Dr.Wuttipong Arjchariyaartong a* and Dr.Thitiwan Sricharoen b. Corresponding Author, address: (W.

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1 Factor Affecting on Poverty of Rural Farm Household in the Northeastern Region of Thailand: Case Study of Tambol Banfang, Banfang District, Khon Kaen Province, Thailand Dr.Wuttipong Arjchariyaartong a* and Dr.Thitiwan Sricharoen b a Department of Economics, Khon Kaen University, Nong Khai Campus, Thailand. b Faculty of Management Science, Khon Kaen University, Thailand. Corresponding Author, address: awutti@googl .com (W. Arjchariyaartong) Abstract This research had the purpose to analyze factor affecting on poverty and the suggestion in poverty reduction. Principle Component Analysis (PCA) was applied to identify factor affecting on poverty. The survey underlying this study was conducted in Tambon Banfang, Amphor Banfang, Khon Kaen Province, Thailand. Data were collected in 12 villages. The sample consisted of 200 farm households. Factor affecting on poverty in research area were number of family members, child dependency rate, old age dependency rate, rice consumption per month in kilograms per adult equivalent, crop production, main crop value, condition of housing, condition of water system, condition of kitchen, condition of furniture, quantity of land owned, quantity of farm land, value of transportation assets per adult equivalent, value of total asset per adult equivalent. The comparison of poverty index and socio-economics variables showed that small family size household had opportunity to outreach poverty. Other factors were number of elders, children, inability persons and unemployment of working members. Moreover, household with small size of farm land had the tendency to encounter the poverty. Key word: Poverty, Poverty reduction, Principle Component Analysis 1.Introduction Poverty is the obstruction of country development. It affects to the economics and society both in micro and macro level. Government has the strategy plan to attack poverty in the tenth National Economic and Social Development Plan (Year ). The strategy of poverty fighting emphasis on poor people in centered approach. Poverty in this approach is defined in broad aspect such as people are poor if they have been ranged from income, education and opportunity. Government should concentrate on poverty reduction through the general poor group and the vulnerability to poverty group. This strategy attempt to relief the effect of poverty, solving the structure problem, and strengthen the overall economics efficiency. According to the poverty reduction strategy, government classifies the poor into three groups. Firstly, the chronic poor is the poverty-stricken person, who has very low capacity to acquire income and hard to outreach poverty. Secondly, general poor is the one who lack of basic facilities but has the potential to escape from poverty. Thirdly, the vulnerability poor who is not poor now but he or she may be poor in the future from the 1

2 changes of life, health, family and work. Most of the poor live in the Northeastern of Thailand. This region is the target area to implement poverty is fighting policy. Northeastern of Thailand is the region where most of population has average income per capita lower than other regions (Table 1). Most household is expansion family. Large number of family member refers to high dependency ratio. Furthermore, these populations mostly have low education and lack of knowledge to earn one s living. In fact, most farmers in the northeast has no own farm land or hold very small size of farm land. They have inefficient in land management. Therefore, crop production is very low. Their output does not sell well. By the end, they do not have enough income to support large family member. Table 1: Poverty line, number and percentage of the poor, classified by region Year Poverty line Number Share of percentage of poverty, classified by region (Baht/month) of the the poor poor (million people) (percent) Central North Northeast South Bangkok Source : Office of the National Economic and Social Development Board (2006). Note to the summary report on poverty reduction of Khon Kaen province present the problems occurring from poverty are problem of household debt, land uses, wandering poor, leaving school of young children to work, children is hoodwinked, etc. These are the problems of 315,782 populations who report to the province, amounting percent of total population. Poverty situation is continuously occurring in Khon Kaen province. The city has fast development. People encounter the problem of income lower than living cost. They must to make money to afford basic facilities such as vehicle, land, etc. Therefore, people must ask for the loan but they do not have ability to return debt (Information and Communication Technology Office, Khon Kaen province, 2004). At the present day, both World Bank and Thailand are emphasis on poverty reduction by creating social welfare, social network and social protection. There are the increases economics opportunity through occupation promotion, market development, and micro credit. Poverty reduction policy also includes the attempting to distribute political power to local area and encouraging local people to solve poverty by himself. National budget have been reallocated in more efficiency way. The economics developments try to make the balance and stability of macroeconomics. It has the purpose to encourage local people have self help and can be stability (Office of the National Economic and Social Development Board, 2006). However, poverty is still being the great problem of Thailand. Although many different governments try to solve problem, but poverty problem still not reduce. So, poverty reduction must have to catch on the situation continuously about the cause of 2

