Pathways from Poverty toward Middle Class: Determinants of Socio-economic Class Mobility in the Rural Philippines

Fuwa, Nobuhiko (2003): Pathways from Poverty toward Middle Class: Determinants of Socio-economic Class Mobility in the Rural Philippines.

Abstract

Exploiting a unique set of longitudinal household data collected in a Philippine village over a thirty year period (1962-1994), this paper seeks to identify the pathways of exiting rural poverty and also the determinants of middle class stability. We also test the changes in the returns on assets in exiting poverty after the 1980s. We find that better access to land facilitates accumulation in agriculture while schooling has positive effects on upward mobility in both agricultural and non-agricultural sectors. Macroeconomic growth was, however, the key determinant of poverty-exit probabilities until the early 1980s. After the 1980s, poverty exit-paths through ‘agricultural ladder’ narrowed, schooling and growth became equally crucial determinants due to the increased returns to schooling (mainly due to the expansion of the international migration opportunities), and labor endowments also became important for the lower, but not upper, social strata (providing an economic incentive to have more children for the poor). Unlike the typical findings from poverty dynamics in the US, we find no evidence of state dependence in the poverty spells. This suggests that the village economy under study is quite dynamic so that policy interventions addressing the observed determinants (especially access to education and economic growth) could well go a long way in pulling the poor out of poverty in the rural Philippines.

• Item Type: MPRA Paper
• Language: English
• Keywords: economic mobility; poverty dynamics; human capital; rural poverty; Philippines
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J62 - Job, Occupational, and Intergenerational Mobility; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration

References

Adelman, I., Morley, S., Schenzler, C., Warning, M., 1994. Estimating Income Mobility from Census Data. Journal of Policy Modeling 16, 187-213.

Anderson, J. N., 1964. Land and Society in a Pangasinan Community. in: Espiritu, S. C., Hunt, C. L. (eds.) Social Foundations of Community Development, R. M. Garcia Publishing, Manila.

Balisacan, A. M., 1999. Poverty Profile in the Philippines: an update and reexamination of evidence in the wake of the Asian crisis. University of the Philippines School of Economics, Quezon City.

Bane, M. J., Ellwood, D. T., 1986. Slipping into and out of Poverty: The Dynamics of Spells. Journal of Human Resources, 1-23.

Banerjee, A. V., Newman A.F, 1993. Occupational Choice and the Process of Development. Journal of Political Economy 101, 274-298.

Bardhan, P. K., Udry C., 1999. Development Microeconomics, Oxford University Press, Oxford.

Baulch, B., Hoddinott, J., 2000. Economic Mobility and Poverty Dynamics in Developing Countries. Journal of Development Studies 36, 1-24.

Deaton, A., 1997. The Analysis of Household Surveys: A Microeconometric Approach to Development Policy. Johns Hopkins University Press, Baltimore.

Dreze, J., Lanjouw, P., Stern, N., 1992. Economic Mobility and Agricultural Labour in Rural India: A Case Study. Indian Economic Review: Special Number in Memory of Shukhamoy Chakraverty.

Eswaran, M., Kotwal, A., 1986. Access to Capital and Agrarian Production Organization. Economic Journal 96, 482-98.

Fuwa, N, 1999. An Analysis of Social Mobility in a Village Community: the case of a Philippine village. Journal of Policy Modeling 21, 101-138.

Gaiha, R., Deolalikar, A., 1993. Persistent, Expected and Innate Poverty: estimates for semi-arid rural South India, 1975-1984. Cambridge Journal of Economics 17, 409-421.

Galor, O., Zeira, J., 1993. Income Distribution and Macroeconomics. Review of Economic Studies 60, 35-52.

Grootaeat, C, Kanbur, R., Oh, G., 1995. The Dynamics of Poverty. Why Some People Escape from Poverty and Others Don’t: An African Study. World Bank Policy Research Working Paper 1499, Washington, D. C..

Gunning, J., Hoddinott, J, Kinsey, B., Owens, T, 2000. Revisiting Forever Gained: Income Dynamics in the Resettlement Areas of Zimbabwe, 1983-96. Journal of Development Studies 36, 131-154.

Hanratty, M. J., Blank, R. M., 1992. Down and out in North America: Recent trends in poverty rates in the United States and Canada. Quarterly Journal of Economics 107, 233-254.

Hausman, J., McFadden, D., 1984. Specification Tests for the Multinomial Logit Model. Econometrica 52, 1219-1240.

Hayami, Y., et. al., 1978. Anatomy of a Peasant Economy: A Rice Village in the Philippines. International Rice Research Institute, Los Banos.

Heckman, J. J., 1981. Statistical Models for Discrete Panel Data. in: Manski, C. F, McFadden, D. L. (eds.), Structural Analysis of Discrete Data with Econometric Applications, MIT Press, Cambridge.

Hulme, D., forthcoming. Conceptualizing Chronic Poverty. World Development.

Jalan, J., Ravallion, M., 2000. Is Transient Poverty Different? Evidence for Rural China. Journal of Development Studies 36, 82-99.

Ljungqvist, L., 1993. Economic Underdevelopment: the case of missing market for human capital. Journal of Development Economics 40, 219-239.

Lillard, L. L., Willis, R. J., 1978. Dynamic Aspects of Earnings Mobility. Econometrica 46, 985-1012.

Loury, G., 1981. Intergenerational Transfers and the Distribution of Earnings. Econometrica 49, 843-867.

Maulicio, J., Haddad, L., May, J., 2000. Social Capital and Household Welfare in South Africa, 1993-98. Journal of Development Studies 36.

McCullock, N., Baulch, B., 2000. Simulating the Impact of Policy Upon Chrinic and Transitory Poverty in Rural Pakistan. Journal of Development Studies 36.

McFadden, D. L., 1973. Conditional Logit Analysis of Qualitative Choice Behavior. In: Zarembka, P. (ed.), Frontiers in Econometrics, Academic Press, New York.

Sawhill, I. V., 1988. Poverty in the U.S.: Why is it so persistent?. Journal of Economic Literature 26, 1073-1119.

Stevens, A. H., 1995. Climbing out of Poverty, Falling back in: Measuring the Persistence of Poverty over Multiple Spells. NBER Working Paper 5390, Cambridge.

Stevens, A. H., 1994. The Dynamics of Poverty Spells: Updating Bane and Ellwood. American Economic Review (Papers and Proceedings) 84, 34-37.

Swaminathan, M., 1991. Measuring Mobility in Wealth: Some Estimation from A South Indian Village. Oxford Bulletin of Economics and Statistics 53, 171-183.

Wydick, W. B., 1999. Credit Access, Human Capital and Class Structure Mobility. Journal of Development Studies 35, 131-152.