georgia: recent trends and drivers of...
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GEORGIA: RECENT TRENDS AND
DRIVERS OF POVERTY REDUCTION(FY16 GEORGIA POVERTY ASSESSMENT)
POVERTY AND EQUITY GLOBAL PRACTICE
AUGUST 17 2016
Summary
Economic growth translated into improvements in living conditions for everyone in the country, especially for those at the bottom of the income distribution.
Poverty decreased for the fourth consecutive year in 2014, but it still affects close to one third of the country (32 percent of population living at less than US$2.5/day 2005 PPP poverty line).
Between 2010-2014 households’ income from economic activities played a significant role in reducing poverty. This is in contrast to the pre-2010 period when income from economic activities played a limited role and income from social transfers were more important for poverty reduction.
Government’s redistributive policies continue to play a significant role in lifting households out of poverty.
Households with per capita spending above the $5/day line are better integrated into the services sector, especially in high-skilled jobs, than those households living on per capita spending of between $2.5/day and $5/day (“vulnerable households”).
Context play a more important role than endowments (such as, education level) in explaining the inability of the persistently poor to escape poverty.
2
Outline
• Recent poverty trends ($2.5/day)
• Drivers of poverty reduction
• Inclusive access to economic opportunities
• A deeper look at the rural economy
• The role of fiscal policy
• Profile of labor market outcomes for those living above the poverty line
• Poverty persistence in Georgia
• Policy discussion
3
POVERTY TRENDS 2010-2014
Robust economic growth of 2010-2014 slowed down in 2015 due to
external factors
5
9.4
12.6
2.4
-3.7
6.27.2
6.4
3.44.6
2.8 3
4.55
-6
-4
-2
0
2
4
6
8
10
12
14
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f 2018f
Average
5.0
Source: CPS 2014-2017, Macro Poverty Outlook – Spring 2016 edition
Average
5.6
Note: 2016-2018 are
forecasts produced by
the WB.
Georgia Real GDP growth 2006-2018f
6
Economic growth accompanied by sustained poverty reduction...
Source: WB staff calculations based on 2006-2014 IHS.
Note: 2015-2018 poverty rates are forecasts
based on the elasticity of GDP-poverty from the
2010-2014 period. These estimates will be
updated as forecasted GDP is updated and
new IHS rounds are available.
35.7
42.6
45.843.0
45.146.7
44.842.5
36.0
32.3
31.0
29.427.5
25.5
17.2
25.4
42.8
10
15
20
25
30
35
40
45
50
55
60
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f 2018f
Georgia poverty rate, $2.5/day 2005 PPP line
National Tbilisi Rest Urban Rural
WB simulations show that a price
increase of 6 percent (as observed
between 2014Q3-2015Q3) would
have led to poverty increase.
However, positive trends in labor
earnings, agricultural income and
social transfers are expected to
have offset these impacts.
7
…and higher living standards across the distribution
-8-4
04
81
2
An
nu
al g
row
th r
ate
%
1 10 20 30 40 50 60 70 80 90 100Consumption percentiles
Growth incidence 95% confidence bounds
Growth in mean Growth at median
Mean growth rate
Georgia (2010-2014)
19.218.1
16.5
13.011.4
10.5 10.08.7
6.55.6
0
5
10
15
20
25
2010 2011 2012 2013 2014
Gap Severity
Source: WB staff calculations based on 2010-2014 IHS.
Note: Poverty gap measures the average distance to the poverty line
for the poor. It is expressed as a percentage of the poverty line. Poverty
severity is the average of squared distance, thus giving more
importance to the extreme poor.
Source: WB staff calculations based on 2010-2014 IHS.
Note: Growth incidence curves measure the change between the initial
and ending period for each percentile of the welfare distribution.
Growth Incidence Curve shows a pro-poor growth
pattern over 2010-2014
Poverty Gap (FGT1) and Poverty Severity (FGT2)
show improvements below the poverty line
8
Inspite of the recent decrease, the poverty rate is still high compared to
countries with similar levels of GDP per capita…
Georgia (2014)Kyrgyz Republic
(2014)Armenia (2014)
FYR Macedonia (2013) Romania (2012)
Albania (2012)
Turkey (2013)Moldova (2014)
0
5
10
15
20
25
30
35
0 5,000 10,000 15,000 20,000 25,000
Povert
y headcount
(US
$2.5
/day
2005 P
PP
)
GDP per capita (2005 PPP US$)
Poverty rate and GDP per capita, selected countries ECA (c. 2014)
Source: WB staff calculations based on data from the ECAPOV harmonization.
