For Richer or for Poorer? Evidence from Indonesia, South Africa, Spain, and Venezuela

We analyze household income dynamics using longitudinal data from Indonesia, South Africa (KwaZulu-Natal), Spain and Venezuela. In all four countries, households with the lowest reported base-year income experienced the largest absolute income gains. This result is robust to reasonable amounts of measurement error in two of the countries. In three of the four countries, households with the lowest predicted base-year income experienced gains at least as large as their wealthier counterparts. Thus, with one exception, the empirical importance of cumulative advantage, poverty traps, and skill-biased technical change was no greater than structural or macroeconomic changes that favored initially poor households in these four countries.     

Livestock in the Household Economy: Cross‐Country Evidence from Microeconomic Data

The development of the livestock sector can contribute to economic growth and poverty reduction, but there is inadequate understanding of livestock‐livelihoods linkages. This article draws on household‐level data from 12 developing countries to investigate the livestock‐asset position of rural households and its contribution to their income. The majority keep livestock; the less well‐off are more likely to keep livestock than the better‐off, but the very poor often lack the resources to invest in small animals. The key policy conclusion is that, contrary to common belief, there are no universal messages about livestock: policy needs to be tailored to farming systems, species, uses of livestock and different wealth groups.     

The social consequences of unemployment in hungary—a household perspective

In this article the following hypotheses are tested using the Hungarian Household Panel Survey and the SOCO data: (a) Poverty is more likely to be felt by ‘unemployed’ households (i.e. households in which one or more members are unemployed) than by ‘non‐unemployment’ households (i.e. households in which none of the members are unemployed); and (b) A household is more likely to be poor if the head of the household becomes unemployed rather than if the spouse or one of the elder children do. The analysis shows that unemployment is closely related to all aspects of poverty (e.g. income, expenditure, and subjective‐poverty), but this association is especially strong in the case of income. It also demonstrates that poverty is more likely when the head of the household, rather than any other member of the household, becomes unemployed. After controlling for all variables we see that when the head of the household becomes unemployed the probability of being poor increases only with regard to income‐ and subjective‐poverty. Wealth‐ and housing‐poverty are not influenced by unemployment in the household. By comparison, in the other Central European countries, when the head of the household becomes unemployed, the probability of being poor increases in all aspects of poverty. This finding suggests that unemployment in Hungary seems to be less devastating than in other post‐socialist countries.     

Even the ‘Rich’ are Vulnerable: Multiple Shocks and Downward Mobility in Rural Uganda

Poverty data rarely capture processes of change, limiting our ability to understand poverty trajectories at the individual or household levels. This article uses a household survey, village‐level participatory studies and indepth life‐history interviews to examine people's poverty trajectories and to identify what drives and maintains chronic poverty. Composite shocks can propel previously non‐poor households into severe and long‐term poverty. Poverty is hard to escape, and people born into chronically poor households find few opportunities for accumulation and wealth creation. The analysis highlights the importance of poverty interrupters, including the end of conflict and the re‐integration of internally displaced people, and suggests that state‐led interventions would be needed to provide real opportunities to the chronically poor.     

The concept and measurement of asset poverty: Levels, trends and composition for the U.S., 1983–2001

American prosperity in the second half of the 1980s together with the booming economy of the 1990s created the impression that American households have done well, particularly in terms of wealth acquisition. In this paper, we develop the concept of “asset poverty” as a measure of economic hardship, distinct from and complementary to the more commonly used concept of “income poverty.” We define a household with insufficient assets to enable it to meet basic needs (as measured by the income poverty line) for a period of three months to be asset poor. The results reveal that in the face of the large growth in overall assets in the U.S. and a fall in standard income poverty over the period from 1983 to 2001, the level of asset poverty increased from 22.4 to 24.5 percent. We also find that asset poverty rates for blacks and Hispanics are over twice those for whites; that asset poverty rates fall monotonically with both age and education; that they are much higher for renters than homeowners; and that by family type they range from a low of 5 percent for elderly couples to 71 percent for female single parents.     

