Is There a Poverty Trap in Paraguay? Evidence from Pseudo-panels and Nonlinear Income Dynamics

Serena Lanusse and Bruno Norbert Delait

No 4812, Asociación Argentina de Economía Política: Working Papers from Asociación Argentina de Economía Política

Abstract: In this study we examine the existence of income poverty traps in Paraguay’s urban and rural areas. In order to do so, we use dynamic pseudo panels to overcome difficulties that arise with traditional panels: lack of long panels in developing countries, measurement errors and attrition. For rural areas, we find non linear income dynamics, but no evidence of poverty traps, even allowing for cohort heterogeneity. On the other hand, our outcomes for urban areas vary between models, as we find that under some specifications there is an unstable equilibrium indicating there could be a trap affecting households that fall under a critical threshold, although this threshold is below the data range for urban income.

JEL-codes: C1 I3 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2025-12
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Persistent link: https://EconPapers.repec.org/RePEc:aep:anales:4812

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