3 poverty, its situation, and the effect of it. Therefore, this research attempts to study the cause of poverty and present the method to solve poverty. If the poverty have been solved, it can be reduced the gap of income between group of people and then reduce economics and social problem. 2. Methodology This research aims at studying the characteristics of farm household poverty, analyzing factor affecting on poverty and suggesting the poverty reduction method. Research areas are in Tambol Banfang, Khon Kaen province, Thailand. Data were collected in 12 villages. The sample consisted of 200 farm households. Methodology applies Principle Component Analysis (PCA) to analyze factor affection on poverty. PCA is a statistical technique to identify commonalities among different variables, and to aggregate these variables into various components (Basilevsky 1994; Sharma 1996). The PCA method, when used as an aggregation procedure for the computation of a poverty or wealth index, identifies important indicators and calculates the weights. Specifically, PCA isolates and measures the poverty component embedded in the various poverty indicators and creates a household specific poverty score or index. Relative poverty comparisons are then made between client and non-client households based on this index. Basically, the principal component technique slices information contained in the set of indicators into several components. Each component is constructed as a unique index based on the values of all the indicators. The main idea is to formulate a new variable X* that is the linear combination of the original indicators such that it accounts for the maximum of the total variance in the original indicators. That is, X* is computed as X* = w 1 X 1 + w 2 X 2 + w 3 X 3 (1) where the weights (the wi) are specified such that X* accounts for the maximum variances in X1, X2, and X3. This index has a zero mean and a standard deviation equal to one (Basilevsky 1994; Sharma 1996). 3. Result Study on poverty is very important more than study on the rich. If the vital problem causing poverty has been solved, the rich will be followed. In this study finds an interesting result that poverty is not rely on any single factor but it is determined by many factors. The poverty in different area is different corresponding to the population, occupation, culture and so on. Most of household members are completed primary education. Family sizes are about 4 to 5 persons. Household head mostly are men and pretty much old. 3

4 The survey on household s economics status indicated that most households are related farm work, rice planting, vegetable planting and animal feeding. Households mostly are poor. Family member have problem of disguised unemployment. They can not find secondary non farm occupation to support their living cost. The result found that factor affecting on poverty in Northeastern of Thailand: case study of Tambon Banfang, Amphor Banfang, Khon Kaen Province were number of family member, child dependency rate, old age dependency rate, rice consumption per month in kilograms per adult equivalent, crop production, main crop value, condition of housing, condition of water system, condition of kitchen, condition of furniture, quantity of land owned, quantity of farm land, value of transportation assets per adult equivalent, value of total asset per adult equivalent. The Kaiser-Meyer-Olkin Measure (KMO) of sampling adequacy is a measure for comparing the magnitudes of observed correlation coefficients with the magnitudes of partial correlation coefficients. The value of the KMO is and shows the appropriateness of the model which is within an acceptable range for a well-specified model and which good to warrant interpretation of results (Table 2). Bartlett s Test of Sphericity indicate the hypothesis test. H0: Each variable are not correlated. H1: Each variable are correlated. Chi-Square is and Significance at zero, which is less than So, it has been reject H0. It means that each variable are correlated. Table 2: KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Approx. Chi-Square df Significance Source: Own survey (2008). Table 3 represents communalities value that indicate how well the indicators combine to identify different components. Most indicators have highly explanatory of the poverty component. Each variable have Initial Communalities and Extraction Communalities. Communalities value is the share of explained variance, which can be explained by Common Factor or Multiple Correlation value of the analyzed factor. From table, the communality coefficients are above 0.5. Communalities are equal to one mean that all factors can explain the variation. Table 3: Communalities Initial Extraction Number of family member Child dependency ratio Elderly dependency ratio Rice consumption per month per adult equivalent Agricultural production Value of main crops Housing condition

5 Water system condition Kitchen condition Furniture condition Total land own Agricultural land Value of transportation asset per per adult equivalent Value of total assets per adult equivalent Extraction Method: Principal Component Analysis. Source: Own survey (2008). The outcome of analyzing indicators from Table 4 indicates the Eigen values calculated for each component. The Eigen value and scree test were used to determine the number of extracted components from the observed data. The size of an Eigen value indicates the amount of variance in the principal component explained by each component. Five components are to be considered as a common variance is being measured. Table 4: Total Variance Explained Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings Component % of Cumulative % of Cumulative % of Cumulative Total Variance % Total Variance % Total Variance % Extraction Method: Principal Component Analysis. Source: Own survey (2008). The comparison of poverty index and socio-economics variables presented that family, which had small number of family members had opportunity to outreach poverty. Other factors affecting on poverty were number of elders, children, inability persons and unemployment of working family members in household. Moreover, farm household, which had no agricultural owned land or hold small size of farm land, had the tendency to encounter the poverty. 4. Suggestion on poverty reduction 5

