Bringing Up Incentives: A Look at the Determinants of Poverty Alice Sheehan
Outline presentation What s going on out there? Growth, Human Development indicators, Poverty rates, etc. A look at determinants of poverty on three different levels: Immediate, Community, and Regional/National An example of these determinants in action A look at the Root Determinants of poverty Data Analysis
Annual increase in per capita GDP 1900-2001 2-3.5 0.2 Source: Cooper, 2005
Some human development indicators Source: Cooper, 2005
Poverty in the World, 1950-2000 86.6 59.3 6.0 54.8 830 104 114 362 Source: Cooper, 2005
People living on less than $1 a day (in millions) Source: World Bank Atlas, 2006
Research Question Why do we see such large variations of poverty rates across countries?
Immediate determinants of poverty at the individual & household levels Demographic Economic Social Household composition Dependency ratio Age and sex of household head Household employment Land owned Ownership of other assets Health Education Shelter
Community and regional/national level determinants Community Level Access to infrastructure Human resources development Access to employment Social mobility Political representation Land distribution Social Capital Regional/National Level Institutions Quality of governance Control of Corruption An active civil society Geography Environmental Conditions Gender, ethnic, racial inequality
Reasons for leaving primary school in Zambia Source: World Bank Atlas, 2006
Root Determinants of Poverty Institutions Quality of Governance Macroeconomic policies Investment climate Risk of Expropriation, Government Effectiveness, Regulatory Quality, Rule of Law, and more Geography Mean Temperature, Proportion of land within 100 Km from the sea, Absolute Latitude Development strategies and Aid Efficiency Good Aid Management Harmonization and Alignment Pro-Poor Growth
0 20 40 60 80 Correlation between Poverty Rate and Rule of Law: -0.5406 MOZ MDG MLIBOL COL ZMB MWI TCD LAO KGZ GTM ARM AZE BGD CMR NICMRT PER UGA BFA KAZ ETH YEM NPL GHA BLR KHM PNG TZA PHL ZWE GUY PAK UZB KEN DOM IND ALB BGR IDN JAM BIH GEO DZA PAN LKA MAR EGY JOR HUN CHL CHN -1.5-1 -.5 0.5 1 Rule of Law - average 1996-2005 bandwidth =.8
-2 0 2 4 Correlation between Log Poverty Rate and Government Effectiveness: -0.4786 TJKTKM NGA ZMB GMB BDI MDG NIC GHA BFA MWISLV HND MOZ KHM BGD IND PER ECU PRY VEN MRT UZB BOL ETH LAO CMR YEM GTM KAZ ARMVNM MEX CIVCHN PHL PAK PANBRA COL BLR AZE BGR RUS GEOLKA IDN ROM UKR CRI KENKGZ ALBDOM IRN JAM LVA HRV EGY GUY LTU TURMAR JOR SVK HUNTUN POL CZE SVN EST THA KOR ARG URY MYS CHL -1.5-1 -.5 0.5 1 Government Effectiveness - average 1996-2005 bandwidth =.8
0 20 40 60 80 Correlation between Log Poverty Gap and Control of Corruption: 0.3901 ZMB MOZ MDG MWI BOL COL MLI GTM KGZ ARM AZE BGD CMR NIC PER ETH KAZ UGA BFA NPL YEM LAO GHA TZAKHM BLR PANPHL PNG GUY ZWE PAK KEN UZB DOM IND BGR LKA ALB IDN JAM EGYMAR GEO DZA JOR CHN HUN CHL -1 -.5 0.5 1 1.5 Control of Corruption bandwidth =.8
0 20 40 60 80 Correlation between Poverty Rate and Risk of Expropriation: -0.5454 MLI MDG BOL ZMB MOZ MWI COL GTM UGA BFA BGD NIC PHL PER CMR ETH YEM GHA PAN ZWE PAK KEN DOM LKA TZA EGY DZAJOR ALB JAM MAR PNG IDN CHL IND BGR HUN CHN 4 5 6 7 8 9 Risk of Expropriation - average 1996-2005 bandwidth =.8
0 20 40 60 80 Correlation between Poverty Rate and Regulatory Quality: -0.1038 BIH ETH UZB AZE MOZ LAOBLR KGZ GTM ARM BGD CMR MRT NIC PER BFA KAZ DJIUGA YEM NPL GHA PNG ZWE TZA KHM PHLPAN GUY GEO DZA MWI PAK KEN MDG IND DOM ALB BGR LKA EGY IDN MAR HUN JAM CHN TCDMLI JOR ZMB COL BOL CHL -2-1 0 1 2 Regulatory Quality - average 1996-2005 bandwidth =.8
0 20 40 60 80 Correlation between Poverty Rate and Time Required to Start a Business: 0.1235 ZMB MDG MWI MLICOL BOL TCD MOZ KGZ GTM ARM BGD KAZ ETH UGA CMR NIC MRT PER BFA NPL YEM GHA PAN TZA PHL PNG GUY KHM BLR ZWE PAK UZB KEN DOM IND BGRALB LKA MAR JAM CHL EGY BIH HUN GEO DZA JOR AZE IDN LAO CHN 0 50 100 150 200 Time required to start a business (days) - average 2003-2005 bandwidth =.8
-1 0 1 2 3 4 Correlation between Log Poverty Gap and Proportion of Land within 100 km of the seacoast: -0.2296 ZMB BDI NGA BFA MWI GHA MOZ PERKHM MRT IND PRY BOL UZB ETH LAO VEN KAZ CHNCMR ARM CIV TJK TKM PAK BRA COL GMB BGD ECU YEMGTM MEX MDG NIC HND VNM SLV PHL PAN BGR RUS AZE GEO ROM UKR BLR CZE HUN KGZ SVK KEN IRNARG JORLTU POL EGYTHA URY MAR TUR TUN LVA HRV SVN CHL IDN EST MYS ALBKOR LKA CRI DOM JAM 0.2.4.6.8 1 Proportion of land within 100 km of the seacoast bandwidth =.8
1 2 3 4 5 Correlation between Log Poverty Rate and Mean Temperature: 0.5020 HUN BGR CHL ALB ZMB BOL GTM MWI MDG MOZ COL TCD PER NPL UGA CMRMRT BGDNIC BFA LAOGHA ZWE TZA PHL PNG KHM PAN PAK KEN DOM IND LKA MAR EGY IDN JAM MLI JOR DZA CHN 10 15 20 25 30 Mean Temperature bandwidth =.8
1 2 3 4 5 Correlation between Log Poverty Rate and lnmalfal: 0.3845 PER GTM NIC NPL MDG MOZ ZMB COL MLI TCDMWI BGD PAN PAK PHL YEM ETHBFA CMR UGA ZWE PNG LAO GHA KHM TZA IND KEN LKA IDN BOL CHN -6-4 -2 0 2 lnmalfal94 bandwidth =.8
Remarks Economic growth is good to reduce poverty Institutional quality is related to poverty rates Geographic variables are also correlated with poverty rates Pro-Poor growth strategies should include institutional development and take geographic variables into consideration Create incentives by reducing barriers
Acknowledgements Special Thanks to Professor Edinaldo Tebaldi