Distinguishing Chronic Poverty from Transient Poverty in Brazil:

Abstract

Although many studies have addressed poverty in Brazil, very few of them have analyzed its dynamic nature. This paper seeks to fill this gap using a pseudo-panel obtained from PNAD. The probabilities of falling to poverty and staying poor are estimated with a bivariate probit for grouped data. Our analysis distinguishes between persistent and observed components that can condition the probability of being poor and helps identify the groups that are particularly affected by either transient or chronic poverty. We find that between 1995 and 2003, 69% of urban poverty in Brazil was chronic and most of this level was simply due to an initial condition of poverty. Finally, since the availability of pseudo-panels is larger than that of panel data, future research can use our proposed method to analyze chronic and transient poverty in a larger number of countries.