Is Poverty Stochastic or Structural in Nature? Evidence from Rural India

Abstract The rationale of this study is to bring in a new area of poverty measurement based on household’s access to basic assets from across Indian States. The major drawback of the average income based measure of poverty is that it is unable to distinguish between the structural and stochastic nature of poverty. This paper applies the asset based framework to poverty to distinguish the relationship between structural and stochastic poverty. The paper has used data from the India Human Development Survey 2005. The results indicate the importance of asset formation for long term poverty reduction. There is a need for targeting pointed policies towards the identified structural poor and stochastic non-poor as they are the most vulnerable and need asset building.