DidPoverty ReallyStagnateinMongolia between 2002/3 and 2007/8? An Exploration of the Data East Asia and Pacific Region The World Bank November 2009
Outline Puzzleof no poverty reduction Possible explanations Approaches to measure poverty trends (consumption based) Trends in non consumption measures of welfare 22
NSO report finds almost no poverty reduction in Mongolia 2002/3 2007/82007/8 2002/03 2007/08 Poverty Poverty Headcount Gap Severity Headcount Gap Severity National 36.1 11.0 47 4.7 35.2 10.11 40 4.0 Urban 30.3 9.2 4.0 26.9 7.7 3.1 Rural 43.4 13.2 5.6 46.6 13.4 5.2 Source: HIES/LSMS 2002/03 and HSES 2007/08. 33
Finding of no poverty reduction is puzzling because 1. Growth 2002 20082008 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 Mongolia GDP per capita (in 2005 Tugrug) 2002 2003 2004 2005 2006 2007 2008 Annual growth in GDPpc between 4 and 9% Cross-country empirical evidence shows negative relationship between poverty rate and growth 4
2. Rising number of livestock 20,000.0 Number of livestock in Mongolia by species 15,000.0 10,000.0 50000 5,000.0 Horse Cattle Sheep Goat.0 2002 2003 2004 2005 2006 2007 2008 55
And rising commodity prices Meat 200 Real price of beef fin Mongolia 180 160 140 120 100 80 2002 2003 2004 2005 2006 2007 2008 66
Rising commodity prices Wool Real price of wool 140 130 120 110 100 90 80 2002 2003 2004 2005 2006 2007 2008 77
3. And real consumption has almost doubled over this period Average Monthly Real Consumption by region 250000 in 200 07/8 Tugrugs 200000 150000 100000 50000 0 overall urban rural 2002/3 2007/8 Note: Consumption aggregates g are constructed consistently across the two rounds 8
What are possible reasons for finding no poverty reduction? Growth but Gini from 0.33 to 0.36 increased BUT growth in low inequality quintiles Average Monthly Real Consumption by quintile 250000 in 2007/8 Tugrugs 200000 150000 100000 50000 0 Poorest 2nd 3rd 4th Richest 2002/3 2007/8
What are possible reasons for finding no poverty reduction? Growth but Gini from 0.33 to 0.36 increased BUT growth in low inequality quintiles Growth but higher h inflation i Taking into account inflation, real consumption still increased
What are possible reasons for finding no poverty reduction? Growth but Gini from 0.33 to 0.36 increased BUT growth in low inequality quintiles Growth but higher h inflation i The way poverty is measured Taking into account inflation, real consumption still increased Consumption aggregate Poverty y line!
How to update poverty lines? 2 methods Method 1: Inflate poverty line using consumer price index (constant real poverty line) 1 Poverty rate 0 povl line cdf 12
How to update poverty lines? 2 methods 1 2 povlines cdf Method 2: Recalculate poverty line Poverty rate 0 13
How to update poverty lines? (+) ( ) Method 1: Inflate poverty line using consumer price index (constant real poverty line) Gives comparable poverty lines Not relevant when there is a case for changing poverty benchmark Method 2: Recalculate poverty line 14 May be useful over long term or when survey design changes significantly Not allow discussion of trend, not for short period
Method 1 is common international practice since able to discuss trends Method 1: Inflate poverty line using consumer price index (constant real poverty line) Apply this method to Mongolia 15
Method 1 can be implemented in 2 ways First way: Take 2002 1 poverty line as given and inflate forward to a revised 2007 poverty line 0 povl line cdf 1616
Method 1 can be implemented in 2 ways Second way: take 2007 poverty line as given and deflate backward to a revised 2002 poverty line 1 cdf 0 1717
Take 2002 poverty line as given and inflate forward to a revised 2007 poverty line Table 1: Maintain i NSO's poverty line of 2002/3 Poverty line (Tugrug Poverty headcount per cap per month) (%) 2002/3 2007/8 2002/3 2007/8 Urban 30.3 26.9 Recalculated 24743 62494 Rural 43.44 46.66 povline =24743*cpi Total growth 36.1 35.2 Inflation Urban 30.3 8.8 adjusted 24743 39392 Rural 43.4 15.5 povline Total 36.1 11.6 18
Take 2002 poverty line as given and inflate forward to a revised 2007 poverty line Tbl Table 1: Maintain Mi ti NSO's poverty line of 2002/3 Poverty line (Tugrug per cap per month) Poverty headcount (%) 2002/3 2007/8 2002/3 2007/8 Urban 30.3 26.9 Recalculated 24743 62494 Rural 43.44 46.66 povline Total 36.1 35.2 Inflation Urban 30.3 8.8 adjusted povline 24743 39392 Rural 43.4 15.5 Total 36.1 11.6 19
Or take 2007 poverty line as given and deflate backward dto a revised d2002 poverty line Tbl Table 2: Maintain Mi ti NSO's poverty line of 2007/8 Poverty line (Tugrug Poverty headcount per cap per month) (%) 2002/3 2007/8 2002/3 2007/8 Urban 30.3 26.9 Recalculated 24743 62494 Rural 43.44 46.66 povline Total =62494/cpi 36.1 35.2 Inflation Urban growth 59.9 26.9 adjusted 39254 62494 Rural 74.2 46.6 povline Total 66.2 35.2 20 20
Or take 2007 poverty line as given and deflate backward dto a revised d2002 poverty line Table 2: Maintain NSO's poverty line of 2007/8 Poverty line (Tugrug per cap per month) Poverty headcount (%) 2002/3 2007/8 2002/3 2007/8 Urban 30.3 26.9 Recalculated 24743 62494 Rural 43.4 46.6 povline Total 36.1 35.2 Inflation Urban 59.99 26.9 adjusted 39254 62494 Rural 74.2 46.6 povline Total 66.2 35.2 21
Method 1 is common international practice since able to discuss trends Method 1: Inflate poverty line using consumer price index (constant real poverty line) Poverty has declined d substantially 22
Is this poverty reduction consistent with other measures of well being?
