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Entry to and Exit from Poverty in Russia: Evidence from Longitudinal Data. Irina Denisova New Economic School, Moscow. Motivation. Long-term sustainability requires social stability and could be undermined by high poverty levels. - PowerPoint PPT Presentation
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4th Russia-India-China Conference, New Dehli, November 20-21
Entry to and Exit from Poverty in Russia: Evidence from
Longitudinal Data
Irina Denisova
New Economic School, Moscow
4th Russia-India-China Conference, New Dehli, November 20-21
Motivation• Long-term sustainability requires social stability and could be undermined by
high poverty levels.
• Poverty in Russia declined during the last five years from 29% of population in 2000 to 15% in 2006. Still more than twenty five million people have incomes that are lower than subsistence level
• The economic crisis is likely to increase poverty. The most vulnerable groups?
• Significant body of literature on poverty in Russia– literature analyzes primarily stocks of poverty – only some indirect insights about flows in and out of poverty – an understanding of how entry to poverty and exit from poverty are shaped is
lacking
• For the field: initial income distribution in transition is very condensed. The role of educational and health endowments could be convincingly highlighted (less correlation with household wealth endowment)
4th Russia-India-China Conference, New Dehli, November 20-21
Literature• Poverty incidence is sizeable but poverty gap is small for
most families– Limited opportunities to smooth consumption
• Most poverty is transitory. Observable determinants of transitory and chronic poverty are the same
• The vulnerable:– Large families– Families with children (particularly single parent)– Rural households– Families with unemployed family heads or wage arrears
• The Buffers– Pensions– Education
4th Russia-India-China Conference, New Dehli, November 20-21
Research questions
• What are the determinants of entry to and exit from poverty (duration of poverty and non-poverty spells)?
• Are the two processes symmetric or there are important asymmetries?
• What are the time-related properties of the flows? Are there changes brought to life by the economic growth that followed the economic decline?
4th Russia-India-China Conference, New Dehli, November 20-21
Data
• Russian Longitudinal Monitoring Survey
• Waves 5 – 13 (1994 to 2004)– Nationally representative, about 5,000
households in each round– Very complete income and expenditure
information– Follows same household structure– Panel attrition is a serious issue
4th Russia-India-China Conference, New Dehli, November 20-21
Attrition of Households from Round 5 (from B.F.Mills (2007))
Percent of
Number Initial
Households in Round 5 4,293
Households in Rounds 5 - 6 3,486 81
Households in Rounds 5 - 7 2,595 60
Households in Rounds 5 - 8 2,152 50
Households in Rounds 5 - 9 1,773 41
Households in Rounds 5 - 10 1,572 37
Households in Rounds 5 - 11 1,434 33
Households in Rounds 5 -12 1,288 30
4th Russia-India-China Conference, New Dehli, November 20-21
Figure 1a: Annual Incidence of Poverty for Panel Sample
0
5
10
15
20
25
30
35
40
1994 1995 1996 1998 2000 2001 2002 2003
Year
% P
oo
r
Income based
Expenditure based
Figure 1b: Annual Incidence of Poor - Period Samples with National Weights
0
5
10
15
20
25
30
35
40
1994 1995 1996 1998 2000 2001 2002 2003
Year%
Po
or
Income based
Expenditure based
Comparing Panel Sample with Period Samples (Mills, 2007)
4th Russia-India-China Conference, New Dehli, November 20-21
Study measures
• Absolute poverty concept
• Total household income is main measure of household economic well-being
• Region specific poverty lines– Local diets– Regional prices– Estimated household equivalence scales
4th Russia-India-China Conference, New Dehli, November 20-21
Poverty rates (RLMS definition)
0
10
20
30
40
50
60
Sep
-92
Mar
-93
Sep
-93
Mar
-94
Sep
-94
Mar
-95
Sep
-95
Mar
-96
Sep
-96
Mar
-97
Sep
-97
Mar
-98
Sep
-98
Mar
-99
Sep
-99
Mar
-00
Sep
-00
Mar
-01
Sep
-01
Mar
-02
Sep
-02
Mar
-03
Sep
-03
Mar
-04
Sep
-04
Mar
-05
Sep
-05
Mar
-06
Sep
-06
Per
cent
age
Under 50% of poverty line 50-100% of poverty line
4th Russia-India-China Conference, New Dehli, November 20-21
Methodology• Survival analysis
– Eliminates estimation bias due to non-normality of time to event and right-censoring
– Allows using an unbalanced panel
