Title: Long Term Dynamics of Poverty Transitions in India
Abstract: We use a stochastic model to explore dynamics of poverty in India between 1952-2006 and find that temporal transitions into and out of poverty are common. Model outcomes suggest that transitions out of poverty outnumber transitions into poverty in recent times, but that there is still a non-trivial proportion of individuals transitioning annually into poverty, highlighting the economic fragility of those near the poverty line. We also find a marked persistence of poverty over time, and although this has been slowly declining, a past in poverty still remains a good predictor of current poverty. Particularly concerning in this context are the income trajectories of those in the bottom decile of the income distribution, for whom escape from poverty appears infeasible given extant income dynamics. Finally, the dynamics suggest that transitional and persistent poverty are distinct phenomenon, and require distinct market and policy responses involving both missing markets and state action.