This paper focuses on poverty dynamics and their determinants, using panel survey data for rural Sindh, Pakistan. Households interviewed by the International Food Policy Research Institute (IFPRI) during 1986–91, were resurveyed in 2004–05 with minimal attrition. The incidence of poverty increased sharply over this time, as the percentage of households entering poverty was nearly three times higher than the percentage of households escaping into poverty. Over a quarter of panel households were also found to be chronically poor, even though income growth was higher for the poor than for the non-poor households during the period between the two surveys. Newly formed households had lower income and assets than 'core' panel households, primary due to life cycle effects. Declining land and asset ownerships among the chronically and descending poor was driven by a combination of agricultural and other shocks, along with a decline in non-farm employment. The few households who escaped poverty did so through crop diversification, investing in education and non-farm employment. This suggests that policies to mitigate shocks in farming, enhance sustainable growth in the agricultural sector, and improve non-farm employment opportunities would reduce chronic poverty, prevent descent into poverty, and allow escape from poverty in the future.
CPRC Working Paper No.157, Chronic Poverty Research Centre, London, UK, ISBN: 978-1-906433-59-8, 59 pp.