Using household level panel data, the thesis provides comprehensive empirical evidence on poverty issues. The thesis constructs spatial and inter-temporal utility consistent poverty lines for Uganda, which are used as inputs to study the sources of poverty, distinguish chronic poverty from transitory poverty and the mechanisms affecting poverty persistence. Based on these poverty lines which are consistent across space and time, the poverty headcount in Uganda increases by about 9% as one moves from 2005 to 2009. In contrast, the official report suggests a reduction in poverty headcount by about 4.5% which is mainly due to low food and non-food consumer price indexes and low food share. Poverty in Uganda is largely chronic. The highest burden of inter-temporal poverty ascribes to households living in the North. Households with a large number of dependent members contribute to inter-temporal poverty more than their population share. The thesis estimates the dynamic random effect probit models and endogenous switching regression. After controlling for observed and unobserved differences in individual characteristics, the thesis still finds strong evidence of state dependence, which is that past poverty actually increases the risk of future poverty. In the presence of genuine state dependence, short run polices are effective.
Since consumption in the household surveys is often measured with error, the thesis applies the mixed latent Markov model to estimate the extent of true mobility into and out of poverty. It finds that measurement error overstates the observed poverty transition probabilities or understates the true poverty persistence. Since the actual poverty persistence rate is at least 61%, the poverty in Uganda is largely permanent, not transitory. Measurement error also understates the impacts of observed individual characteristics on making poverty transition from one state to another. Land size per capita, having mobile phone and TV-radio reduce the probability of transiting into poverty as well as increase the chances of poverty exit. The empirical evidence suggests that policy makers have to target households whose consumption slightly above the poverty line and households who are very poor. Since poverty is state dependence, short run policies are effective to keep individuals not to fall into poverty in the first place because once they are poor, they are less likely to exit poverty. Since poverty is mainly chronic in Uganda, on the other hand, long term intervention through increasing human and physical capital and the returns to these assets is effective to the very poor households. Using employer- employee panel data from Ghana, the thesis also finds that poor women are disproportionately sorting into low paying firms. Even after controlling for gender difference in individuals endowments and sorting effects, firms actually pay different wage premium for comparable female and male. When wage inequality increases among the poor, chronic poverty increases. The result suggests that targeting female dominant firms to increase their productivity helps mitigate the national level chronic poverty. The thesis also identifies the type of firms that pay equal premium for comparable gender attributes
