Making and Un-Making Poverty Anirudh Krishna Copenhagen, May 5, 2008 [Ak: insert picture]

Making and Un-Making Poverty

Anirudh Krishna

Copenhagen, May 5, 2008

[Ak: insert picture]

Research Questions

1. ORIGINS: How do people come to be poor?

2. REMOVAL: How – for what reasons – do people escape?

Basis Vectors…

Few answers available

• Stocks measured (rarely flows)

• Handful of panel studies in developing countries

• Rarely probe WHY questions

• Methods gaps…critical

Grassroots Investigations in 400 diverse communities of

INDIA

KENYA

PERU

UGANDA

NORTH CAROLINA, USA

Poverty Dynamics tracked for > 35,000 households

STAGES OF PROGRESS METHODOLOGY

Seven Steps

Step 1. Getting together a representative community group

Step 2. Discussing the objectives of the exercise Step 3. Defining “poverty” collectively in terms of

Stages of Progress

Stages of Progress (Rajasthan)

1. Food for the family

2. Send children to school

3. Some clothes to wear outside the house

4. Start repaying debts

5. Repair the existing shelter Poverty Cutoff

6. Dig a well

7. Purchase cows and buffaloes

8. Construct a pakka (brick) shelter

9. Purchase ornaments Prosperity Cutoff

10. Radio, tape recorder, refrigerator

11. Motorcycle

12. Tractor, car

Initial stages before the poverty cutoff:

STAGE Rajasthan Gujarat W. Kenya

1. Food Food Food

2. Primary education

Some Clothing (to wear outside)

Some Clothing (to wear outside)

3. Some Clothing (to wear outside)

Primary education House repair (roof renovation)

4. Retiring accumulated debt

Retiring accumulated debt

Primary education

5. House repair (roof renovation)

House repair (roof renovation)

Small animals (chicken, sheep, goat)

6. Hiring in a small tract of land

• STAGES OF PROGRESS METHOD

• Step 4. Define “X years ago” in terms of a well known signifying event

• Step 5. List all households. Ascertain stage for each household at present time and in earlier period

• Step 6. Categorize all present-day households: A. Poor 25 years ago and poor now (Remained poor)

B. Poor then and not poor now (Escaped poverty)C. Not poor then but poor now (Became poor)D. Not poor then and now (Remained non-poor)

STAGES OF PROGRESS METHOD

Step 7. For a random sample (25-40%) of households in each category, investigate reasons for change or stability

I. Community inquiry:Comparative perspectiveProbing

II. Household inquiry: To verify what the community has said and to go deeper into reasons

Training is critical

Stages-of-Progress Methodology

• Robust local understandings: similar within contexts

• Relatively long time-horizons

• Triangulating recall data

• Close correspondence with “objective” data

• Identification of reasons

The Good News

  Escaped Poverty

Rajasthan (35 villages) 11%

Gujarat (36 villages) 9%

Andhra (36 villages) 14%

W. Kenya (20 villages) 18%

Uganda (36 villages) 24%

Peru (20 communities) 17%

North Carolina

(13 communities)23%

Escaped Poverty

Became Poor Change in Poverty

Rajasthan (35 villages)

11% 8% 3%

Gujarat (36 villages)

9% 6% 3%

Andhra (36 villages)

14% 12% 2%

W. Kenya (20 villages)

18% 19% -1%

Uganda (36 villages)

24% 15% 9%

Peru (20 communities

17% 15% 2%

North Carolina (13 communities)

23% 12% 11%

The Entire News

Not a “rising tide” but a bathtub of poverty

Falling into poverty: NOT isolated, marginal or temporary

Large numbers – one-third – of poor people not born poor

Bathtub result: not methodology-dependent

Country Period Study Escaped Poverty %

Fell into Poverty

%

Uganda(1300)

1992-2000

Deininger-Okidi (2003) 29 12

India(3139 rural)

1970-1982

Bhide - Mehta (2004) 23 13

S. Africa(1171)

1993-1998

Carter- May (2001)

10 25

B’desh(379)

1987-2000

Sen (2003) 26 18

Signs of Rising Vulnerability

Uganda: Central and Western Region

% of all households

First Period

1979-1994

Second Period

1994-2000

Escaped Poverty 13% 12.2%

Fell into Poverty 5.6% 10.9%

Increased Vulnerability in North Carolina (13 rural communities)

% of all households

First Period

1995-2000

Second Period

2000-2005

Escaped Poverty 16% 13%

Fell into Poverty 6% 12%

Increased Vulnerability in Kenya (Countrywide:71 rural and urban communities)

% fell into poverty

Zone 1 Zone 2 Zone 3 Zone 4 Urban Zone

National Average

First period

(1991-1998)7% 10% 12% 15% 7% 10%

Second period

(1998-2006)

11% 14% 13% 22% 15% 14%

Lessons learned (1)

Poverty is constantly being created, even as some of it is removed

Descents could be becoming more frequent generally

But hardly anything is being done to PREVENT descents

GENERAL REASONS FOR DESCENT

Falling into poverty is slow and cumulative. Multiple contributing reasons.

BAD HEALTH AND HIGH HEALTH CARE EXPENSES: primary reason

(59% in Rajasthan; 73% in W. Kenya; 88% in Gujarat; 77% in Uganda; 75% in Andhra; 67% in Peru; 41% in North Carolina)

Other location-specific reasons:Social and customary expenses; high-interest debt; crop disease, land exhaustion, drought; job loss

Not significant in any region: Laziness, Alcoholism

The critical significance of Health

Increasing out-of-pocket costs and “catastrophic” health expenses (Xu et al. 2003; Sen, Iyer and George 2002).

