYMENT AGRICULTURAL SELF-EMPLOYMENT WAGE EMPLOYMENT RURAL POVERTY REDUCTION DECOMPOSITION ANALYSIS CROSS-SECTION DATA POVERTY INCREASE HUMAN DEVELOPMENT INEQUALITY
Online Access:	http://documents.worldbank.org/curated/en/2016/03/26073166/poverty-decline-india-nonparametric-decomposition-exercise http://hdl.handle.net/10986/24143

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Summary:	This paper uses panel data to analyze factors that contributed to the rapid decline in poverty in India between 2005 and 2012. The analysis employs a nonparametric decomposition method that measures the relative contributions of different components of household livelihoods to observed changes in poverty. The results show that poverty decline is associated with a significant increase in labor earnings, explained in turn by a steep rise in wages for unskilled labor, and diversification from farm to nonfarm sources of income in rural areas. Transfers, in the form of remittances and social programs, have contributed but are not the primary drivers of poverty decline over this period. The pattern of changes is consistent with processes associated with structural transformation, which add up to a highly pro-poor pattern of income growth over the initial distribution of income and consumption. However, certain social groups (Adivasis and Dalits) are found to be more likely to stay in or fall into poverty and less likely to move out of poverty. And even as poverty has reduced dramatically, the share of vulnerable population has not.

Why Did Poverty Decline in India? : A Nonparametric Decomposition Exercise

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