“The Poor Stay Poor”: Household Asset Poverty Traps in Rural Semi-Arid India

SummaryAlthough identifying household-level poverty dynamics would have important implications for poverty reduction policies empirical evidence is still scant. This paper employs a novel semiparametric panel data estimator that combines the advantages of estimation methods in the existing literature and applies it to a uniquely long panel data set to examine poverty dynamics in three villages in rural semi-arid India. Structural immobility is pervasive. The currently poor are likely to remain poor, suggesting a structural poverty trap. While all households face static asset holdings, higher castes, larger landholders, and more educated households are significantly less likely to be poor.