Income Fluctuations, Poverty and Well-Being Over Time: Theory and Application to Argentina by

This paper studies poverty as a dynamic phenomenon, motivated by the recurring economic crises that affect developing countries and the incidence of income fluctuations on household welfare. While the increasing availability of household panel data has been exploited in theoretical analysis and empirical applications, the methodological and applied literatures still lack a unified framework. Echoing Atkinson (1987), this paper addresses the question of how poverty should be measured over time – or, in more general terms, how to measure well-being based on repeated observations of household income. The paper develops and illustrates a set of tools for empirical work based on theoretically sound extensions of the existing methodology for static distributional analysis. Moreover, this framework encompasses some of the existing approaches as special cases. These tools are illustrated with longitudinal data for Argentina in the 1995-2002 period, which is well suited for this type of analysis given the large fluctuations in household income due to the repeated economic crises in the country. ACKNOWLEDGEMENTS The views expressed here are those of the author and do not represent those of ECLAC or the UN. This paper constitutes the second Chapter of my PhD dissertation at the London School of Economics, supervised by Professor Frank Cowell. It has benefitted from joint work with Quentin Wodon, and from comments from (and discussions with) Frank Cowell, Stefan Dercon, Martin Ravallion, Ramses Abul-Naga and Sebastián Galiani, as well as detailed comments from my Ph.D examiners, Tony Atkinson and Jonathan Wadsworth. The usual disclaimer applies.