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Making and Un-Making Poverty
Anirudh Krishna
Copenhagen, May 5, 2008
[Ak: insert picture]
Research Questions
1. ORIGINS: How do people come to be poor?
2. REMOVAL: How – for what reasons – do people escape?
Basis Vectors…
Few answers available
• Stocks measured (rarely flows)
• Handful of panel studies in developing countries
• Rarely probe WHY questions
• Methods gaps…critical
Grassroots Investigations in 400 diverse communities of
INDIA
KENYA
PERU
UGANDA
NORTH CAROLINA, USA
Poverty Dynamics tracked for > 35,000 households
STAGES OF PROGRESS METHODOLOGY
Seven Steps
Step 1. Getting together a representative community group
Step 2. Discussing the objectives of the exercise Step 3. Defining “poverty” collectively in terms of
Stages of Progress
Stages of Progress (Rajasthan)
1. Food for the family
2. Send children to school
3. Some clothes to wear outside the house
4. Start repaying debts
5. Repair the existing shelter Poverty Cutoff
6. Dig a well
7. Purchase cows and buffaloes
8. Construct a pakka (brick) shelter
9. Purchase ornaments Prosperity Cutoff
10. Radio, tape recorder, refrigerator
11. Motorcycle
12. Tractor, car
Initial stages before the poverty cutoff:
STAGE Rajasthan Gujarat W. Kenya
1. Food Food Food
2. Primary education
Some Clothing (to wear outside)
Some Clothing (to wear outside)
3. Some Clothing (to wear outside)
Primary education House repair (roof renovation)
4. Retiring accumulated debt
Retiring accumulated debt
Primary education
5. House repair (roof renovation)
House repair (roof renovation)
Small animals (chicken, sheep, goat)
6. Hiring in a small tract of land
• STAGES OF PROGRESS METHOD
• Step 4. Define “X years ago” in terms of a well known signifying event
• Step 5. List all households. Ascertain stage for each household at present time and in earlier period
• Step 6. Categorize all present-day households: A. Poor 25 years ago and poor now (Remained poor)
B. Poor then and not poor now (Escaped poverty)C. Not poor then but poor now (Became poor)D. Not poor then and now (Remained non-poor)
STAGES OF PROGRESS METHOD
Step 7. For a random sample (25-40%) of households in each category, investigate reasons for change or stability
I. Community inquiry:Comparative perspectiveProbing
II. Household inquiry: To verify what the community has said and to go deeper into reasons
Training is critical
Stages-of-Progress Methodology
• Robust local understandings: similar within contexts
• Relatively long time-horizons
• Triangulating recall data
• Close correspondence with “objective” data
• Identification of reasons
The Good News
Escaped Poverty
Rajasthan (35 villages) 11%
Gujarat (36 villages) 9%
Andhra (36 villages) 14%
W. Kenya (20 villages) 18%
Uganda (36 villages) 24%
Peru (20 communities) 17%
North Carolina
(13 communities)23%
Escaped Poverty
Became Poor Change in Poverty
Rajasthan (35 villages)
11% 8% 3%
Gujarat (36 villages)
9% 6% 3%
Andhra (36 villages)
14% 12% 2%
W. Kenya (20 villages)
18% 19% -1%
Uganda (36 villages)
24% 15% 9%
Peru (20 communities
17% 15% 2%
North Carolina (13 communities)
23% 12% 11%
The Entire News
Not a “rising tide” but a bathtub of poverty
Falling into poverty: NOT isolated, marginal or temporary
Large numbers – one-third – of poor people not born poor
Bathtub result: not methodology-dependent
Country Period Study Escaped Poverty %
Fell into Poverty
%
Uganda(1300)
1992-2000
Deininger-Okidi (2003) 29 12
India(3139 rural)
1970-1982
Bhide - Mehta (2004) 23 13
S. Africa(1171)
1993-1998
Carter- May (2001)
10 25
B’desh(379)
1987-2000
Sen (2003) 26 18
Signs of Rising Vulnerability
Uganda: Central and Western Region
% of all households
First Period
1979-1994
Second Period
1994-2000
Escaped Poverty 13% 12.2%
Fell into Poverty 5.6% 10.9%
Increased Vulnerability in North Carolina (13 rural communities)
% of all households
First Period
1995-2000
Second Period
2000-2005
Escaped Poverty 16% 13%
Fell into Poverty 6% 12%
Increased Vulnerability in Kenya (Countrywide:71 rural and urban communities)
% fell into poverty
Zone 1 Zone 2 Zone 3 Zone 4 Urban Zone
National Average
First period
(1991-1998)7% 10% 12% 15% 7% 10%
Second period
(1998-2006)
11% 14% 13% 22% 15% 14%
Lessons learned (1)
Poverty is constantly being created, even as some of it is removed
Descents could be becoming more frequent generally
But hardly anything is being done to PREVENT descents
GENERAL REASONS FOR DESCENT
Falling into poverty is slow and cumulative. Multiple contributing reasons.
BAD HEALTH AND HIGH HEALTH CARE EXPENSES: primary reason
(59% in Rajasthan; 73% in W. Kenya; 88% in Gujarat; 77% in Uganda; 75% in Andhra; 67% in Peru; 41% in North Carolina)
Other location-specific reasons:Social and customary expenses; high-interest debt; crop disease, land exhaustion, drought; job loss
Not significant in any region: Laziness, Alcoholism
The critical significance of Health
Increasing out-of-pocket costs and “catastrophic” health expenses (Xu et al. 2003; Sen, Iyer and George 2002).
