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

This paper studies poverty as a dynamic phenomenon, motivated by the recurringeconomic crises that affect developing countries and the incidence of income fluctuationson household welfare. While the increasing availability of household panel data has beenexploited in theoretical analysis and empirical applications, the methodological andapplied literatures still lack a unified framework. Echoing Atkinson (1987), this paperaddresses the question of how poverty should be measured over time - or, in moregeneral terms, how to measure well-being based on repeated observations of householdincome. The paper develops and illustrates a set of tools for empirical work based ontheoretically sound extensions of the existing methodology for static distributionalanalysis. Moreover, this framework encompasses some of the existing approaches asspecial 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 inhousehold income due to the repeated economic crises in the country.