• Proportional hazard model
• Cox model specification (non-parametrical baseline)• Cluster on id (to take into account multiple failures)• Try strata on settlement type and period (allows
baseline hazard to vary across the groups)
txxt 00 ,,,, ,
4th Russia-India-China Conference, New Dehli, November 20-21
Methodology
• Explanatory variables (X) include
– demographic characteristics of a household; – labor market attachment of adult family members; – eligibility for public transfers; – characteristics of human capital of a household; – settlement type and economic region; – time period
• Changes in variables in X are considered
4th Russia-India-China Conference, New Dehli, November 20-21
Panel statistics
Year # of hh 1994 1995 1996 1998 2000 2001 2002 2003 2004 Initial panel Frequency initial id
8323 3,973 3,781 3,750 3,831 4,006 4,528 4,668 4,718 4,715
Percent 10.46 9.96 9.88 10.09 10.55 11.93 12.29 12.43 12.42
Poverty panel Frequency initial id new id
6214 7143 2,810 2,808 2,763 2,835 2,995 3,296 3,441 3,569 3,551
Percent 10.01 10 9.84 10.1 10.67 11.74 12.26 12.72 12.65
Non-poverty panel Frequency initial id new id
6214 7143 2,810 3,188 3,063 3,044 3,017 3,285 3,424 3,548 3,494
Percent 9.73 11.04 10.61 10.54 10.45 11.38 11.86 12.29 12.1
4th Russia-India-China Conference, New Dehli, November 20-21
Gaps in data record: an example
1996 1997 (unobserved) 1998 1 poor poor poor 2 poor non-poor poor 3 poor poor non-poor 4 poor non-poor non-poor 5 non-poor poor poor 6 non-poor non-poor poor 7 non-poor poor non-poor 8 non-poor non-poor non-poor
1, 3 and 5 – underestimate poverty spells 4, 6 and 8 – underestimate non-poverty spells2 and 7 - overestimate poverty and non-poverty spells
4th Russia-India-China Conference, New Dehli, November 20-21
Poverty and non-poverty incidence and duration
Total number of rounds in poverty
0 1 2 3 4 5 6 7 8 9 Total Number of hh 3,388 1,451 596 332 182 118 72 45 25 5 6,214
% 54.52 23.35 9.59 5.34 2.93 1.9 1.16 0.72 0.4 0.08 100
Maximum duration of poverty spells
0 1 2 3 4 5 6 7 8 9 Total Number of hh 3,388 1,706 585 245 130 72 45 21 17 5 6,214
% 54.52 27.45 9.41 3.94 2.09 1.16 0.72 0.34 0.27 0.08 100
Total number of rounds in non-poverty
0 1 2 3 4 5 6 7 8 9 Total Number of hh 526 1,761 827 610 563 400 334 345 436 412 6,214
% 8.46 28.34 13.31 9.82 9.06 6.44 5.37 5.55 7.02 6.63 100
Maximum duration of non-poverty spells
0 1 2 3 4 5 6 7 8 9 Total Number of hh 526 1,942 938 715 628 503 303 141 106 412 6,214
% 8.46 31.25 15.09 11.51 10.11 8.09 4.88 2.27 1.71 6.63 100
4th Russia-India-China Conference, New Dehli, November 20-21
Survival function of staying in poverty
.621
210.
116.
94.
34.16.
7.6. .5
0.00
0.25
0.50
0.75
1.00
0 2 4 6 8 10analysis time
Kaplan-Meier survival estimate
4th Russia-India-China Conference, New Dehli, November 20-21
Survival function of staying out-of-poverty
.1531
703.
514.436.
.416 .340 233. 100. .412
0.00
0.25
0.50
0.75
1.00
0 2 4 6 8 10analysis time
Kaplan-Meier survival estimate
4th Russia-India-China Conference, New Dehli, November 20-21
When in poverty When in non-poverty
Variable Mean Std. Dev. Mean Std. Dev. Mean Std. Dev.
family size, number of people 2.755 1.427 3.061 1.539 2.712 1.391 change in family size 0.015 0.271 0.031 0.310 0.009 0.258 # of kids <7 yrs in hh 0.214 0.486 0.303 0.597 0.190 0.453 # of kids 7-18 yrs in hh 0.466 0.746 0.668 0.879 0.430 0.712 HH headed by adult male 0.609 0.488 0.722 0.448 0.573 0.495 HH headed by adult female 0.135 0.342 0.165 0.371 0.122 0.328 HH headed by retired male 0.121 0.327 0.039 0.194 0.155 0.362 HH headed by retired female 0.134 0.340 0.072 0.258 0.150 0.357 HH headed by a young person 0.001 0.031 0.002 0.045 0.001 0.026 share of adults in LF 0.627 0.423 0.679 0.394 0.606 0.430 share of adults with job 0.579 0.419 0.586 0.399 0.572 0.424 share of adults unemployed BLS 0.046 0.160 0.091 0.225 0.033 0.130 share of adults in bad health 0.183 0.309 0.167 0.292 0.190 0.310 share of adults-pensioners 0.399 0.439 0.248 0.369 0.455 0.447 share of adults in public sector 0.264 0.354 0.289 0.364 0.265 0.353 share of adults with university degree 0.166 0.316 0.099 0.251 0.177 0.322 share of adults with secondary school only 0.110 0.244 0.151 0.280 0.100 0.232 maximum level of education 1.978 0.863 1.901 0.760 1.987 0.888 family involved in subsistence farming 0.142 0.349 0.111 0.314 0.166 0.372
4th Russia-India-China Conference, New Dehli, November 20-21
Survival of staying in poverty, by settlement type
0.00
0.25