9
…and differences in living standards across regions persist
Source: WB staff calculations based on 2014 IHS.
Poverty Headcount by Regions ($2.5/day 2005 PPP)
Georgia 2014
10
Inequality also decreased likely driven by improved welfare among the
less well-off. Shared prosperity indicator shows similar pattern.
6.4
7.76.9
5.3
8.3
9.8
8.77.9
0
2
4
6
8
10
12
National Tbilisi Rest Urban RuralA
nn
ual
ized
gro
wth
201
0-2
014
(P
erce
nta
ge)
Shared Prosperity Indicator
All population Bottom 40 percent
Source: WB staff calculations based on 2010-2014 IHS.
Note: Shared prosperity measures annualized growth of mean per capita consumption
expenditure of the bottom 40 percent of the population. This is compared to annualized
growth of mean consumption of the total population. World Bank standardized
consumption expenditure is used. This differs from Geostat’s consumption expenditure.
42.141.6 41.3
40.0 40.1
2.62.5 2.5
2.5 2.5
2.82.9
2.72.6 2.6
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
35
36
37
38
39
40
41
42
43
44
45
2010 2011 2012 2013 2014
Inequality Indicators
Gini
Ratio 90th/50th percentile
Ratio 50th/10th percentile
Source: WB staff calculations based on 2010-2014 IHS.
Georgia 2010-2014
11
Despite improvements, Georgia must pay attention to:
(a) those who remain in poverty for long time (poverty persistence);
(b) potential risk of poverty increase due to macro conditions
31.8
21.5
16.114.2
16.5
Perc
enta
ge o
f popula
tion
(a) Poverty status 2009-2011-2013
2.9
1.50.8
-0.04
-10
0
10
20
30
40
50
Rate Gap Severity Gini
Poverty Inequality
Actual 2014 $2.5/day
Adding 2015 inflation effect
Adding 2015 inflation effect adjusted by consumption bundle
Source: Welfare Monitoring Survey 2009-2011-2013 panel. Nationally
representative household survey (See Annex slides for more information)
Note: Persistent poverty is defined as being poor in 2009, 2011 and 2013. In
and out are households who escape poverty in 2011 and fall back in 2013,
or that fall to poverty in 2011 and escape in 2013.
(b) Welfare effects of 2015 Inflation
Source: WB staff calculations based on 2014 IHS (Q3).
Note: “Inflation effect” estimated deflating consumption by national average price
increases 2014Q3-2015Q3 (estimated at 6 percent) and re-estimating poverty.
“Inflation effects adjusted by consumption bundle” is estimated similarly but using a
household-level price increase which reflects the household consumption basket.
See Cancho et al. (2016) for more details.
WB simulations show that a price
increase of 6 percent (as observed
between 2014Q3-2015Q3) would
have led to poverty increase.
However, positive trends in labor
earnings, agricultural income and
social transfers are expected to
have offset these impacts.
12
Share of vulnerable population is also growing
(percentage of those who live just above the poverty line)
47 45 43 36 32
34 35 3537
37
15 16 17 21 24
4 4 5 5 7
0
10
20
30
40
50
60
70
80
90
100
2010 2011 2012 2013 2014
Poverty and Vulnerable groups, 2010-2014 (percentage)
<$2.5 $2.5 - $5 $5 - $10 $10+
Poor
Moderate
Poor
Vulnerable
Middle-class
Source: WB staff calculations based on 2010-2014 IHS.
Note: All measures based on US$ 2005 PPP. $2.5/day is the ECA regional extreme poverty line, $5/day is the ECA
regional moderate poverty line. Above $10/day is considered middle class.
13
DRIVERS OF POVERTY REDUCTION
2010-2014
14
Real incomes increased across rural and urban areas 2010-2014
174.8
206.6
174.7157.4
242.1
300.9
235.5214.2
8% 10% 8% 8%
0
50
100
150
200
250
300
350
National Tbilisi Rest Urban Rural
Average monthly per capita income (bars, 2010-2014, 2014 GEL) and annualized growth (numbers in bold), by region
2010 2014
Source: WB staff calculations based on 2010-2014 IHS.
Note: Income includes labor earnings, agricultural income, social protection, remittances, inter-household transfers and
other minor sources. Numbers at the column base represent average annual growth 2010-2014.