Welfare proxies other than consumption based also point ttoward social ilprogress Livestock size increased Real consumption increased Real price of wool increased Consistent with poverty reduction Real GDP growth Access to savings increased Education, health indicators improved Access to some basic infrastructure improved 24
Livestock size increased significantly Livestock headcount (bods) 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Urban Rural Total 2002 2007 50.0 40.0 Livestock Headcount (Bods) Rural Only Nu umber 30.0 20.00 10.0 0.0 Poorest 2nd 3rd 4th Richest Per Capita Consumption Quintiles Rural 2002 2007 25
Access to savings increased significantly 30.0 % Households with Savings Account 25.0 20.0 15.0 10.0 5.0 0.0 Urban Rural Total 2002 2007 50.0 % Households with Savings Account by quintile 40.00 30.0 20.0 10.0 00 0.0 Poorest 2nd 3rd 4th Richest 2002 2007 26
Education attainment slightly improves 70.0 60.00 50.0 40.0 30.0 20.0 10.0 0.0 % Household heads with at least secondary education Urban Rural Total 2002 2007 80.00 60.0 40.0 20.0 0.0 % Household heads with at least secondary education by quintile Poorest 2nd 3rd 4th Richest 2002 2007 27
Illness incidence decreases among rural, poor 8.0 Illness incidence (% individuals reporting health problem last month) 6.0 4.0 2.0 0.0 Urban Rural Total 2002 2007 15.0 Illness incidence (% individuals reporting health problem last month) by quintile 10.0 5.0 00 0.0 Poorest 2nd 3rd 4th Richest 2002 2007 28
Access to solar energy improved 45.0 40.0 35.0 30.00 25.0 20.0 15.0 10.0 5.0 00 0.0 % Households with solar energy Urban Rural Total 2002 2007 30.0 25.0 20.0 15.0 10.0 5.0 00 0.0 % Households with solar energy by quintile Poorest 2nd 3rd 4th Richest 2002 2007
Access to telecommunication improved 100.0 % Households with landline/mobile telephone 80.0 60.0 40.0 20.0 0.0 Urban Rural Total 2002 2007 100.0 % Households with landline/mobile telephone by quintile 80.00 60.0 40.0 20.0 0.0 Poorest 2nd 3rd 4th Richest 2002 2007
Sanitation improved in rural, but worsened in urban Overall Urban 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 % Households with waste disposal Urban Rural Total 2002 2007 2002/03 2007/08 %Hh with Waste Disposal Ger 76.8 74.3 Apartment 90.3 90.2 House 79.3 76.5 31
POVERTY HAS DECLINED 32
THANK YOU! 3333
World Bank Poverty Analysis Work Plan Policy note #1: poverty profile 2002/3 2007/8 2007/8 Policy note #2: Impact of financial crisis Policy note #3 : Social safety nets Policy note #4: Migration Others???? 34
Appendix: Poverty rate if use NSO s 07 08 line and WB s cpi dfl deflation to 02 03 Headcount Rate(P0) Mongolia 2002/03 Mongolia 2007/08 Urban 59.99 26.9 Rural 74.2 46.6 Total 66.2 35.2 Strata Capital city 55.8 21.9 Aimag center 64.7 34.9 Soum center 74.3 42.0 Rural 74.1 49.7 Headcount Rate(P0) Mongolia 2002/03 Mongolia 2007/08 Capital city Ger 82.7 43.3 Apartment 34.9 3.8 Detached house 66.2 23.5 Aimag center Ger 75.3 50.8 Apartment 56.66 12.5 Detached house 65.0 35.7 Soum center Ger 74.4 50.0 Apartment 20.9 Detached house 73.2 37.9 35 Rural Ger 72.0 50.0 Apartment 24.7 Detached house 52.4
Internal migration: changes in population share Ulanbaatar Aimag Center Soum Center Countryside Dwelling 2002/2003 2007/2008 2002/2003 2007/2008 2002/2003 2007/2008 2002/20032007/2008 Ger 14.0 25.0 26.4 35.0 44.3 47.6 90.1 83.1 Apartment 38.0 33.4 28.9 26.6 10.0 9.4 0.9 2.5 House 46.44 41.2 43.33 37.6 45.1 42.3 89 8.9 14.2 Other 1.6 0.4 1.4 0.8 0.6 0.7 0.1 0.2 Total 100% 100% 100% 100% 100% 100% 100% 100% 3636
Constructing a nutrition based poverty line FOOD Reference group For food(e.g. bottom 40%) NON-FOOD Hh around food povline (upper/lower) Caloric equivalence of ref. group s food bundle Food and non food shares (Engel curve) + = Food povline = cost Non food povline of food bundle at 2100 cal/cap/day =non food POV LINE consumption 3737