Assessing the Relationship Between Gender,Household Structure,and Net Worth in the United States

This paper examines wealth disparities by gender and household structure in the United States using data from the 1998–2013 Survey of Consumer Finances. Following studies of economic insecurity, we placed households at the center of our analysis to highlight the interconnected nature of wealth with multiple aspects of family structure. We investigated net worth by both gender and household structure, which includes variation by partnership status and the presence of other adult relatives and their roles within the household. We found that wealth disparities were largest among single adult households, but these varied by gender. Female single adult households held some of the lowest levels of net worth, but after accounting for key explanations of wealth inequality, single male households actually held greater wealth than two-adult partnered households. This relationship further depended on the presence of extended family members, where gender disparities were smaller among households with other relatives present.     

Household Enterprises and Poverty Reduction in Sub‐Saharan Africa

Employment in Household Enterprises (HEs) has been an integral part of the recent economic growth in sub‐Saharan Africa (SSA). Yet employment and development strategies tend to exclude the sector, despite the fact that households with HEs tend to be richer. A good example is Mozambique, where 34% of households rely on income from this source. Analysis of household livelihoods using panel data shows that starting HEs is associated with upward wealth mobility and poverty reduction, particularly for rural and poorly‐educated households. Targeted programmes directed towards the constraints to HE creation, survival and income growth would be likely to enhance the effectiveness of employment and poverty reduction strategies in Mozambique as well as in other low income countries in SSA.     

Changes in durable stocks, portfolio allocation, and consumption expenditure in the aftermath of the Kobe earthquake

To understand the household recovery process from unexpected serious damage caused by a natural disaster, we analyze household data from the Kobe earthquake in 1995. We address three questions—how damaged stocks of durable wealth are reinvested, how an ex post portfolio of borrowing or dissaving is reallocated to diversify the asset shocks caused by the disaster, and how formal and informal consumption insurance mechanisms are effective for amending home damage—all of which have been largely unanswered. We obtain three findings. First, people respond to negative income changes and housing damage by reinvesting damaged wealth. Second, households borrow extensively to amend the large housing damage caused by the earthquake. However, they dissave only for minor household asset damage. Third, consumption smoothing is not achieved for nondurable goods that are significantly affected by negative income changes and household asset damage. These findings suggest that asset shocks caused by a large natural disaster are not sufficiently diversified for households, indicating a large gap in designing effective insurance mechanisms.     

Comparing Child Poverty Risk by Family Structure During the 2008 Recession

Children in nonmarried families are at greater risk for poverty and especially so during a time of macroeconomic recession. Using carefully harmonized data, the authors analyze child poverty among nonmarried families before and during the 2008 recession in five liberal welfare states: Australia, Canada, Ireland, the United Kingdom, and the United States. Although having similar demographic compositions, the authors document wide cross‐national variation in poverty risk based on marital status and gender of the household head. Through the recession, child poverty in Canada and the United Kingdom declined while it increased in Australia and Ireland and was largely unchanged in the United States. Decomposing changes within countries over time, family benefits in the form of income transfers play a major role in reducing poverty for nonmarried families. In all countries, children in cohabitating families were less protected from market instability.     

Targeting the reach of educational support interventions in Kenya

The Free Primary Education program introduced in Kenya in 2003 increased primary school attendance rates. However, disparities in primary school education are evident throughout the nation. Using data from the 2003 and 2008–09 Kenya Demographic Health Surveys (KDHS), this study investigates the household characteristics—in addition to poverty—associated with poor school attendance. Using bivariate analysis and logistic regression we confirm that indeed household wealth is a factor in accessing free primary education. Younger children, those living in households headed by a non-biological parent are also less likely to attend school. Moreover households in arid and semi-arid regions of the country—areas characterized by historical socio-economic and political marginalization report significantly low primary school attendance rates. Findings from this study call attention to continued education disparities in spite of the free tuition program. The study further directs policy makers on how best to deploy scarce resources to target households most unable to provide adequate educational supports to children.     

