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This paper estimates the relationship between initial village inequality and subsequent household income growth for a large sample of households in rural China. Using a rich longitudinal survey spanning the years 1987-2002, and controlling for an array of household and village characteristics, the paper finds that households located in higher inequality villages experienced significantly lower income growth through the 1990s. However, local inequality's predictive power and effects are significantly diminished by the end of the sample. The paper exploits several advantages of the household-level data to explore hypotheses that shed light on the channels by which inequality affects growth. Biases due to aggregation and heterogeneity of returns to own-resources, previously suggested as candidate explanations for the relationship, are both ruled out. Instead, the evidence points to unobserved village institutions at the time of economic reforms that were associated with household access to higher income activities as the source of the link between inequality and growth. The empirical analysis addresses a number of pertinent econometric issues including measurement error and attrition, but underscores others that are likely to be intractable for all investigations of the inequality-growth relationship.

Access to Finance --- Annual Growth --- Credit Market --- Dynamic Panel --- Economic Reforms --- Empirical Analysis --- Enterprises --- Finance and Financial Sector Development --- Household Income --- Income Growth --- Inequality --- Poverty Impact Evaluation --- Poverty Reduction --- Rural Inequality --- Rural Poverty Reduction --- Services & Transfers to Poor --- Villages

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This paper evaluates the degree of consumption insurance enjoyed by Latin American and Caribbean countries, with respect to various reference areas, by estimating a parameter expressing the sensitivity of a country's consumption growth to a measure of idiosyncratic shocks to income. The paper surveys common econometric implementations of "consumption insurance tests." The author proposes some econometric procedures in order to detect the actual presence of international risk sharing, as well as to assess the relative impact of idiosyncratic versus aggregate shocks. The evidence suggests that Latin American and Caribbean economies have been hit by non-diversifiable income shocks, that idiosyncratic risk is relatively more important than aggregate risk, and that some countries in the region appear to enjoy a certain amount of international risk diversification. The paper also identifies some macroeconomic factors that may be responsible for a higher or lower degree of risk pooling (such as international openness, financial depth, and credit availability). The findings show that the financial development of an economy is a crucial factor in determining the amount of risk sharing opportunities, as well as public expenditure. The preliminary results also suggest that trade openness and shocks to terms of trade play an important role in determining the degree of insurability of such risks.

Aggregate consumption --- Aggregate income --- Consumption --- Consumption growth --- Currencies and Exchange Rates --- Domestic consumption --- Economic Theory and Research --- Finance and Financial Sector Development --- Financial Intermediation --- Growth rates --- Income growth --- Inequality --- Levels of investments --- Macroeconomics and Economic Growth --- National income --- Poverty Reduction --- Public expenditure --- Trade openness

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Poverty reduction has become a fundamental objective of development, and therefore a metric for assessing the effectiveness of various interventions. Economic growth can be a powerful instrument of income poverty reduction. This creates a need for meaningful ways of assessing the poverty impact of growth. This paper follows the elasticity approach to propose a measure of pro-poorness defined as a weighted average of the deviation of a growth pattern from the benchmark case. The measure can help assess pro-poorness both in terms of aggregate poverty measures, which are members of the additively separable class, and at percentiles. It also lends itself to a decomposition procedure, whereby the overall pattern of income growth can be unbundled, and the contributions of income components to overall pro-poorness identified. An application to data for Indonesia in the 1990s reveals that the amount of poverty reduction achieved over that period remains far below what would have been achieved under distributional neutrality. This conclusion is robust to the choice of a poverty measure among members of the additively separable class, and can be tracked back to changes in expenditure components.

Developing World --- Development Goals --- Development Policy --- Distributional Impact --- Economic Growth --- Growth Pattern --- Growth Process --- Growth Rate --- Growth Rates --- Health, Nutrition and Population --- Income Growth --- Income Poverty --- Inequality --- Non-Income Dimensions --- Policy Research --- Population Policies --- Poverty --- Poverty Impact --- Poverty Measure --- Poverty Reduction --- Pro-Poor --- Pro-Poor Growth --- Relative Gains --- Rural Development --- Rural Poverty Reduction --- Services and Transfers to Poor

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This paper analyzes the impact of trade reforms on household welfare. In particular, it studies the importance of each of the links that together constitute the impact using data from the Vietnamese experience in the 1990s. The implementation of trade reforms in the 1990s, most noteworthy of which was the liberalization of rice, resulted in substantial improvement in welfare as evidenced by the drastic decline in poverty. Using analytical and empirical methods, the author examines the role of each channel (direct versus indirect) in this improvement for different groups of households. Results indicate that the growth has been broad based and pro-poor. Poorer households experienced more growth for each and every group analyzed. And contrary to the standard literature, net buyer households had more growth compared with net sellers, emphasizing the importance of indirect links. Decomposition of the growth shows that for rural households, both the direct effect and the multiplier effect drive growth while the multiplier effect was key in urban areas. The importance of the secondary effects underscores the need for a broader model to estimate the impact of trade reforms fully.

Agricultural Production --- Counterfactual --- Economic Theory and Research --- Emerging Markets --- Farmers --- Finance and Financial Sector Development --- Financial Literacy --- Food Buyers --- Food Crops --- Food Prices --- Household Welfare --- Income --- Income Distribution --- Income Growth --- Income On Food --- Inequality --- Labor Policies --- Land Titling --- Macroeconomics and Economic Growth --- Poor --- Poor Households --- Poverty --- Poverty Diagnostics --- Poverty Profile --- Poverty Reduction --- Private Sector Development --- Rural --- Rural Areas --- Rural Development --- Rural Households --- Rural Poor --- Rural Poverty Reduction --- Small Area Estimation Poverty Mapping --- Social Protections and Labor