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Poverty and Permanent Income: A Methodology for Cross-Section Data

If the set of households which are income poor does not fully overlap with the set of the consumption poor, it could well be that income and consumption expenditure convey different information regarding an unobserved variable on the basis of which families allocate their resources intertemporally. This paper presents a methodology for predicting the unobserved permanent incomes of households using multiple welfare indicators typically available in cross-section data.