Being informed matters: Experimental evidence on the demand for environmental quality

A randomly selected treatment group of households in Gurgaon, India was informed whether (or not) their drinking water had tested positive for fecal contamination using a simple test costing about $0.50. Households that were not initially purifying their water, and were told that their drinking water had tested positive, were 11 percentage points (p-valueEnvironmental quality, drinking water, information, awareness, experiment

Household Income Dynamics in Rural China

Income dynamics, Poverty , Multiple equilibria, China

Does piped water reduce diarrhea for children in rural India ?

The effects of public investments aimed at directly improving children's health are theoretically ambiguous, since the outcomes also depend on indirect effects through parental inputs. The authors investigate the role of such inputs in influencing the incidence of child health gains from access to piped water in rural India. Using propensity score matching methods, they find that the prevalence and duration of diarrhea among children under five are significantly less on average for families with piped water than for families without it. But health gains largely bypass children in poor families, particularly when the mother is poorly educated. The author's findings point to the importance of combing infrastructure investments with effective public action to promote health knowledge and income poverty reduction.Water Conservation,Water and Industry,Public Health Promotion,Health Economics&Finance,Environmental Economics&Policies,Water and Industry,Town Water Supply and Sanitation,Health Economics&Finance,Environmental Economics&Policies,Health Monitoring&Evaluation

Household income dynamics in rural China

Theoretical work has shown that nonlinear dynamics in household incomes can yield poverty traps and distribution-dependent growth. If this is true, the potential implications for policy are dramatic: effective social protection from transient poverty would be an investment with lasting benefits, and pro-poor redistribution would promote aggregate economic growth. The authors test for nonlinearity in the dynamics of household incomes and expenditures using panel data for 6,000 households over six years in rural southwest China. While they find evidence of nonlinearity in the income and expenditure dynamics, there is no sign of a dynamic poverty trap. The authors argue that existing private and social arrangements in this setting protect vulnerable households from the risk of destitution. However, their findings imply that the speed of recovery from an income shock is appreciably slower for the poor than for others. They also find that current inequality reducesfuture growth in mean incomes, though the"growth cost"of inequality appears to be small. The maximum contribution of inequality is estimated to be 4-7 percent of mean income and 2 percent of mean consumption.Economic Theory&Research,Labor Policies,Health Economics&Finance,Environmental Economics&Policies,Payment Systems&Infrastructure,Environmental Economics&Policies,Inequality,Economic Theory&Research,Health Economics&Finance,Rural Poverty Reduction

Income gains to the poor from workfare - estimates for Argentina's TRABAJAR Program

The authors use propensity-score matching methods to estimate the income gains to families of workers participating in an Argentinian work-fare program. The methods they propose are feasible for evaluating safety net interventions in settings in which many other methods are not feasible. The average gain is about half the gross wage. Even allowing for forgone income, the distribution of gains is decidedly pro-poor. More than half the beneficiaries are in the poorest decile nationally and 80- percent of them are in the poorest quintile --reflecting the self-targeting feature of the program design. Average gains for men and women are similar, but gains are higher for younger workers. Women's greater participation would not enhance average income gains, and the distribution of gains would worsen. Greater participation by the young would raise average gains but would also worsen the distribution.Payment Systems&Infrastructure,Poverty Monitoring&Analysis,Services&Transfers to Poor,Health Economics&Finance,Poverty Impact Evaluation,Poverty Monitoring&Analysis,Poverty Impact Evaluation,Health Economics&Finance,Rural Poverty Reduction,Services&Transfers to Poor

Behavioral responses to risk in rural China

Does risk perpetuate poverty in a credit-constrained economy? Jalan and Ravallion study portfolio and other behavioral responses to measured risk using household panel data for rural China. One-quarter of wealth is held in unproductive liquid forms. But only a small share of this appears to be a precaution against income risk. The authors estimate that eliminating income risk would reduce the share of wealth held in liquid form by less than 1 percentage point. Moreover, that effect is confined largely to middle-income groups; high-income households do not, it seems, need to hold unproductive cautionary wealth, and the poor probably cannot afford to do so. The authors find no evidence that income risk discourages schooling, but risk does inhibit the out- migration of labor. Generally, the results provide only limited support for the idea that uninsured risks promote unproductive portfolio behavior in this setting. There is such an effect, but it is small in magnitude and cannot be deemed an important cause of poverty.Environmental Economics&Policies,Health Economics&Finance,Economic Theory&Research,Banks&Banking Reform,Financial Intermediation

Are there dynamic gains from a poor-area development program?

