Studies from several countries suggest that poverty is a dynamic phenomenon with households moving in and out of poverty all the time. This paper describes the dynamics of poverty in rural Sichuan using a unique panel data set of 3,311 households surveyed between 1991 and 1995. Poverty is found to be extremely dynamic with over 30 per cent of households falling below the lower consumption poverty line at some point in the five years.
Most households who fall into poverty experience only one or two years of poverty, but poverty is persistent with the total time spent in poverty more likely to be endured as a single spell of poverty than multiple repeated spells. A new measure of vulnerability is constructed and compared with traditional poverty measures. Households are found to be highly vulnerable to falling into poverty even when their average incomes are some distance above the poverty line. The results hold implications for targeting and anti-poverty policy in China.
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