Naga, Ramses Hany Abul
(1994)
Poverty, intergenerational mobility, and the role of imperfect information: An inquiry with reference to the panel study of income dynamics.
PhD thesis, London School of Economics and Political Science.
Abstract
The standard approach to the study of poverty assumes the existence of an ideal variable that captures the extent of deprivation. In our first chapter, we postulate that poverty is involved with many dimensions. We use a latent variable framework to predict the extent of an individual's hardship as a function i=ax1i+bx2i +..., where the x's are indicators of i's income status, yi, and the latter variable is not observed. In chapter 2, the problem of allocating benefits for poverty relief is considered in a situation of uncertainty about who the poor are. The decision to grant a benefit of fixed size is analyzed in the context of a social objective of minimizing poverty, subject to the social costs incurred by expenditure on poverty alleviation programmes. Chapters 1 and 2 contain empirical applications based on the Panel Study of Income Dynamics (PSID). We then construct a theoretical model for the purpose of studying the relationship between poverty and credit market imperfections. These imperfections originate from information asymmetries between borrowers and lenders. We assess to what extent the above type of information asymmetry can be a cause of poverty. We identify cases where the presence of information asymmetries has a neutral effect, and other situations where it can cause reductions in the level of poverty. We then review the issues pertaining to the topic of intergenerational earnings mobility. We define a criterion for the justice assessment of intergenerational mobility processes, based on the comparison of the earnings distributions of children originating from privileged groups and those from disadvantaged backgrounds. We apply our concept to intergenerational data from the PSID.
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