Poor-area development programs- in which the government transfers extra resources to unusually poor areas -have been widely used to fight poverty. There has been some research on such programs, but little is known about their impact on household living standards over time. The authors address the issue for a sizable poor-area development program in rural China. China's program had a significant impact on rural living standards in the targeted areas of the sample. The consumption-growth model suggests that households living in the targeted areas had a higher rate of consumption growth than one would have otherwise expected. Nonetheless the authors found that while the gains in growth were enough to prevent an absolute decline in average living standards, they were not enough to reverse the strong underlying divergent tendencies in the rural economy.Poverty Reduction Strategies,Services&Transfers to Poor,Public Health Promotion,Environmental Economics&Policies,Health Monitoring&Evaluation,Achieving Shared Growth,Environmental Economics&Policies,Inequality,Poverty Assessment,Economic Theory&Research

Transient poverty in rural China

The authors study transient poverty in a six-year panel dataset for a sample of 5,000 households in post-reform rural China. Half of the mean squared poverty gap is transient, in that it is directly attributable to fluctuations in consumption over time. There is enough transient poverty to treble the cost of eliminating chronic poverty when targeting solely according to current consumption - and to title the balance in favor of untargeted transfers. Transient poverty is low among the chronically poorest, and tends to be high among those near the poverty line. Using censored quantile regression techniques, the authors find that systemic factors determine transient poverty, although they are generally congruent with the determinants of chronic poverty. There is little to suggest that the two types of poverty are created by fundamentally different processes. It appears that the same things that would help reduce chronic poverty - higher and more secure farm yield and higher levels of physical and human capital - would also help reduce transient poverty.Health Economics&Finance,Environmental Economics&Policies,Poverty Reduction Strategies,Services&Transfers to Poor,Poverty Monitoring&Analysis,Safety Nets and Transfers,Services&Transfers to Poor,Poverty Assessment,Poverty Reduction Strategies,Rural Poverty Reduction

Spatial poverty traps?

Can place of residence make the difference between growth and contraction in living standards for otherwise identical households? The authors test for the existence of spatial poverty traps, using a micro model of consumption growth incorporating geographic externalities, whereby neighborhood endowments of physical and human capital influence the productivity of a household's own capital. By allowing for nonstationary but unobserved individual effects on growth rates, they are able to deal with latent heterogeneity (whereby hidden factors entail that seemingly identical households see different consumption gains over time), yet identify the effects of stationary geographic variables. They estimate the model using farm-household panel data from post-reform rural China. They find strong evidence of spatial poverty traps. Their results strengthen the case -- both for efficiency and equity -- for investing in the geographic capital of poor people.Environmental Economics&Policies,Economic Theory&Research,Public Health Promotion,Health Monitoring&Evaluation,Economic Conditions and Volatility,Achieving Shared Growth,Economic Theory&Research,Environmental Economics&Policies,Inequality,Health Monitoring&Evaluation

Estimating the Benefit Incidence of an Antipoverty Program by Propensity Score Matching

Income gains from participation in economic programs are estimated as the difference between income with the program and that without it. The "with" data can be collected without much difficulty. But the "without" data are fundamentally unobserved, since an individual cannot be both a participant and a non-participant of the same program. It is common practice to estimate the unobserved income without the program as income with the program minus wages received. However, there are opportunity costs of participating in the program. Ignoring these foregone incomes of participation will result in over-estimation of the gains from the program. We apply recent advances in propensity-score matching methods (PSM) to the problem of estimating the distribution of net income gains from an Argentinean workfare program. PSM allows us to draw a statistical comparison group to workfare participants from a larger contemporaneous and comparable survey of non-participants. The average incomes of the comparison group are compared with the average incomes of the participants to assess the direct income gains from the program. The average gain is found to be about half the gross wage. Over half of the beneficiaries are in the poorest decile nationally, and 80% are in the poorest quintile. Our PSM estimator is reasonably robust to a number of changes in methodology, including a instrumental variables test for selection bias after matching.