0.50
0.75
1.00
0 2 4 6 8 10analysis time
urban = 0 urban = 1
Kaplan-Meier survival estimates, by urban
4th Russia-India-China Conference, New Dehli, November 20-21
Survival of staying in non-poverty, by settlement type
0.00
0.25
0.50
0.75
1.00
0 2 4 6 8 10analysis time
urban = 0 urban = 1
Kaplan-Meier survival estimates, by urban
4th Russia-India-China Conference, New Dehli, November 20-21
Survival of staying in poverty, by period
0.00
0.25
0.50
0.75
1.00
0 2 4 6 8 10analysis time
period = 0 period = 1
Kaplan-Meier survival estimates, by period
4th Russia-India-China Conference, New Dehli, November 20-21
Survival of staying in non-poverty, by period
0.00
0.25
0.50
0.75
1.00
0 2 4 6 8 10analysis time
period = 0 period = 1
Kaplan-Meier survival estimates, by period
4th Russia-India-China Conference, New Dehli, November 20-21
Hazard rate from poverty Hazard rate into poverty family size, number of people in family 0.079 0.079 -0.037 -0.047 [0.020]*** [0.020]*** [0.027] [0.028]* # of kids <7 yrs in hh -0.08 -0.086 0.202 0.195 [0.039]** [0.039]** [0.049]*** [0.048]*** # of kids 7-18 yrs in hh -0.11 -0.114 0.244 0.225 [0.029]*** [0.029]*** [0.036]*** [0.036]*** HH headed by adult female -0.034 -0.028 0.048 0.097 [0.051] [0.051] [0.066] [0.065] HH headed by retired male 0.186 0.184 -0.529 -0.618 [0.088]** [0.087]** [0.107]*** [0.108]*** HH headed by retired female 0.281 0.277 -0.213 -0.241 [0.084]*** [0.084]*** [0.107]** [0.107]** share of adults in LF 0.547 0.501 0.513 0.083 [0.355] [0.359] [0.495] [0.500] share of adults with job -0.513 -0.46 -0.639 -0.19 [0.351] [0.355] [0.491] [0.496] share of adults unemployed BLS -0.671 -0.636 -0.449 -0.05 [0.360]* [0.363]* [0.507] [0.511] share of adults in public sector -0.003 -0.018 0.241 0.136 [0.056] [0.056] [0.063]*** [0.062]**
4th Russia-India-China Conference, New Dehli, November 20-21
Hazard rate from poverty Hazard rate into poverty share of adults with university degree 0.257 0.261 -0.545 -0.545 [0.057]*** [0.057]*** [0.077]*** [0.078]*** share of adults with secondary school only -0.168 -0.17 0.107 0.112 [0.065]** [0.066]*** [0.074] [0.073] family involved in subsistence farming -0.115 -0.104 -0.049 -0.055 [0.058]** [0.057]* [0.057] [0.056] share of adults with bad health -0.089 -0.102 0.387 0.304 [0.060] [0.060]* [0.076]*** [0.075]*** share of adults-pensioners 0.109 0.101 -0.13 -0.23 [0.066] [0.067] [0.081] [0.081]*** 1- urban 0- rural or pgt 0.106 0.099 -0.378 -0.399 [0.034]*** [0.034]*** [0.042]*** [0.042]*** Moscow&St.Petersburg 0.095 0.114 -1.059 -0.877 [0.075] [0.076] [0.124]*** [0.123]*** decline =0 growth=1 -0.107 -1.043 [0.038]*** [0.050]*** Observations 6347 6347 20664 20664
4th Russia-India-China Conference, New Dehli, November 20-21
Results
• Symmetries– Presence of children weakens hh position– Households headed by retired males and females
tend to be in a stronger position than headed by an adult man
– Adult female-headed households are indistinguishable from adult male-headed households
– High share of adults with university degree is an effective buffer against poverty: it reduces entry to poverty and increases exit from it.
– Families that live in urban areas have lower chances to get into poverty and higher chances to get out of it.
4th Russia-India-China Conference, New Dehli, November 20-21
Results
• Asymmetries– larger families are doing better when getting out of poverty and
average when slipping into poverty– higher share of unemployed reduces hazard from poverty but
does not affect the rate of entry to poverty – higher share of employed in the public sector increases entry to
poverty but is insignificant for poverty exit rate– involvement in subsistence farming is a sign of lower exit rate
and has no influence on entry rate – bad health increases chances to enter poverty but does not
affect chances to escape it – economic growth lowers chances to slip into poverty but also
reduces hazards from poverty.
4th Russia-India-China Conference, New Dehli, November 20-21
Conclusions and policy implications
• Find significant asymmetries between determinants of entry to and exit from poverty– A better design of policies to fight poverty should
distinguish between measures to prevent from slipping into poverty, and measures to get out of poverty for those who are poor.
– Households in poverty in the period of economic upturn are to be paid special attention to
• Confirm the role of educational and health endowments in preventing poverty