4%11%
6%2%
18%16%
21%
13%13%
6%1% 11%
11%
8%
8%
14%
6%
10%
7%
4%
-10%
0%
10%
20%
30%
40%
50%
National Tbilisi Rest Urban Rural2006-2008National*
Drivers of income increases on average, Georgia 2010-2014
Share adults Employment Labor income Agricultural income
Social Protection Private transfers Property income
Total Income Growth
2006-2008
(National)*
Source: WB staff calculations based on 2010-2014 IHS. (*) Based on 2006-2008 IHS, per adult equivalent income.
15
Economic
activities
income
Income increase was driven by income from economic activities
(paid work and agriculture) and social transfers
16
Economic activities and transfers also explain most of the
poverty reduction observed between 2010-2014
-0.26
11.11
8.57
-1.71
-3.36
Demographics
Economic activities
Transfers
Other
Cons/Inc.*
Contribution to poverty reduction 2010-2014 (percentage points, positive bars are
drivers that lowered poverty and negative bars are drivers that raised poverty)
Total poverty reduction: 14.4 percentage points
Source: WB staff calculations based on 2010-2014 IHS. Economic activities refer to employment
rate, earnings, agricultural income and agricultural self-consumption. Transfers include income from
social protection, remittances and private transfers. Other refers to miscellaneous income sources.
(*) Cons/Inc. represents the ratio consumption to income at the household level, used to transform
income into consumption levels.
Note: Effects estimated as average change in poverty attributable to
each source of income. Average change estimated over effects
obtained when varying the order in which income sources are added.
See Azevedo et al. (2012) for more details on the methodology.
17
Economic activities and transfers also explain most of the
poverty reduction observed between 2010-2014
(with disaggregated income components)
Contribution to poverty reduction 2010-2014 (percentage points)
Total poverty reduction: 14.4 percentage points
Source: WB staff calculations based on 2010-2014 IHS. (*) Cons/Inc. represents the ratio consumption to income at the
household level, used to transform income into consumption levels.
Demographics
Economic activities
Transfers
Other
Cons/Inc.*
Labor Market Agricultural
18
This is in contrast to the results before 2010, when government transfers
were by and large the largest driver of poverty reduction
Demographics
Economic Activities
Transfers
Other
0.1
0.80
4.54
0.40
Contribution to poverty reduction 2006-2008 (percentage points)
Source: WB staff calculations based on 2014 Georgia Poverty Assessment analysis of 2006 and 2008 IHS. Poverty measured
based on income and national poverty line, decreases from 24.5 to 18.7 (5.9 percentage points). Actual consumption poverty
in the period fell from 18 to 17.7 percent.
Estimates based on income per adult equivalent, results should be consistent when using per capita scale as in previous slides
Drivers of poverty reduction are similar across urban and rural areas
-3.7
-0.2
2.3
3.3
3.0
3.0
-0.1
6.5
0.4
1.3
-2.9
Rural
-3.4
-0.2
3.9
6.6
0.2
0.0
0.1
4.9
0.7
2.8
-0.1
Cons./Inc.
Dependency rate
Non-farm employment
Labor income
Agric. sales
Agric. self-cons.
Property income
Social Protection
Remittances
Private transfers
Other income
Tbilisi
Disaggregated Income components and their effects on poverty reduction 2010-2014,
by location
Total poverty reduction 15.8pp 16.6pp 12.9pp
-3.0
-0.3
3.4
5.6
0.5
1.0
0.3
5.5
1.4
2.1
-0.1
Rest Urban
Source: WB staff calculations based on 2010-2014 IHS.
20
Labor market status, education and gender of the household head are
among the factors that determine probability of being poor
Marginal effect on probability of being poor
Poverty $2.5/day
National Urban Rural
HH Head Sociodemographic
65+ (elderly less likely to be poor) - -
Female (female heads are more likely to be poor) + + +
Secondary or higher (less likely to be poor) - - -
HH Head Labor Market Status (compared to employed)
Self-employed (more likely to be poor) + +
Unemployed (more likely to be poor) + + +
Inactive (more likely to be poor) + + +
HH Head Status
IDP (more likely to be poor) + +
Disability (more likely to be poor) + +
Household characteristics
Size (larger families more likely to be poor) + + +
Children 0-14 (more likely to be poor) + + +
Rural (more likely to be poor) +
Note: Table reports statistical significance and sign of marginal effect of variable to the probabilities of being poor. Dark yellow indicates
statistical significance at 1%, light yellow at 5%. Includes regional dummies.