Household Finance and Food Insecurity

Despite repeated expansions of federal food assistance, food insecurity and hunger continue to affect many Americans. While job loss and poverty are among major contributors, theoretical and empirical literature suggest that households’ ability to borrow and save might provide a buffer protecting from food insecurity. Using data from the Panel Study of Income Dynamics, we tested whether liquidity constraint, asset inadequacy, and insolvency risk defined based on financial ratios could predict household food insecurity separately from the effects of income and program participation. Results showed that a household’s liquidity constraint and asset inadequacy were linked with increased risk of food insecurity at all income levels, although the association was strongest among poor households and those with incomes slightly above the federal food assistance eligibility threshold. Unlike indications from qualitative literature, financial constraint appeared to be an exogenous determinant of household food insecurity. Implications for financial practitioners and policymakers are discussed.     

Can Trade Help Poor People? The Role of Trade,Trade Policy and Market Access in Tanzania

Many development economists prescribe trade as a poverty‐reducing formula. But how is this elixir supposed to work? This article contributes to the lively debate on this topic with household evidence from Tanzania — a poor country even within sub‐Saharan Africa, the poorest region. About 81% of the poor work in agriculture, which accounts for 88% of the export bundle. The article describes existing poverty and then evaluates the poverty‐reduction potential of trade, trade policy and market access. The article extends the analysis by simulating tariff changes and four switching scenarios that swap some poor households into trade‐related sectors, such as cash cropping or tourism, to project national poverty reductions of up to 5.6% and household income increases of up to 21.5%.     

Urban poverty and labor market dynamics in five Latin American countries: 2003–2008

Latin America experienced a long period of sustained growth since 2003 that positively impacted social and labor market indicators, including poverty. This paper contributes to the understanding of this process as it carries out a comparative study of poverty dynamics in five Latin American countries during 2003–2008. It analyzes the extent to which countries with different levels of poverty incidence diverge in terms of poverty exit and entry rates, identifies the relative importance of the frequency and impact of events associated to poverty transitions and examines how these events affect households with different characteristics. For this, a dynamic analysis of panel data is carried out using regular household surveys. Sizeable rates of poverty movements were observed in all five countries and it was found that a large proportion of household experienced positive events, mainly related to the labor market; however, only a small fraction of them actually exited poverty. Demographic events and public cash transfers proved to be of little relevance; in particular, the latter did not contribute much either to intensify poverty exits or to prevent poverty entries. Households with children experienced more (less) negative (positive) events than those without children. It appeared therefore that even when the economy behaved reasonably well at the aggregate level, high levels of labor turnover and income mobility (even of a negative nature) still prevail, mainly associated to the high level of precariousness and the undeveloped system of social protection that characterize the studied countries.     

Sources of information and portfolio allocation

This research investigates the relationship between how a household receives financial information and the degree to which investment portfolios are diversified. Diversification is measured as allocation across asset classes and share of assets held in each asset class. Propensity score-based techniques incorporating stratification and weighting are employed to better isolate causal links, while also controlling for objective and subjective financial literacy and overconfidence. Results indicate that the use of financial planners and brokers is associated with an increase in asset class diversification. Households that consult with financial planners and bankers allocate their wealth systematically different from those who do not. These results highlight the role that financial professionals play in helping households make investment decisions.     

Risk-taking behavior in the presence of nonconvex asset dynamics

The growing literature on poverty traps emphasizes the links between multiple equilibria and risk avoidance. However, multiple equilibria may also foster risk-taking behavior by some poor people. We illustrate this idea with a simple analytical model in which people with different wealth and ability endowments make investment and risky activity choices in the presence of known nonconvex asset dynamics. This model underscores a crucial distinction between familiar static concepts of risk aversion and forward-looking dynamic risk responses to nonconvex asset dynamics. Even when unobservable preferences exhibit decreasing absolute risk aversion, observed behavior may suggest that risk aversion actually increases with wealth near perceived dynamic asset thresholds. Although high ability individuals are not immune from poverty traps, they can leverage their capital endowments more effectively than lower ability types and are therefore less likely to take seemingly excessive risks. In general, linkages between behavioral responses and wealth dynamics often seem to run in both directions. Both theoretical and empirical poverty trap research could benefit from making this two-way linkage more explicit.     

