Transition Rate

Identifying the most effective poverty reduction policies is important in the fight against poverty. Lying at the heart of such an endeavor is an analysis of the poverty transition rate—or the dynamic aspects of poverty. Without further insights on poverty dynamics, the same poverty rate of 20 percent in two adjacent periods may mask diametrically different processes, ranging from complete stagnation (i.e., zero mobility, where all households see no change in their welfare) to extreme volatility (i.e., perfect mobility, where all poor households in the first period escaped poverty and were all replaced by households that had previously been nonpoor in the first period). Policies to deal with these situations are very different. If poverty is mostly transitory, more attention should be focused on designing ...