Measuring Chronic Poverty Without a Panel

A new method of decomposing cross-sectional poverty estimates into chronic and transient components is demonstrated using data from a recent household survey in Papua New Guinea. This method is simpler than previously used panel methods because it does not require data on every household in every period. The only requirement is that a subset of the surveyed households have a repeat observation made on their welfare indicator some time after the initial observation. In the setting considered, the chronic and transient components of headcount poverty are roughly equal, while three-quarters of the mean poverty gap is transient – in the sense of being due to within-year fluctuations in expenditures. Acknowledgements: I am grateful to two anonymous referees, Scott Rozelle, Christopher Scott, Jeffrey Williams and Fred Zimmerman for helpful advice. Data used in this paper were originally collected as part of a World Bank poverty assessment for Papua New Guinea, for which financial support from the governments of Australia (TF-032753), Japan (TF-029460), and New Zealand (TF-033936) is gratefully acknowledged. All views in this paper are those of the author and should not be attributed to the World Bank. JEL: C81, I32