Income mobility and poverty traps: New evidence for the Southern Cone countries

Abstract

This paper uses the methods proposed by Antman y Mckenzie (2007) to tests the existence of poverty traps in Argentina, Brazil and Uruguay. We model the income dynamics of households and their reactions to recessions. We also focus in income trajectories for different educational levels, and estimate the rate at which households overcome poverty situations or return to their equilibrium income level after a shock. The results do find evidence of nonlinearities in household income dynamics. Further when educational levels are taken into account, poverty traps with non-convex income dynamics are found in the cases of Argentina, Brazil and Uruguay for households whose head belongs to low educational levels. These results are in stark contrast with previous empirical applications.