As @gabriel_zucman, @PikettyLeMonde, @lucas_chancel & others have been discussing economic inequality and potential remedies, we model income inequality and poverty dynamics in India. A thread on some preliminary results... 1/

Modeling incomes using a stochastic differential equation to capture reallocation occurring within the distribution (RGBM - @ole_peters, @alex_adamou, @bermanjoe), we find that since 2000 reallocation has been negative, implying transfer of resources from poor to rich... 2/

... & this is evident not only in declining income shares lower in the income distribution, but more worryingly in declining real incomes of bottom decile and bottom percentile. We estimate these growth rates to be -2.5% and -6% per annum for 2001-10 ( https://arxiv.org/abs/1909.04452 ). 3/

Using the modeled distribution, we study dynamics of poverty transitions from 1952-2006. Annual poverty transitions show temporally rising trend, driven by transitions out of poverty. But economic fragility is real & revealed by continued, non-trivial transitions into poverty. 4/

There remains significant persistence of poverty over time, with past poverty still a reliable indicator of future poverty. However, probability of poverty persistence is slowly declining. Particularly worrying are poverty trajectories of the poorest ( https://arxiv.org/abs/2010.06954 ). 5/

Between 2014-19, income shares & real incomes of the poorest (bottom ventile) declined further by -38% and -4%pa respectively. But there is clear discrepancy between rural & urban income dynamics, with bottom urban incomes showing increasing share and positive growth rates... 6/

...while bottom rural incomes are losing share and showing real income declines. The disturbing trend of sustained real income declines since 2000 is thus largely a rural phenomenon focused on small/marginal farmers & agricultural labourers ( https://arxiv.org/abs/2010.03602 ). 7/

These outcomes point to immediate challenges requiring action on possibly multiple fronts such as increased public investments in health & education, inequality-indexed taxes, deepening financial markets, as well as meaningful discussions on basic incomes or dividends. 8/8

@BrankoMilan @beamboybeamboy @binduananth @bharathmp @srukrish @infoasym @amitbasole @EE_2021 @nachiketmor @1amnerd @rmnth @yanisvaroufakis