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Dynamics of Regional Poverty and Real Wages: Policy Implications for Development Interventions

Professor Shamsul Alam Member(Senior Secretary) General Economics DivisionPlanning Commission

Dr. Kazi Iqbal,Senior Economist, SSIP,GED

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Motivation • Regional poverty dynamics and its drivers have received very

little attention in the literature - Lack of appropriate data - Poor understating of the role of regional variations of

poverty dynamics in the preparation of regional policies and development interventions

At aggregate level we have no dearth of Studies : - Aggregate level analysis often masks some important regional

facts- Spatial analysis is an important tool for local and regional

planning

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Objective of the study

• Uncover some stylized facts about the regional poverty dynamics

• Illustrate some stylized facts about the regional wage dynamics

• Association between regional poverty and wage dynamics

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Data

• Sub-district wise poverty data: BBS-WFP (2005, 2010)

• Wage data: - Aggregate data : Monthly Statistical Bulletin,

BBS- Sub-district level: Community Modules of

HIES, 2005 and 2010- District Statistics, 2011 (BBS, 2013)

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Stylized facts about the sub-district level poverty dynamics

• Based on: • Maps of changes in poverty (upper and lower lines)• 20 most poverty stricken sub-districts (lower poverty line), 2010

and 2005• 20 most poverty stricken sub-districts (upper poverty line), 2010

and 2005• 20 sub-districts with highest proportion of extreme poor in total

poor, 2010 and 2005• Top 20 sub-districts with highest rate of poverty reduction in

2005-2010• Top 20 sub-districts with highest increase in poverty in 2005-

2010

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Changes in poverty (lower and upper lines)

Map 1: Change in poverty rates by sub-district

(upper poverty line): positive means increase in

poverty

Map 2: Change in poverty rates (lower

poverty line): positive means increase in

poverty

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Table: Top 20 poverty stricken Sub-district (lower poverty line), 2010 and 2005

2010 2005 District Sub-district Poverty District Sub-district Poverty BARISAL MEHENDIGANJ 50.0 PATUAKHALI GALACHIPA 68.00 BARISAL HIZLA 49.5 SATKHIRA SHYAMNAGAR 65.20 KURIGRAM PHULBARI 48.8 PATUAKHALI KALA PARA 64.50 KURIGRAM CHAR RAJIBPUR 48.7 PATUAKHALI DASHMINA 63.80 KURIGRAM RAJARHAT 48.6 SATKHIRA KALIGANJ 62.50 SYLHET GOWAINGHAT 46.5 NILPHAMARI DIMLA 61.50 KURIGRAM ULIPUR 46.2 BARISAL HIZLA 60.70 KURIGRAM NAGESHWARI 45.4 KHULNA DACOPE 60.40

KURIGRAM BHURUNGAMARI 44.7 NILPHAMARI JALDHAKA 59.30

BARISAL MULADI 44.1 KURIGRAM CHAR RAJIBPUR 58.80

BARISAL BAKERGANJ 42.20 KURIGRAM RAUMARI 58.10 KURIGRAM CHILMARI 42.10 BARISAL MEHENDIGANJ 57.50 MYMENSINGH NANDAIL 41.80 SATKHIRA ASSASUNI 57.50 JAMALPUR DEWANGANJ 41.60 NILPHAMARI KISHOREGANJ 56.20 CHANDPUR HAIM CHAR 41.00 BANDARBAN THANCHI 55.80 SHARIATPUR GOSAIRHAT 40.70 NILPHAMARI DOMAR 55.80

KURIGRAM KURIGRAM SADAR 40.50 BANDARBAN RUMA 55.30

BARISAL GAURNADI 39.90 BANDARBAN ROWANGCHHARI 55.20

GAIBANDHA FULCHHARI 39.80 KURIGRAM NAGESHWARI 55.00 SYLHET KANAIGHAT 39.70 BAGERHAT FAKIRHAT 55.00

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Table: 20 most poverty stricken Sub-districts (upper poverty line), 2010 and 2005

2010 2005

District Sub-district Poverty

rate District Sub-district Poverty

rate KURIGRAM CHAR RAJIBPUR 68.8 BANDARBAN ALIKADAM 78.40 KURIGRAM PHULBARI 68.5 PATUAKHALI GALACHIPA 76.80 KURIGRAM RAJARHAT 67.7 BANDARBAN THANCHI 76.70 KURIGRAM ULIPUR 65.3 PATUAKHALI DASHMINA 76.60 KURIGRAM BHURUNGAMARI 65.1 SATKHIRA SHYAMNAGAR 75.70 KURIGRAM NAGESHWARI 65.0 NILPHAMARI DIMLA 75.70 BARISAL MEHENDIGANJ 64.4 BANDARBAN RUMA 75.40 BARISAL HIZLA 62.3 BANDARBAN ROWANGCHHARI 75.40 CHANDPUR HAIM CHAR 61.3 SATKHIRA KALIGANJ 74.90 KURIGRAM CHILMARI 61.1 PATUAKHALI KALA PARA 74.20 MYMENSINGH NANDAIL 60.70 NILPHAMARI JALDHAKA 74.00 MYMENSINGH PHULPUR 58.80 KURIGRAM CHAR RAJIBPUR 73.90 JAMALPUR DEWANGANJ 58.50 KURIGRAM RAUMARI 73.50 RANGPUR GANGACHARA 58.30 KHULNA DACOPE 73.30

SHARIATPUR GOSAIRHAT 58.30 COX'S BAZAR TEKNAF 73.10

MYMENSINGH DHOBAURA 58.20 BANDARBAN NAIKHONGCHHARI 72.80 BARISAL MULADI 58.20 NILPHAMARI KISHOREGANJ 71.80 GAIBANDHA FULCHHARI 58.10 BARISAL BAKERGANJ 71.50

KURIGRAM KURIGRAM SADAR 58.00 NILPHAMARI DOMAR 71.00

KURIGRAM RAUMARI 57.00 KURIGRAM NAGESHWARI 70.30

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1. Regional distribution of changes in poverty rate is more or less same for both upper and lower poverty lines.