“Medical poverty trap” (Whitehead, Dahlgren and Evans 2001 )
Average long-term income loss of 17 percent (Yao 2005)
More than half of all personal bankruptcies in America (Himmelstein et al. 2005)
Poor people pay more (Fabricant et al. 1999, Farmer 1999)
Macro Evidence (EQUITAP 2005; Milly 1999; Scruggs and Allan 2006)
GENERAL REASONS FOR ESCAPE
Escape also usually occurs over a period of time. People work upon strategies that take them upward.
Diversification of Income Sources: Agriculture and Informal Sector(70% Rajasthan, 73% W. Kenya, 79% Uganda, 71% Andhra, 69% Peru, 70% Gujarat)
OTHER REASONS (much less frequent)Jobs – in Government and Private Sector
Not very significant: Government assistance programs
AGRICULTURE: A pathway to prosperity?
Average land held by poor households:
Uganda - 1.48 acres
Gujarat - 1.13 acres
Peru - 1.39 acres
Kenya - 1.67 acres
Prospects are equally limited in the informal sector
Lessons learned (2)
Escape and Descent in parallel
Asymmetric Reasons
Consequences for Economic Policy: Separate policies : (1) promote escapes,
(2) prevent descents
Consequence for Political Analysis: Subgroups better than “The Poor”
Distinct subgroups (separate needs and experiences): (range)
– Persistent Poor 2 - 31%
– Newly Poor 8 - 25%
– Recently Escaped 6 - 29%
– Never Poor
National statistics do not collect these data
HYPOTHESIS
Because different reasons affect their
lives and influence their strategies,
different subgroups of poor people
have substantially different demands
from the state
Empirical Test
• 1,032 households in 36 communities
(Andhra Pradesh, India)
• Poverty status assessed: 1997 and 2004
• Classified within 4 subgroups
• Asked to rank their major demands from
the state
Major demands by subgroups (% within each subgroup)
Health Service
Housing Irrigation High School
Wage Labor
Persistent Poor
8 9 9 3 46
Newly Poor
34 24 9 6 8
Escaped Poverty
7 3 28 25 5
Lessons learned (3)
“The Poor”: merely a figure of speech
Not a valid category for political analysis
Because Ins and Outs regularly refresh the composition of poverty
www.pubpol.duke.edu/krishna
Stage – and assets (recorded 7 years ago)
STATUS7 Land (bighas)
Large Animals
Small Animals
Kaccha house
Very Poor
(Stage 1-3)
3.6 1.8 2.8 86%
Poor
(Stage 4-5)
5.5 2.5 3.7 77%
Middle
(Stage 6-8)
8.1 3.1 5.1 51%
Better Off
(Stage 9+)
10.6 4.3 3.1 22%
Also worrisome: Very limited upward mobility
•71 Rajasthan villages (last 10 years)
Accountant (2) Lineman (7)
Advocate (4) Panchayat Secy. (4)
Computer Operator (4)
Patwari (11)
Constable (8) Messenger (6)
Clerk Typist (10) Sub-Inspector (4)
Doctor (1) Schoolteacher (50)
Driver (4)
Soldier (Jawan) (32)
Civil Engineer (2) Software Engineer (1)
And in Karnataka...
20 Karnataka villages (last 10 years)
Accountant (3) Engineer (3)
Advocate (4) Lineman (2)
Computer Operator (4)
Nursing Assistant (1)
Constable (8) Patwari (3)
Clerk Typist (6) Peon (6)
Doctor (1) Schoolteacher (20)
Driver (2)
Soldier (Jawan) (8)
Similarly Low Glass Ceiling in other Countries…
• UGANDA (40 communities) –
1 Doctor, 1 Bank Manager, 14 “businessmen”
• PERU (20 communities) –
1 Civil Engineer, I Agricultural Engineer, 2 Nurse Practitioners, several “merchants”
Available pathways (agriculture and the informal sector) limited upward mobility
Example of NC “Stages of Progress”
1. Food2. Shelter3. Transportation4. Clothing---------------------------------------(extreme poverty)5. Phone6. Television7. Car8. Entertainment-------------------------------------------------(poverty)9. Savings10. Buy Home11. Saving for Kids’ Education
NC Findings (2)
• Primary Factors in Escaping Poverty:• Employment• Family• Budgeting
• Primary Factors of Falling Into Poverty:• Health Care• Job Loss• Family
Five years or more school education (% in 20 Rajasthan villages)
11-20
years
21-30
years
41-60
years
61+
years
Upper caste
89 76 41 27
OBC 64 43 14 7
SC 64 40 12 4
AVERAGE
(n=26,124) 64 45 18 11
Five years or more school education (% in 20 Karnataka villages)
11-20
years
21-30
years
41-60
years
61+
years
OBC 86 59 30 19
SC 85 50 16 6
ST 71 32 13 11
Muslims 82 65 21 21
AVERAGE
(n=23,067)85 55 25 15
STUDY: SOFTWARE ENGINEERS IN BANGALORE
• 150 newly recruited software engineers selected at random from three different firms
• Invited by e-mail to take part in a Web-based survey
• Remarkable response rate (73 percent)
Results:
THREE SIGNIFICANT GAPS
• Rural Gap: 7-11% from rural areas
• Wealth Gap: 15% lower middle class; none “poor”
• Generational Education Gap – most significant –
College graduate fathers and high school graduate mothers
Limits to Upward Mobility
• Parents’ education sets apart new entrants
• Small sliver of Indians 18-30 years old have equally educated parents (no more than 4-7%)
Why should parents’ education matter so much?
Career aspirations of youth (14-22 yrs) attending school
n=1,456
Rajasthan Karnataka
School teacher 43% 39%
Police constable 11% 12%
Army recruit 13% 5%
Other low-paid government 15% 22%
Other low-paid private 5% 11%
TOTAL LOW-PAID 87% 89%