Source: WB staff calculations based on 2014 IHS data.
21
INCLUSIVE ACCESS TO ECONOMIC OPPORTUNITIES
All sectors of the economy expanded in 2010-2014
22
6% 3% 6% 1% 9% 3% 4% 6% 14% 3% 3% 3% 8% 0% 4% 9% 6% 4%0
500
1000
1500
2000
2500
3000
3500
4000
20
10
mil.
GE
L
GDP (mil. GEL) and GDP Annual Growth (%) 2010-2014 by Sectors
2010 2014
Numbers at column bases indicate sector annualized GDP growth 2010-2014.
Source: WB staff calculations based on 2010-2014 IHS.
Manufacturing
Electricity and utilities
Construction
Trade
Hotels and restaurants
Transport and communication
Real estate and …
Education
HealthOther
community
-5%
0%
5%
10%
15%
20%
25%
30%
-5% 0% 5% 10% 15% 20% 25% 30%
An
nu
al g
row
th a
ve
rag
e s
ala
rie
s
Annual growth employment
Manufacturing
Electricity and utilities
Construction
Trade
Hotels and restaurants
Transport and communication
Real estate and business activities
Education
Health
Other community
-5%
0%
5%
10%
15%
20%
25%
30%
-5% 5% 15% 25%A
nn
ua
l gro
wth
ave
rag
e s
ala
rie
s
Annual growth employment
Economic growth was associated with both salary growth and
employment creation, in contrast to the pre-2010 period
23
Average salary growth and employment growth by sectors
2006-2010 2010-2014
Note: Bubble size represents the size of employment in the sector by the ending period.
Source: WB staff calculations based on average salaries from Geostat and employment from 2006, 2010 and 2014 IHS.
24
Note: Data include forms in non-service sectors only.
Source: Georgia Country Economic Memorandum (2014). Based on Geostat employment
data
This is consistent with the evidence of a slowdown in job destruction and higher net job creation in more recent years (2010-2012)
Job Creation and Destruction in Georgia 2007-2012 (percent of previous year’s
employment)
7%
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2010 2014 Growth in labor income
Em
plo
yment
Agriculture Manufacturing Construction Services
56.6%
50.7%
Between 2010 and 2014, employment rates among the poor increased from 50.7% to
56.6% even though the total number of the poor who are employed declined (this is
due to reduction in number of poor)
This translates into increased access to economic opportunities for the poor
Note: Numbers above the bars represent the employment rate for the poor in 2010 and 2014, respectively.
Source: WB staff calculations based on employment and income information from 2010-2014 IHS.
25
Labor Force Status by Poverty and Vulnerability Status, Urban-Rural (2014)
Employment is opportunity to escape poverty in a sustainable manner, as employment indicators for the well-off suggest…
0
10
20
30
40
50
60
Less than$2.5
$2.5 - $5 $5 - $10 $10 + Less than$2.5
$2.5 - $5 $5 - $10 $10 +
Urban Rural
Employed Self-employed Unemployed Inactive
Source: WB staff calculations based on employment information from 2014 IHS.
26
31.243.7
51.961.7
31.120.7
13.67.0
25.8 21.0 17.3 11.1
11.8 13.7 16.1 18
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Less than $2.5 $2.5 - $5 $5 - $10 $10 +
Share of income by components, by poverty and vulnerability status (Georgia 2014)
Labor Income Social Assistance Agricultural Income Private Transfers Property
27
…and sources of income for the well-off also support this conclusion
Source: WB staff calculations based on 2010-2014 IHS.
28
A DEEPER LOOK AT THE RURAL ECONOMY
Direction and statistical significance of effect
On: Poverty Headcount
From: National Urban Rural
Urban growth - -
Rural growth - -
On: Poverty Gap
From: National Urban Rural
Urban growth -
Rural growth - -
Note: Primary sector includes agriculture, forestry, fishing, mining, and quarrying; the secondary sector includes manufacturing, construction, and
electricity, gas, and water supply; the tertiary sector includes trade, hotels, restaurants, transport, storage, communication, finance, insurance,
real estate, business services, and community, social, and personal services. Results from OLS regression of average consumption on poverty
levels, following Ravallion and Datt (1996). Signs indicate direction of the effect and shadowed cell indicate statistical significance at 0.01.
