Journal
JOURNAL OF INTERNATIONAL DEVELOPMENT
Volume 33, Issue 5, Pages 894-909Publisher
WILEY
DOI: 10.1002/jid.3563
Keywords
caste; India; multiple equilibria; poverty trap; welfare dynamics
Categories
Funding
- SSHRC Institutional Grant
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This study introduces a new method to detect multiple equilibria and poverty traps within household wealth distribution, demonstrated using panel data from over 6000 rural households in India. The research also examines poverty within castes, the main source of social stratification in India, contributing to the economic development literature.
Despite a large literature, empirical evidence on multiple-equilibria poverty traps remains elusive. Current empirical methods estimate average welfare-dynamics, which masks inherent heterogeneity across households. We develop an alternative approach that allows welfare-dynamics to differ across the household wealth distribution. Drawing on the literature on regression discontinuity designs, we propose a new statistical test for detecting multiple-equilibria and poverty traps. We demonstrate the approach using panel data on over 6000 rural households in India. Our application contributes to the economic development literature by examining poverty within caste, the main source of social stratification in India.
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