A new method of decomposing cross-sectional poverty estimates into chronic
and transient components is demonstrated using data from a recent household
survey in Papua New Guinea. This method is simpler than previously used pa
nel methods because it does not require data on every household in every pe
riod. The only requirement is that a subset of the surveyed households have
a repeat observation made on their welfare indicator some time after the i
nitial observation. In the setting considered, the chronic and transient co
mponents of headcount poverty are roughly equal, while three-quarters of th
e mean poverty gap is transient-in the sense of being due to within-year fl
uctuations in expenditures. (C) 2001 Elsevier Science B,V, All rights reser
ved.