2. In the North-west region poverty rate has decreased in almost all sub-districts.

3. A substantial number of sub-districts experienced an increase in moderate and extreme poverty.

4. Increase in Poverty is higher in the Eastern part than in the Western part of the country.

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5. There are three distinct regions where poverty has increased significantly–greater Sylhet region, Mymensingh region and Meghna Basin.6. Though the rate of poverty has declined, North-west is still the most poverty stricken region in the country.7. Most of the poor are extreme poor in greater Sylhet region.8. Hill-track region is no longer in the list of twenty most poverty stricken sub-districts.

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Wage Dynamics: Aggregate and regional

• Real wage in agriculture 2

46

810

real w

age (

daily

wage/p

rice o

f coars

e r

ice p

er

kg)

1970 1980 1990 2000 2010year

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• Now an agricultural labor can buy about 10 kg of coarse rice with his daily wage, which was below 6 kg of rice just about five years ago.

• Economy may have reached ‘Lewis’ tipping point’ (Lewis, 1954), beyond which the wage increases very fast.

• The shrinking share of households with main occupation of agricultural wage labor indicates strongly about the waning of surplus labor (Hossain and Bayes, 2009).

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Three major factors behind this sharp increase in the real wage

I. Tightening of rural labor market• Reallocation of labor from farm to non-farm• Reallocation of labor from wage-labor to own-farm

II. Increase in labor productivity mechanization of agriculture, adoption of HYV/hybrid crops and modern

irrigation systems• Real wage is catching up the higher productivity of labor (Osmani, 2015)

III. Stable and moderate food inflation

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Regional wage dynamics: Some stylized facts

• There is a wide variation of real wage across regions

• Mean (8.54 kg of coarse rice), standard deviation (3.36), highest (Gurudaspur of Natore 22.5), lowest (Durgapur of Netrokona 4.29 kg ) [BBS, 2011]

0.0

5.1

.15

.2

Density

5 10 15 20 25realw

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Stylized facts….

• Some sub-districts of Chittagong and Natore have the highest real wages

• Real wages in Northern sub-districts are among the lowest

• There are distinct pockets of high and low real wages

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Association between poverty and real wages

Figure 7: Relationship between poverty (upper

poverty line) and real wage (HIES, 2005)

Figure 8: Relationship between poverty (lower

poverty line) and real wage (HIES, 2005)

Figure 9: Relationship between poverty (upper poverty

line) and real wage (HIES, 2010)

Figure 10: Relationship between poverty (lower

poverty line) and real wage (HIES, 2010)

020

40

60

80

2 4 6 8 10rwage

upl Fitted values

020

40

60

80

2 4 6 8 10 12rwage

upl Fitted values

020

40

60

80

2 4 6 8 10 12rwage

upl Fitted values

010

20

30

40

50

2 4 6 8 10 12rwage

lpl Fitted values

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Regression results: dependent variable: poverty rate

HIES 2005 HIES 2005 HIES 2010 HIES 2010

District Series, 2011

District Series, 2011

Panel (Sub-district, 2005-2010)

VARIABLES Moderate poverty

Extreme poverty

Moderate poverty

Extreme poverty

Moderate poverty

Extreme poverty

Moderate poverty

Extreme poverty

Real wage -1.941*** -1.959*** -1.460** -1.109** -.826*** -.611*** -3.926*** -3.706***

(0.663) (0.593) (0.599) (0.450) (0.243) (0.189) (1.020) (0.903)

Constant 53.135*** 38.430*** 39.981*** 24.206*** 39.96*** 24.352*** 64.099*** 49.138***

(3.256) (2.910) (3.480) (2.612) (2.30) (1.791) (10.848) (9.599)

Sub-district dummy No No No No

No

No Yes Yes

Observations 262 262 177 177

425

425 439 439

R-squared 0.032 0.040 0.033 0.034 0.027 0.24 0.778 0.767 Standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1

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Regression results

• OLS results for 2005: One more kilogram (rice) increase in real wage is associated with reduction of poverty by about 2 percentage points.

• OLS results for 2010: one more kg (rice) increase in real wage is associated with 1-1.5 percentage point reduction in poverty.

• Panel: One kg (of coarse rice) increase in real wage is associated with about 4 percentage point decrease in poverty rates

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Conclusion and policy implications for development interventions

• Spatial poverty dynamics is an important tool for effective development intervention.

• Spatial distribution of rural real wages can be a good indicator for intervention.

• Ranking of the sub-districts in terms of poverty and its dissemination among development practitioners are important for greater attention.

• It is imperative to understand why poverty pockets exist for effective intervention.

• Knowledge on regional distribution of safety nets is essential for understanding regional poverty and this may be studied further.

• Knowledge on regional distribution of ADP is essential for understanding regional poverty and this may also be studied further.

• Local level poverty estimates should be used with care.• Top-down Planning and governance structure may be resource wasting

and time consuming to redress regional Poverty Pockets.

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Thanks