The current trends in poverty measurement moving toward a focus on asset and
wealth stocks, and hence away from traditional flow measures of consumption and
income, warrant the scaling up of efforts to understand how individuals convert asset
stocks into economic well-being. At the same time, modern advancements in computing
power have led to an increase in the level of rigor associated with ex ante simulations of
how macroeconomic changes potentially impact microeconomic well-being. In the
presentation of three essays, this study investigates how individuals and households that
are endowed with heterogeneous capabilities convert productive assets into economic
well-being through the lenses of ex-post empirical analysis and an ex-ante macro-micro
simulation.
This analysis advances thinking on poverty an inequality by presenting a reconstructive
critique of both the asset-based and human development/capabilities
perspectives on poverty measurement, arguing that there are significant
complementarities and reconcilable differences in which researchers can take significant
advantage of. The theoretical and empirical insights regarding the role of capability
disparities in conditioning household poverty trap thresholds are then applied in a
preliminary fashion to a computable general equilibrium (CGE) model that is linked to a
microsimulation model (MSM). The top-down behavioral CGE-MSM is capable of
addressing the question of how macro changes impact poverty and income distribution
when individuals are endowed with heterogeneous capabilities in an ex-ante fashion.
In an attempt to isolate the impacts of macro changes on micro poverty and wellbeing,
the questions of what poverty and well-being really are must be addressed first.
The opening essay thus traces out the common origins, divergent evolution, and
reconcilable differences across asset-based and Human Development/Capabilities
perspectives of poverty. It is argued that asset-based studies have embedded in them a
strong temptation to focus solely on asset accumulation policies without giving the
conversion process of assets into livelihood its due study. Although the asset-based
literature has made advances on the theoretical front in explaining how poverty trap
thresholds are unique and dependent on intrinsic ability, the empirical analysis of what
intrinsic ability may encompass remains understudied.