Geographical Poverty Traps in Ecuador using Pseudo Panel Data

Marcos Robles, Inter-American Development Bank
Viviane Azevedo, Inter-American Development Bank

Using a dynamic pseudo-panel data, we analyze the role of geography in explaining the persistence of poverty in Ecuador. Specifically, we examine the relationship between household consumption and geographic variables and analyze the presence of geographic poverty traps -if these variables explain part of the differences in welfare over time for households with similar socioeconomic characteristics. The pseudo-panels track cohorts based on date of birth and years of education of the household head using four cross-sectional surveys, and the external data set includes geographic endowments, such as climate conditions and type of soils, and geographic capital, such as local basic services and provision of infrastructure. We find a significant impact of geographic factors on consumption growth, which in part explains the existence of poverty traps in Ecuador. The findings are consistent with Ecuador’s geographic diversity, including the unequal spatial distribution of geographic capital at the sub-national level.