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Abstract
Assessment of the welfare impacts of low-frequency events, such as
macroeconomic crises and stabilizations, are often confounded by sampling and
nonsampling errors that generate fluctuations in household survey-based welfare
indicators; they are also limited by our ability to explain fluctuations in terms of other
available data. Basing policy on short-term movements in welfare indicators can thus
be hazardous. There was a sharp increase in India's poverty measures in the aftermath
of the mid-1991 crisis and the ensuing stabilization reforms. However, only one-tenth
of the increase in measured poverty is explicable in terms of the variables one would
expect to transmit the shock. Poverty measures soon returned to their pre-reform
levels, belying the notion of a reforms-induced structural break.