Poverty Transitions, Shocks, and Consumption in Rural Bangladesh: Preliminary Results from a Longitudinal Household Survey

Abstract

This paper examines the correlates of poverty transitions and consumption per capita, using a new longitudinal data set from Bangladesh. It first examines the determinants of poverty transition categories (chronic poor, never poor, falling into poverty, moving out of poverty) as a function of household characteristics in the original survey round and shocks experienced by the household, controlling for unobserved community characteristics. The probability of being chronically poor (never poor) is negatively (positively) associated with years of schooling of the household head, the value of nonland assets, and the proportion of children below 15 and adults 55 and older in the baseline survey. However, the responsiveness of log per capita consumption does not differ significantly across the four poverty transition categories. Regressions on log per capita consumption also show that per capita consumption increases with years of schooling and assets. Higher proportions of children and older people are also significantly associated with lower per capita consumption, pointing to the importance of life-cycle and demographic factors in the creation and transmission of poverty. Having older household members also makes the household vulnerable to shocks such as illness, death, and property division. Illness shocks - in particular, the income foregone when an income earner falls ill - are important contributors to poverty. The impact of these and other shocks - such as dowry and wedding expenses, floods, and legal costs - in reducing consumption is shown to depend on the amount of land and assets owned by the household together with the schooling of the