Source: Sinha et al. (2016)
Rural poverty reduction over 2006-2014 is only associated with rural growth and growth in agricultural sector; it is unaffected by urban growth
Direction and statistical significance of effect
On: Poverty Headcount
From: National Urban Rural
Primary sector - -
Secondary
Tertiary -
On: Poverty Gap
From: National Urban Rural
Primary sector -
Secondary
Tertiary
29
Employment levels and annualized growth (2010-2014), by sectors and areas
In addition, there has been employment growth in rural areas for non-agricultural sectors in 2010-2014…
Note: Numbers on columns base indicate annualized growth 2010-2014.
Source: WB staff calculations based on employment information from 2010-2014 IHS.
1.1 1.3 0.4 4.8 3.7 6.1 1.3 4.7
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
Urban Rural Urban Rural Urban Rural Urban Rural
Agriculture Manufacturing Construction Services
Em
plo
ym
en
t
2010 2014
30
-1.74
-1.81
2.83
0.26
4.42
4.54
0.38
6.02
-2.15
Demographics
Education
Diversification
Sector
Employment
Agric. Income
Residuals
Nonlabor income
Others
Income Components Effects on Rural Poverty Reduction 2010-2014 (Behavioral responses model, Inchauste et al. (2013))
… which can be linked to the emerging role that diversification plays in explaining rural poverty reduction 2010-2014
Bars indicate the contribution, in percentage points, of the factors listed for rural poverty reduction. Non-labor income
includes social protection government transfers and private transfers.
Source: WB staff calculations based on methodology developed by Inchauste et al. (2013) and information from 2010-
2014 IHS.
31
Total rural poverty reduction: 12.9 percentage points
Distributional Impacts of Fiscal
Policies
32
72% 14% 117% 22% 88%0
200
400
600
800
1,000
1,200
1,400
Selected social programs introduced or scaled-up 2012-2014 (2012 GEL)
2012 2014
2012-2014 social spending was expanded, leading to a growth of 60 percent in real terms, led by pensions, health and other direct transfer
Note: Numbers on columns base indicate total growth 2012-2014.
Source: Georgia Public Expenditure Review 2015, based on Ministry of Finance information.
425
1,055
1,822
2,926
6,924
2,631
9651,495
2,061
2,913
6,092
2,706
0
1000
2000
3000
4000
5000
6000
7000
8000
Poorest II III IV Richest
Quintiles All
Average annual household income, before and after fiscal interventions (2013 GEL)
Before taxes and transfers After taxes and transfers
Overall, taxes and transfers redistribute resources from the top to the bottom of the income distribution
Source: Georgia Public Expenditure Review 2015. Based on Commitment to
Equity methodology and information from 2010-2013 IHS.
34
Labor Market Profile
Above the Poverty Line
35
36
-0.8
22.3
37.2
13.2
9.5
0.8
38.8
6.9
15.5
-11.1
-32.5
-1.8
20.1
31.4
12.8
13.1
0.5
40.0
5.9
13.8
-12.4
-23.4
Share adults
Employment
Labor income
Agricultural sales
Agricultural self-consumption
Property
Social Protection
Remittances
Private transfers
Other
Cons./Inc.
$5.0
$2.5
Labor markets played a more important role in moving people above the $5/day line than in moving them above the $2.5/day line
Contribution to poverty reduction 2010-2014 (as a percentage of the reduction)
Total poverty reduction: 14.4 pp ($2.5/day) and 11.1 pp ($5.0/day)
Source: WB staff calculations based on 2010-2014 IHS.
1422
31
42
3929
22
144 6 7
810 9 75
31 32 32 29
0
20
40
60
80
100
Poor(<$2.5)
Moderate Poor($2.5-$5)
Vulnerable($5-$10)
Middle class($10+)
Unknown
Inactive
Discouraged
Unemployed
Self-employed (Non-agric.)
Self-employed (Agric.)
Employed
37
Those above the poverty line have better attachment to labor markets (lower unemployment and less incidence of agric. self-employment)
Labor Force Status by vulnerability and poverty status (15+ years old), Georgia 2014
Source: WB staff calculations based on 2010-2014 IHS.