“Medical poverty trap” (Whitehead, Dahlgren and Evans 2001 )

Average long-term income loss of 17 percent (Yao 2005)

More than half of all personal bankruptcies in America (Himmelstein et al. 2005)

Poor people pay more (Fabricant et al. 1999, Farmer 1999)

Macro Evidence (EQUITAP 2005; Milly 1999; Scruggs and Allan 2006)

GENERAL REASONS FOR ESCAPE

Escape also usually occurs over a period of time. People work upon strategies that take them upward.

Diversification of Income Sources: Agriculture and Informal Sector(70% Rajasthan, 73% W. Kenya, 79% Uganda, 71% Andhra, 69% Peru, 70% Gujarat)

OTHER REASONS (much less frequent)Jobs – in Government and Private Sector

Not very significant: Government assistance programs

AGRICULTURE: A pathway to prosperity?

Average land held by poor households:

Uganda - 1.48 acres

Gujarat - 1.13 acres

Peru - 1.39 acres

Kenya - 1.67 acres

Prospects are equally limited in the informal sector

Lessons learned (2)

Escape and Descent in parallel

Asymmetric Reasons

Consequences for Economic Policy: Separate policies : (1) promote escapes,

(2) prevent descents

Consequence for Political Analysis: Subgroups better than “The Poor”

Distinct subgroups (separate needs and experiences): (range)

– Persistent Poor 2 - 31%

– Newly Poor 8 - 25%

– Recently Escaped 6 - 29%

– Never Poor

National statistics do not collect these data

HYPOTHESIS

Because different reasons affect their

lives and influence their strategies,

different subgroups of poor people

have substantially different demands

from the state

Empirical Test

• 1,032 households in 36 communities

(Andhra Pradesh, India)

• Poverty status assessed: 1997 and 2004

• Classified within 4 subgroups

• Asked to rank their major demands from

the state

Major demands by subgroups (% within each subgroup)

Health Service

Housing Irrigation High School

Wage Labor

Persistent Poor

8 9 9 3 46

Newly Poor

34 24 9 6 8

Escaped Poverty

7 3 28 25 5

Lessons learned (3)

“The Poor”: merely a figure of speech

Not a valid category for political analysis

Because Ins and Outs regularly refresh the composition of poverty

www.pubpol.duke.edu/krishna

Stage – and assets (recorded 7 years ago)

STATUS7 Land (bighas)

Large Animals

Small Animals

Kaccha house

Very Poor

(Stage 1-3)

3.6 1.8 2.8 86%

Poor

(Stage 4-5)

5.5 2.5 3.7 77%

Middle

(Stage 6-8)

8.1 3.1 5.1 51%

Better Off

(Stage 9+)

10.6 4.3 3.1 22%

Also worrisome: Very limited upward mobility

•71 Rajasthan villages (last 10 years)

Accountant (2) Lineman (7)

Advocate (4) Panchayat Secy. (4)

Computer Operator (4)

Patwari (11)

Constable (8) Messenger (6)

Clerk Typist (10) Sub-Inspector (4)

Doctor (1) Schoolteacher (50)

Driver (4)

Soldier (Jawan) (32)

Civil Engineer (2) Software Engineer (1)

And in Karnataka...

20 Karnataka villages (last 10 years)

Accountant (3) Engineer (3)

Advocate (4) Lineman (2)

Computer Operator (4)

Nursing Assistant (1)

Constable (8) Patwari (3)

Clerk Typist (6) Peon (6)

Doctor (1) Schoolteacher (20)

Driver (2)

Soldier (Jawan) (8)

Similarly Low Glass Ceiling in other Countries…

• UGANDA (40 communities) –

1 Doctor, 1 Bank Manager, 14 “businessmen”

• PERU (20 communities) –

1 Civil Engineer, I Agricultural Engineer, 2 Nurse Practitioners, several “merchants”

Available pathways (agriculture and the informal sector) limited upward mobility

Example of NC “Stages of Progress”

1. Food2. Shelter3. Transportation4. Clothing---------------------------------------(extreme poverty)5. Phone6. Television7. Car8. Entertainment-------------------------------------------------(poverty)9. Savings10. Buy Home11. Saving for Kids’ Education

NC Findings (2)

• Primary Factors in Escaping Poverty:• Employment• Family• Budgeting

• Primary Factors of Falling Into Poverty:• Health Care• Job Loss• Family

Five years or more school education (% in 20 Rajasthan villages)

11-20

years

21-30

years

41-60

years

61+

years

Upper caste

89 76 41 27

OBC 64 43 14 7

SC 64 40 12 4

AVERAGE

(n=26,124) 64 45 18 11

Five years or more school education (% in 20 Karnataka villages)

11-20

years

21-30

years

41-60

years

61+

years

OBC 86 59 30 19

SC 85 50 16 6

ST 71 32 13 11

Muslims 82 65 21 21

AVERAGE

(n=23,067)85 55 25 15

STUDY: SOFTWARE ENGINEERS IN BANGALORE

• 150 newly recruited software engineers selected at random from three different firms

• Invited by e-mail to take part in a Web-based survey

• Remarkable response rate (73 percent)

Results:

THREE SIGNIFICANT GAPS

• Rural Gap: 7-11% from rural areas

• Wealth Gap: 15% lower middle class; none “poor”

• Generational Education Gap – most significant –

College graduate fathers and high school graduate mothers

Limits to Upward Mobility

• Parents’ education sets apart new entrants

• Small sliver of Indians 18-30 years old have equally educated parents (no more than 4-7%)

Why should parents’ education matter so much?

Career aspirations of youth (14-22 yrs) attending school

n=1,456

Rajasthan Karnataka

School teacher 43% 39%

Police constable 11% 12%

Army recruit 13% 5%

Other low-paid government 15% 22%

Other low-paid private 5% 11%

TOTAL LOW-PAID 87% 89%