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  • Furthermore the authors claim that transitory poverty is due

    2018-10-25

    Furthermore, the authors claim that transitory poverty is due to individuals’ vulnerability to drops in their standard of living: non-poor individuals may suddenly fall into poverty and individuals not far below the poverty line can, all of a sudden, drop into extreme poverty (Jalan and Ravallion, 2000, p. 82). On the other hand, chronic poverty is defined as poverty persisting in time, even when the inter-temporal consumption variability diminishes. Lastly, inter-temporal poverty is the sum of poverty\'s chronic and transitory components. In the context of distinguishing stochastic or transitory poverty and permanent or chronic poverty, Morduch\'s work (1994) must be cited. Concerned with the causal relation between the lack of safety mechanisms against shocks and the incidence of poverty, Morduch defines stochastic poverty as that which does not occur during the entire more of analysis, thus attributing stochastic poverty to a family if its current consumption is below the poverty line, located below the permanent or average income. In other words, the family is poor at a specific moment in time, yet its permanent income is above the poverty line. For this author, such phenomenon could be related to stochastic elements in a local economy or could be due to an impossibility to acquire loans due to credit market imperfections. On the other hand, structural poverty, linked to intrinsic family characteristics and/or incapacity to obtain sufficient income, is defined as a situation in which the family remains poor throughout the whole period of analysis. In other words, its current consumption and permanent income are both below the poverty line defined as the standard. Structural poverty could be associated to shocks in the family structure, which trigger a decline in the permanent income, and/or impossibility to access loans because of permanent low income, this fact leading to permanence in poverty for some time (Morduch, 1994). Hence, the distinction among different profiles of demographic and socioeconomic groups about the oscillation in per capita family income around the poverty line, throughout a time series, must be analyzed in studies dealing with poverty dynamics. This differentiation must be considered whenever public policies are designed. Families always poor require, in addition to income transfer programs, to be qualified and enabled to work as well as policies to be integrated into the social networks. On the other hand, families facing episodic poverty in lean economic cycles – a situation most of the time plaguing autonomous freelance workers – may need greater access to credit programs. In considering then these different dimensions of poverty, the following section herein presents the methodology used to classify families as per Hulme and Shepherd\'s categorization (2003). In the poverty dynamics approach, families are classified and clustered through specific and aggregate categorizations presented by Hulme and Shepherd (2003), in an adaptation of Jalan and Ravallion\'s work (2000), who broke down poverty into two categories only: chronic and transitory. In an initial categorization, Hulme and Shepherd (2003) define five groups (labeled specific categories) according to the location of the household poverty indicator observed in a point of the time series (henceforth known herein as punctual) and of the average poverty indicator (tendency of the observed household poverty indicator in the time series). The poverty indicator can be in terms of income, expenditure, consumption, assets, nutrition, or combinations of indicators such as a household level human deprivation index (Hulme and Shepherd, 2003). In this article, we use the household income as the household poverty indicator, the only indicator available on data from PME. Thus, the specific categories are: always poor (SP), whose punctual poverty indicator for each time period and average poverty indicator are below the poverty line; usually poor (UP), whose average poverty indicator is below the poverty line, but are not poor in all time periods; in other words, the punctual poverty indicator is above the poverty line at some point in time (in this paper, they are the groups that crossed the poverty line only once); churning poor (RP), whose average poverty indicator hugs the poverty line, but they can be poor in some time periods and non-poor in others; occasionally poor (OC), with the average poverty indicator above the poverty line but they lived at least one time period in poverty; and never poor (NP), whose average poverty indicator and punctual indicator are both always above the poverty line.