Dynamic Poverty Decomposition Analysis: An Application to the Philippines

In this paper, we propose a new method of poverty decomposition. Our method remedies the shortcomings of existing methods and has some desirable properties such as time-reversion consistency and subperiod additivity. It integrates the existing methods of growth-redistribution decomposition and sector-based decomposition, because it allows us to decompose poverty change into growth and redistribution components for each group (e.g., regions or sectors) in the economy. We extend our method to have six components and provide an empirical application to the Philippines for the period of 1985 to 2009.