Accounting for Income Fluctuations in Distributional Analysis: Theory and Evidence for Argentina

This paper studies the impact of income fluctuations on poverty, motivated by the recurring economic crises that affect developing countries and the incidence of income fluctuations on householdwelfare. The paper presents a set of tools for empirical work based on theoretically sound extensions of the existing methodology for static distributional analysis. Results form longitudinal data for Argentina in the 1995-2002 period find that the large fluctuations in household income due to the repeated economic crises in the country in this period had a significant effect on household welfare.