71
52
37
22
4
7
7
10
4
4
22
3852
64
0
10
20
30
40
50
60
70
80
90
100
Poor(<$2.5)
Mod. Poor($2.5-$5)
Vulnerable($5-$10)
Middle class($10+)
Agriculture Manufacturing Construction Services
38
Largest sector of employment for the vulnerable is services, but for the moderate poor it is still agriculture. There is roughly similar composition of services sub-sectors across income groups
6.1 11.3 14.8 19.6
6.7 10.211.1 12.3
2.0 4.27.0 10.8
3.1 5.07.3 7.4
1.4 2.5 5.8 7.0
2.0 3.6 4.4 4.7
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Poor(<$2.5)
Mod. Poor($2.5-$5)
Vulnerable($5-$10)
Middle class($10+)
Health & education Wholesale & retail tradePublic administration Transport & communic.Real estate & finance Hotels & restaurantOther
Sector of employment by vulnerability and
poverty status (15+ years old), Georgia 2014
Sub-sector of employment within services by vulnerability
and poverty status (15+ years old), Georgia 2014
Source: WB staff calculations based on 2010-2014 IHS.
Note: Numbers in bars represent share of total employment in each services sub-sector. They add up to total services
sector share.
39
The vulnerable have better access than the moderate poor to jobs requiring advanced skills
Source: WB staff calculations based on 2014 IHS.
Occupation by vulnerability and poverty status (15+ years old), Georgia 2014
69.4
50.6
36.2
22.1
4.3
9.8
19.8
28.6
6.8
11.79.7
10.1
5.9 12.5
3.67.8 11.4
14
15.2 17.9 16.9 12.7
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Poor (<$2.5) Mod. Poor ($2.5-$5) Vulnerable ($5-$10) Middle class ($10+)
Other Technicians and Associate Professionals
Legislators, Senior Officials and Managers Service Workers, Shop and Market Sales Workers
Professionals Skilled Agricultural and Fishery Workers
40
POVERTY PERSISTENCE IN GEORGIA
Source: WMS 2009-2011-2013.
Escaped poor defined as poor in 2009 or 2011 but not in 2013. Downward mobility defined as non-poor in
2009 and poor in 2013.
41
31.839.4
23.9
32.2
31.0
33.6
16.5 14.318.7
19.515.4
23.8
0
10
20
30
40
50
60
70
80
Non-Poor Poor Non-Poor Poor Non-Poor Poor
National Urban Rural
Poverty status by mobility status, Georgia 2013 (Urban and Rural)
Never poor Escaped poverty Persistent poor Downward mobility
Close to half of the poor in 2013 are persistently poor, and overall roughly half of the population in the country has either moved out of poverty or fallen into poverty
44.0
56.1
4.2
12.6
3.9
12.4
9.9
6.0
25.5
17.0
3.6
5.0
Urban
Rural
Mtskheta-Mtianeti
Samegrelo
Guria
Qvemo Qartli
Kakheti
Sida Qartli
Tbilisi
Imereti*
Samtskhe-Javakheti
Adjara
Distribution of Persistent Poverty, Georgia 2013
42
Persistent poverty is both an urban and rural phenomenon; the highest incidence of persistence tends to coincide with the highest overall poverty rates
*Includes Racha-Lechkhumi and Kvemo-Svaneti
Source: WMS 2009-2011-2013.
Urban
RuralMtskheta-Mtianeti
Samegrelo
Guria
Qvemo Qartli
Kakheti
Sida Qartli
Tbilisi
Imereti*
Samtskhe-JavakhetiAdjara
0
10
20
30
40
50
60
0 10 20 30 40
20
13
Po
ve
rty H
ea
dco
un
t (2
00
5 U
S$
)
2013 persistent Poverty Headcount
Poverty Persistence and Poverty by Urban/Rural and Regions (Georgia, 2013)
*Includes Racha-Lechkhumi and Kvemo-Svaneti
Source: WMS 2009-2011-2013 and 2013 IHS.
1.51.7
5.9
1.6
3.7
6.3
2.1
6.0
7.7
0
1
2
3
4
5
6
7
8
9
Persistent Escapes poverty Never poor
Ave
rag
e e
xp
en
ditu
re p
er
ca
pita
pe
r d
ay (
20
05
US
$
PP
P)
Average expenditure by category 2009-2011-2013 (US$/day per capita, 2005 PPP)
2009
2011
2013
Source: Welfare Monitoring Survey 2009-2011-2013 rounds
43
The persistent poor have also benefited from the recent growth, but less so than the rest
44
95.7 96.5 94.3
82.476.4 81.9
-20
0
20
40
60
80
100
120
National Urban Rural National Urban Rural
Household education and demographic composition Adding assets
Pe
rce
nta
ge
po
ints
Endowments Returns to endowments Interaction
Endowments (household head’s age, education, ownership of assets) explain very little of difference in welfare between persistent poor and those escaping poverty. Unobserved factors (returns to endowments) explain most of the difference
Source: Own estimations based on Welfare Monitoring Survey 2013 round.
