Is transient poverty different? Evidence for rural China

Abstract

We define ‘transient poverty’ as the component of time‐mean consumption poverty at household level that is directly attributable to variability in consumption; this can be thought of as a measure of vulnerability to falling consumption. The non‐transient component then depends solely on mean consumption over time, and we call this ‘chronic poverty’. Using robust semi‐parametric methods and household panel data for rural China, we test whether transient poverty is determined by a process that is similar to chronic poverty. Commonly identified causes of poverty in this setting have weak explanatory power for transient poverty and some of the factors determining transient poverty do not matter to chronic poverty, or even have the opposite effect. Successful policy responses to chronic poverty may still leave considerable transient poverty.