Does poverty entrap?
نویسندگان
چکیده
We test whether income dynamics over 30 years in rural Indian villages suggest the presence of a poverty trap. A weighted dynamic panel estimate using rainfall as an instrument for lagged income addresses measurement error, attrition bias, and the inherent endogeneity of lagged income while allowing the steady state of income to vary across individuals. Estimates of the model provide robust evidence of a low-level steady state equilibrium but, consistent with other studies, no evidence of a poverty trap. Schooling substantially increases a person’s steady state income, however, implying that education provides one secure escape from poverty. ∗Authors contact: [email protected] and [email protected]. We thank Reena Badiani for extensive and insightful help in preparing and processing the data.
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