Abstract
This article examines the determinants of household income among urban and rural areas in India and evaluates households’ performance with different characteristics in terms of poverty. It uses four rounds of data from the consumer expenditure survey (50th, 1993/1994; 55th, 1999/2000; 61st, 2004/2005; and 66th, 2009/2010) by the National Sample Survey Organization (NSSO) in the empirical section. This study consists of two main parts. In the first, it looks at the impact of the characteristics of the head of the household (age, educational level, marital status, and gender) and household characteristics (main occupational type, household size, and social status) on monthly per capita expenditure through conditional mean least squares (LS) regressions and conditional quantile regressions. Households headed by those who are older, married, belonging to lower castes, and living in less-developed states are more likely to be in poverty. In the second part, the article explores stochastic dominance rankings relative to large classes of welfare functions/preferences between pairwise sub-groups identified by the survey year, gender, social status, and occupational type of the household heads. Our results show that ‘inferior groups’ such as ‘Backward classes’, agricultural labor in rural areas, and casual labor in urban areas are vulnerable and may be targeted for poverty alleviation strategies. The first part sheds light on key determinants of household expenditure, while the second provides a picture of poverty outcomes which helps identify potential target groups for poverty-alleviation strategies.
Highlights
Poverty alleviation has been the goal of India’s income policy since its independence in 1947.Investments in human capital to raise labor productivity is one example of the goals of this policy.Despite three decades of good distributional intentions and constant piecemeal changes in policy, about half of the population in India has been struggling under the poverty line
When Scheduled Tribes is set as the reference group, the results show that the Scheduled Castes have a 5 percent higher consumption level than Scheduled Tribes in rural areas, while for the urban areas the relationship is reversed
The results show that in the 50th and 61st Rounds, no full dominance existed in rural groups
Summary
Poverty alleviation has been the goal of India’s income policy since its independence in 1947. Ordinal comparisons (Sen 1976) enable a comparison of indices across time, states, and socio-demographic characteristics, or comparisons of policy regimes and introduction of fiscal policy and macroeconomic adjustment programs These two approaches may be sensitive to the subjective choice of indices and poverty lines, undermining one’s confidence in comparing distributions or in making policy recommendations. The two parts are complementary as the first sheds light on key determinants of household expenditure while the second provides a picture of poverty which helps identify the target groups to which the government can direct poverty alleviation strategies. The non-parametric method provides information about distribution of consumption expenditure by different household characteristics but it does not shed light on the factors impacting the level and variations in the consumption and the quantification of their impact.
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