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Poverty in Malawi: Policy Analysis with Distributional Changes

Mussa, Richard (2017): Poverty in Malawi: Policy Analysis with Distributional Changes.

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This paper addresses an issue which has hitherto been ignored in the existing studies on poverty and its correlates. Existing poverty studies ignore the fact that changes in the correlates of poverty may not only affect the average level of consumption, but may also affect the distribution of consumption. The paper develops methods for addressing this weakness. Using Malawian data from the Third Integrated Household Survey, the empirical application of the methods suggest that ignoring these distribution effects leads to mismeasurement both quantitatively and qualitatively of policy interventions on poverty. It is found that an additional year of female education for urban households without distributional changes reduces the poverty headcount by 7.6%, and the reduction almost doubles to 11.4% with distributional effects. A similar pattern is observed for the rural simulation. This in turn suggests that policy conclusions based on the existing methods might be misleading.

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