6 The suggestions on poverty reduction were: 1) Result from survey finds that although the research area is not very povertystricken area, the picture of poor households is mostly appeared. It can be implied that in very far area, there may have plenty of the poor. Therefore, government should have the development targeting area, where the area close to urban should have similar development level. 2) The development should start from the local area. The development in each area should link together and can be shared resources from place to place. 3) Government should range the area to develop in ordering and should have the model of successful area. The successful area of poverty reduction will be as a model to use in other area. It should be have the ex-evaluation of the experiment area about the reduction of number of the poor, the improvement of well-being. 4) Government should set the standard of living and basic facilities and then provide them to the local area. 5) Problem in research area is the unemployment among many groups of people such as the recent graduation student, the elder, the farmer, the inabilities person, and the children who are not continue higher education. There is no skill, professional job in local area. So, government should implement the policy in creating job, reducing unemployment and decreasing the migration rate. Moreover, government should help the farmer to find output market. When people have increased income, the quality of life will be improved. 6) Education is the heart of poverty reduction. The higher education people have the greater ability of them to acquire income. However, education cost in Thailand at is high. So, government should reduce the educational expenses of household, increase the education level and improve working skill of labor. 7) Government should improve the health insurance system and medical care service. The reduction in household expenditure on these items can reduce poverty. 8) The studying on the experience of developed country in poverty reduction can create new idea to improve poverty situation. 9) Creating the tourist attraction place in local area can increase local household income. 10) The distribution of local area in administrating and managing own budget and development. It is the way to decentralization of the administration. 11) The creating the opportunity of the poor in accessing in social resources. 12) The economics stimulation in local area can reduce the migration rate of labor and lead local population gain more income. 13) The equality of budget distribution between urban and rural area is very important. In Thailand, the development is concentrated in central cities. These cities become more trouble with the great number of residents and social problem. A lot of poor persons live in the cities. 14) The developing of information technology in updating poor household data base. It can be as the navigator to help the poor quickly. 15) The poverty classification of the poor for helping. 16) The changing of farm management such as the diversification of crop planting, the seeking of second occupation of farm household, the problem solving of last year crop damage, the promotion of diversity crop planted etc. 17) The stimulation of farmer has incentive to save in long term. Government should work with farmer to brain storm how to reduce the debts. 18) Many time budgets are not reaching to target group. So, the reduction of corruption of the policy maker, and the related people is important. 6

7 5. Conclusion Elimination poverty is impossible but poverty reduction is the best way to do. It can not be successes within short term. There are new poor persons everyday. Therefore, poverty reduction is not zero sum game and there is no any specific method to eliminate the poverty. It seems not as easy as pie. All in all, national policy plays a significance role in poverty reduction. When poverty situation of household have been solved, the local area have been developed. Then, overall economy performances are likely to be better. 7. Reference Basilevsky, A.T Statistical Factor Analysis and Related Methods. New York: John Wiley and Sons. Bilsborrow, R Towards a rapid assessment of poverty. In Poverty monitoring: An international concern, ed. R. van der Hoeven and R. Anker, New York: St. Martin.s Press. Boltvinik, J Poverty Measurement Methods-An Overview. Access from Carney D., (ed), Sustainable Rural Livelihoods: What Contribution Can We Made. Department for International development, London. Habicht, J-P., and D. L. Pelletier The importance of context in choosing nutritional indicators. J. Nutr. 120(suppl. 11): Hutaserani, S., and S. Jitsuchon, Thailand's Income Distribution and Poverty Profile and Their Current Situations. Paper presented at Thailand Development Research Institute Year End Conference, Pattaya, December Information and Communication Technology Office Summary Report on poverty reduction of Khon Kaen province. Access from Kakwani, N., and M. Krongkaew Poverty in Thailand: Defining, Measuring and Analyzing. Working Paper No.4, Asian Development Bank and Development Evaluation Division, NESDB. Medhi Krongkaew (1985), "Agricultural Development, Rural Poverty and Income Distribution in Thailand," The Developing Economies, Vol. 23, no. 4, December Messer N. and Townsley P Local Institiutions and Livelihoods: Guidelines for Analysis. Rome: Rural Development Division, FAO. Narayan, C Bonds and bridges: Social capital and poverty. Poverty Group, PREM, The World Bank, Washington, D.C. Office of the National Economic and Social Development Board Factor Analysis of Rural Poverty and Development Problems. Office of the National Economic and Social Development Board. Country development partnership on poverty analysis and monitoring (CDP-PAM), October Office of the National Economic and Social Development Board Project on solving poverty in village and rural area. Research. Office of the National Economic and Social Development Board. 7

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