POLI-cY RESEARCH WORKING PAPER 1499

# Summary findings

Empirical investigations of poverty in developing countries tend to focus on the incidence of poverty at a particular point in time. If the incidence of poverty increases, however, there is no information about how many new poor have joined the existing poor and how many people have escaped poverty.

Yet this distinction is of crucial policy importance. The chronically poor may need programs to enhance their human and physical capital endowments. Invalids and the very old may need permanent (targeted) transfers. The temporarily poor, on the other hand, may best be helped with programs that complement their own resources and help them "bridge" a difficult period.

Results from analyses of panel surveys show significant mobility into and out of poverty and reveal a dynamism of the poor that policy should stimulate. Understanding what separates chronic from temporary poverty requires knowing which characteristics differentiate those who escape poverty from those who don't.

In earlier work, Grootaert, Kanbur, and Oh found that region of residence and socioeconomic status were important factors. In this paper they investigate the role of other household characteristics, especially such asset endowments as human and physical capital. in the case of C6te d'lvoire.

In urban areas of C6te d'lvoire, human capital is the most important endowment explaining welfare changes over time. Households with well-educated members suffered less loss of welfare than other households. What seems to have mattered, though, is the skills learned through education, not the diplomas obtained. Diplomas may even have worked against some households in having oriented workers too much toward a formal labor market in a time when employment growth came almost entirely from small enterprises.

- In rural areas, physical capital especially the amount of land and farm equipment owned - mattered most. Smallholders were more likely to suffer welfare declines. Households with diversified sources of income managed better, especially if they had an important source of nonfarm income.

In both rural and urban areas, larger households suffered greater declines in welfare and households that got larger were unable to increase income enough to maintain their former welfare level.

Households whose heads worked in the public sector maintained welfare better than other households, a finding that confirms earlier observations. The results also suggest that government policies toward certain regions or types of household can outweigh the effects of household endownments.

Surprisingly, migrant non-lvorian households tended to be better at preventing welfare losses than Ivorian households, while households headed by women did better than those headed by men (after controlling for differences in or changes in endowment).

The implications for policymakers? First, education is associated with higher welfare levels _and_ helps people cope better with economic decline. Second, targeting the - social safety net to larger households possibly through - the schools, to reach children is justified in periods of decline. Third, smallholders might be targeted in rural areas, and ways found to encourage diversification of income there.

- This paper a joint product of the Social Policy and Resettlement Division, Environment Department, and the Africa Regional Office, Office of the Chief Economist - is the result of a research project on "The Dynamics of Poverty: Why Some People Escape Povertv and Others Don't, A Panel Analysis for C6te d'lvoire" (RPO 678-70). Copies of this paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Anju Sachdeva, room S5-029, telephone 202-458-2717, fax 202-522-3247, Internet address asachdevae@worldbank.org. August 1995. (25 pages)

_The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be used and cited accordingly. The findings, interpretations, and conclusions are the authors' own and should not be attributed to the World Bank, its Executive Board of Directors, or any of its member countries._ Produced by the Policy Research Dissemination Center