Kyrgyz Republic Poverty and Inequality

in 2009

Sarosh SattarEurope and Central Asia Region

The World BankOctober 6, 2011

2

Outline of presentation Motivation Objectives Developments in poverty and inequality

over 2006-2009 Poverty profile: selected characteristics Concluding remarks

3

Motivation

Opportunity to show the importance of micro data to really understand what is happening to the population in the Kyrgyz Republic

Economic growth does not benefit all groups equally therefore it is important to look at disaggregated data

4

Objectives To monitor development’s in the

population’s welfare – especially those who are the most vulnerable

A descriptive report which complements the National Statistical Committee’s publication on poverty indictors

Stimulate interest by raising more questions than are answered

5

Dynamics of Poverty

& Inequality,2006 - 2009

6

Economic ContextLarge movements in macroeconomic aggregates

2006 2007 2008 2009-40-30-20-10

0102030405060 GDP

real, growth, %Worker remi-tances, growth , %Total con-sump-tion, growth, %

perc

ent

7

Poverty was responsive to economic growth

2006 2007 2008 2009

-50.0-40.0-30.0-20.0-10.0

0.010.020.0

GDP No. of poor

8

Large decrease in poverty rates

Absolute Extreme0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

61.0

17.1

31.7

3.0

2006 2009

in %

of p

opul

atio

n

9

Growth improved the livelihoods of lower income groups more….

Bottom 2 3 4 Top0

10

20

30

40

5046

41 4235

12

Change in Mean Consumption per capita, 2006-2009

population quintile by consumption per capita

in p

erce

nt

10

Mean consumption in 2006 & 2009

1 2 3 4 50

10,000

20,000

30,000

40,000

50,000

60,000

2006 2009

population quintile by consumption per capita

annu

al c

onsu

mpt

ion

per

year

in s

om

11

By 2009 share of salaries fell and pensions rose compared to the previous year

2007 2008 20090%10%20%30%40%50%60%70%80%90%

100%

78 83 80

10 8 118 7 6

Other

Material support from friends, relatives and local admin.

Pensions

Salaries

12

Inequality fell as measured by the Gini coefficient

2006 2007 2008 20090.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0 31.328.2

25.9 25.5

National

perc

ent

13

Also, the share of consumption increase for the bottom 80% of the population

Bottom

2

3

4

Top

0 5 10 15 20 25 30 35 40 45

9

13

16

21

42

10

14

17

22

36

20092006

popu

latio

n qu

intil

e by

co

nsum

ptio

n pe

r ca

pita

14

Macro and micro points What we know….

Before 2008 economic growth and remittances went hand in hand with falling poverty rates

In 2009 there were dramatic changes in growth, remittances, and public expenditures and poverty remained level

What we don’t know Why the bottom 40 percent of the population

benefited the most in 2006-2009. What economic developments occurred that were

“pro-poor” and are they a result of government policies?

15

Why using household level data raises interesting questions for policy makers… and example

A puzzle…..

16

Rural and urban changes in mean consumption differed somewhat

Bottom 2 3 4 Top05

101520253035404550

Urban Rural

17

Significant reduction in rural absolute poverty

2006 2007 2008 200901020304050607080

4738

23 22

69 64

37 37

Urban Rural

Perc

ent o

f pop

ulat

ion

18

But agriculture did poorly. So what led to poverty reduction in rural areas?

2006 2007 2008 2009100

105

110

115

120

125

130

135

Agriculture Non-Agriculture

19

What could be happening…. Farm income rose due to high food price

increases but volume didn’t change Non-farm income is rising Remittances could have increased

substantially …. Or something else

20

Large differences across regions and large changes over just a few years….

Another puzzle…..

21

Significant differences across mean consumption per capita by oblast

Bishkek Issykul Jalal-Abad Naryn Batken Osh Talas Chui

137

81 86 83 91 94 90

113

Mean per capita consumption

Inde

x of

con

sum

ptio

n pe

r ca

pita

, Mea

n =

100

22

Large declines in poverty but also big differences

Absolute Poverty 

2009change

2006-09Bishkek 14 -8Issyk-kul 46 -18Jalal-Abad 37 -43Naryn 44 -30Batken 31 -42Osh 38 -37Talas 33 -27Chui 21 -20

23

Poverty rates and mean consumption are strongly correlated

70 80 90 100 110 120 130 140 15005

101520253035404550

Index of mean consumption per capita

pove

rty

inci

denc

e, in

per

cent Osh’s poverty

rate is relatively high

24

Obvious questions Why is there such high diversity among

mean consumption levels and poverty rates across oblasts?

What factors could explain this? Private sector development? Education and productivity of labor? Government spending?

Why are changes in poverty rates so dramatic but different across oblasts?

25

POVERTY PROFILE2009

26

Geography matters for povertya: Absolute Poverty b: Extreme Poverty

Bishkek Issykul Jalal-Abad Naryn Batken Osh Talas Chui01020304050

14

4637

44

3138

33

21

712

22

7 8

30

410

Absolute Poverty Rate

perc

ent

27

Larger households associated with higher risk of poverty

Poor Non poor

All Poor Non poor

All Poor Non poor

All

National Urban Rural

0.0

1.0

2.0

3.0

4.0

5.0

6.05.0

3.5 3.84.5

3.1 3.3

5.2

3.84.2

pers

on

28

Higher poverty in households with more children

Households without children

Households with 1 child

Households with 2-3 children

Households with more

than 3 children

0%10%20%30%40%50%60%

11%18%

52%

18%

31% 27%38%

4%

Poor Non poor

29

Distribution of poor by employment status

A: Absolute Poverty Distribution (HH head)

B

All Poor Nonpoor0%10%20%30%40%50%60%70%80%

33% 35% 32%

67% 65% 68%

Not employed Employed

30

Poverty rates among household heads by employment statusA: Absolute Poverty Distribution (HH head)

B: Absolute and Extreme Poverty Rates by Employment Status (HH head)

HH head not employed

HH head employed

HH head not employed

HH head employed

Absolute Poverty Extreme Poverty

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.033.7

30.8

5.02.0

perc

ent

31

Extreme poor more dependent on social assistance, but no significant difference between poor and nonpoor

Extreme Poor Poor Nonpoor

Income from work 66 80 80

Pensions 18 12 11Social benefits 5 1 0Material support: local admin, relatives or friends

9 5 6

Other income 2 2 3

Total 100 100 100

32

Poverty distribution and rates in terms of education (HH head): negative relationship

Higher

Secondary Prof.

General Secondary (complete)

Elementary

Illiterate

0 10 20 30 40 50 60 7015

3026

3339

3624

5963

81

1214

506

41

4Distribution of the Poor Poverty Headcount Rate

percent

33

Concluding Thoughts

34

Key Messages

Macroeconomic developments had a significant impact on the population’s living standards and the welfare of low income groups

Many interesting and unresolved issues of poverty and development

A large research agenda remains that could help policy makers pursue more thoughtful solutions