The concept and measurement of asset poverty: Levels, trends and composition for the U.S., 1983–2001

American prosperity in the second half of the 1980s together with the booming economy of the 1990s created the impression that American households have done well, particularly in terms of wealth acquisition. In this paper, we develop the concept of asset poverty as a measure of economic hardship, distinct from and complementary to the more commonly used concept of income poverty. We define a household with insufficient assets to enable it to meet basic needs (as measured by the income poverty line) for a period of three months to be asset poor. The results reveal that in the face of the large growth in overall assets in the U.S. and a fall in standard income poverty over the period from 1983 to 2001, the level of asset poverty increased from 22.4 to 24.5 percent.We also find that asset poverty rates for blacks and Hispanics are over twice those for whites; that asset poverty rates fall monotonically with both age and education; that they are much higher for renters than homeowners; and that by family type they range from a low of 5 percent for elderly couples to 71 percent for female single parents.     

Social network capital, economic mobility and poverty traps

This paper explores the role social network capital might play in facilitating poor agents?? escape from poverty traps. We model and simulate endogenous link formation among households heterogeneously endowed with both traditional and social network capital who make investment and technology choices over time in the absence of financial markets and faced with multiple production technologies featuring different fixed costs and returns. We show that social network capital can either complement or substitute for productive assets in facilitating some poor households?? escape from poverty. However, the voluntary nature of costly link formation also creates exclusionary mechanisms that impede some poor households?? use of social network capital. Through numerical simulation, we show that the ameliorative potential of social networks therefore depends fundamentally on the broader socio-economic wealth distribution in the economy, which determines the feasibility of social interactions and the net intertemporal benefits resulting from endogenous network formation. In some settings, targeted public transfers to the poor can crowd-in private resources by inducing new social links that the poor can exploit to escape from poverty.     

Poverty and child health: an annotation

SUMMARY. There is a long established link between poverty and child health, both in the United Kingdom and in other countries. In this review of the literature, the author explores the nature of this link. The paper discusses the historical background and briefly reviews the evidence from the developing countries and the controversy surrounding the definition of poverty before examining the association between child health and poverty in the United Kingdom. The author concludes with some suggestions for future research and some thoughts on the implications for doctors working with children     

Housing Valuation,Wealth Perception,and Homeowners’ Portfolio Composition

This study explores the link between wealth perception from an appreciation of the residential property price and homeowners’ preference toward asset categories pooled by risk. Household survey data for Portugal were used to build shares of low, medium, and high risk assets representing fractions of household’s total wealth. Data showed incomplete household portfolios along with housing capturing the largest share of households’ wealth, in line with the literature on composition puzzles. The findings indicate robust empirical evidence that the rate of housing valuation is an indicator of households’ wealth perception. When the housing price appreciates with respect to its initial cost, households suffer an endowment effect and tend to increase diversity in their portfolio, expanding the holdings of safe deposits as they raise the share of high risk assets.     

Is Household Wealth Sustainable? An Examination of Asset Poverty Reentry After an Exit

This paper analyzed the influence of financial behaviors on the duration out of asset poverty while controlling for households’ life cycle and demographic characteristics. We found evidence for the existence of structural barriers to asset acquisition. Asset accumulation at or above levels equal to nine-months worth of income at the income-poverty level was important for improving a household’s odds of permanently escaping asset poverty, but a linear relationship between asset accumulation and the likelihood of returning to asset poverty did not emerge. Moreover, minimizing debt and diversifying the asset portfolio to include more productive assets were positively related to maintaining assets; but households should also consider the risks associated with portfolio allocations.