importance of different sources of<sup>incometo different groups within the society.Also,</sup> although it is difficult to obtain<sup>good measuresof the</sup><sup>_level_of welfarefrom participatory</sup> assessments making comparisons<sup>across groups difficult,such exercisesdo generally</sup> provide useful indications of the<sup>directionof</sup><sup>_changes_in welfare over time.They can also</sup> provide information about:<sup>the key causes of poverty; the dimensionsof povertywhich</sup> matter to the poor in that country;<sup>the natureand extent of the risksfaced by the poor; the</sup> policies and institutions which<sup>have thelargestimpact upon theirlives; theroleand</sup> timing of seasonal shocks; the<sup>agro-climaticconditionsfaced by differentgroupsand so</sup> forth. They can therefore provide<sup>a valuableinputintothe analysisof the impact of</sup> structural reform on poverty.

# **Summary and Conclusions**

This paper has outlined a simple<sup>methodologyfor linking structuralreforms and poverty</sup> using household survey data<sup>fromdeveloping countries.As is always the case, the nature</sup> of the appropriate model for<sup>analyzingsuch linkages must depend upon the precise</sup> question being asked and upon<sup>thedata and time resourcesavailable.If theintention is to</sup> analyse the short-run impact<sup>of exogenousprice changes,then the basic methodology,</sup> which assumes that all quantities<sup>remainfixed, can be usedto providea first-order</sup> approximation to the likely<sup>changein net income for eachhousehold. Furthermore,if the</sup> nature and size of the transport<sup>and transactioncosts determiningproducer and consumer</sup> prices are known then it is<sup>possibleto simulate the impact of exogenous changes in these</sup> costs.

If it is desired to look at the medium<sup>run outcomeof suchexogenouspolicy changesthen</sup> it is necessary to account for<sup>the possibility of substitution in both consumptionand</sup> production. Ideally this should<sup>be doneby the econometricestimationof price elasticities</sup> of supply, and income and<sup>price elasticitiesof demand if suitabledata areavailable.If</sup> this is not possible within<sup>theavailabletime or data constraints, then estimates can be</sup> selected from other studies of<sup>thesame or "similar" countries,or, at worst,parameterscan</sup> be chosen which reproduce<sup>theobservedoutputlevelsgiven anassumed functionalform.</sup> Experience from several countries<sup>suggests that many households tend to be more</sup> specialized in production than<sup>in consumption,so that the incorporationof substitution</sup> possibilities in production<sup>hasa greaterimpact upon the finalresults than the</sup> incorporation of substitution in<sup>consumption.</sup> In many circumstances, households<sup>earn animportantshareof their income from the</sup> labour market. The basic<sup>methodology'sassumptionof fixed quantitiesmay not always</sup> be appropriate here, since<sup>exogenousprice shocksresulting from reforms may give rise to</sup> changes in employment levels<sup>in differentsectorsrather than only changesin wages. If</sup> excess labour means that it<sup>is reasonableto assumethat employmentcan change without</sup> changes in wage rates and<sup>the sector of employmentis indicatedin thehouseholdsurvey</sup> data, then employment can<sup>be scaled up or down by the sectoralgrowth rate.</sup> 29