Income strongFluctuationsstrong, Poverty and Well Being Over Time Theory.pdf

Income Fluctuations, Poverty and Well-Being Over Time: Theory and Application to Argentina by Guillermo Cruces ECLAC and STICERD Discussion Paper Distributional Analysis Research Programme No. DARP 76 The Toyota Centre July 2005 Suntory and Toyota International Centres for Economics and Related Disciplines London School of Economics Houghton Street London WC2A 2AE i ABSTRACT This paper studies poverty as a dynamic phenomenon, motivated by the recurring economic crises that affect developing countries and the incidence of income fluctuations on household welfare. While the increasing availability of household panel data has been exploited in theoretical analysis and empirical applications, the methodological and applied literatures still lack a unified framework. Echoing Atkinson (1987), this paper addresses the question of how poverty should be measured over time – or, in more general terms, how to measure well-being based on repeated observations of household income. The paper develops and illustrates a set of tools for empirical work based on theoretically sound extensions of the existing methodology for static distributional analysis. Moreover, this framework encompasses some of the