Note: The figure decomposes consumption differences between the persistent poor and those originally poor who escaped
poverty into the part that can be attributed to endowments, the difference in the returns to these endowments, and the
unexplained portion of the differential. Methodology Oaxaca (1973), following Vakis et al. (2015). Endowments considered are
household head age and education, household demographic composition and asset ownership (e.g. vehicles, appliances).
Differences in welfare explained by endowments and returns to endowments,
Georgia 2013
0
10
20
30
40
50
60
70
80
90
HH Head Labor ForceStatus
Sector of employment HH Head Labor ForceStatus
Sector of employment
Urban Rural
Labor Market Indicators for Persistent Poor and Escaped Poverty at Initial Period (2009)
Chronic Poor Escaped Poverty
Employment indicators also show differences in spite of similar endowments, especially in urban areas
Note: OLF stands for Out of Labor Force.
Source: WB staff calculations based on employment information from 2009-2013 Welfare Monitoring Survey.
45
Policy discussion
46
Implications for a policy agenda
GROW
• Deepen structural transformation + promote efficient relocation of resources
• Raise agricultural productivity
• Develop the tradeable sector
INVEST
• Connectivity (infrastructure + people)
• Improve access to and quality of basic services
• Grow productive assets base (skills, land, credit)
PROTECT
• Safety nets – Continue to strengthen (income) support for the poor, paying attention
to potential work disincentives
• Social insurance – Continue to provide fiscally sustainable support to those unable
to work
47
Appendix
48
Feedback from Consultation
Discussion held in Tbilisi on May 19th, 2016.
Comments received:
• Importance of regional poverty dynamics in the country, as some regions have reduced
poverty considerably.
• Social benefits should not create disincentives to work, as anecdotic evidence in the
country may suggest.
• Role of Universal Health Care to reduce poverty should be analyzed.
• Aging should be included in the discussion on poverty, as it will play a more important
role to shape social assistance policies in the future.
• The Ministry of Agriculture expressed interest in disseminating results from analysis to a
wider audience.
49
Methodological Notes
The poverty line used in this study is $2.5/day 2005 PPP.
• Regional extreme poverty line, average of the national poverty line of the poorest countries in the region
converted into comparable prices using the 2005 Purchasing Power Parity prices.
Consumption aggregate used is a harmonized aggregate, designed to allow comparability across
countries.
• Consumption is used as welfare aggregate in all instances, except when presenting the
microdecomposition 2006-2008. In this case, the welfare aggregate is income.
• The harmonized consumption measure is called Europe and Central Asia Poverty (ECAPOV)
consumption, maintained by the ECA Team for Statistical Development.
• Databases used for Georgia are the 2010-2014 IHS, harmonized versions.
• Consumption aggregate contains Food, Alcohol/Tobacco, Clothing, Housing/Utilities, Furnishings/HH
Equipment, Health, Transport, Communications, Recreation, Education, Hotels/Restaurants and
Miscellaneous. In addition, it contains rent and durables.
• Expressed in per capita terms, deflated spatially and in time.
The shared prosperity indicator is defined as the annualized growth of the mean consumption of
the country, against the annualized growth of the mean consumption of the bottom 40 percent
of the population
• Estimated using the ECAPOV consumption aggregate.
• The shared prosperity indicator should ideally be positive and larger for the bottom 40, as to signal positive
economic growth and inclusion of the less well-off in the growth process.50
Microdata used for this analysis (Integrated Household Survey) is collected by
Geostat, which also provided support for understanding details of the data.
• The IHS is a nationally representative household budget survey conducted continuously during
the year.
• It is representative at the annual and quarter level (in time) and for urban/rural regions, and 11
administrative conglomerates
• It contains information on employment, income and expenditure.
• The sample size is around 11,000 interviews per year.
Welfare Monitoring Survey (2009-2011-2013) data, shared by UNICEF, is
used for the analysis of poverty dynamics.
• The WMS is a nationally representative household budget survey conducted in 2009, 2011 and
2013 to the same sample of households (panel).
• It is representative at the national level and contains information on income and expenditure,
health and employment.
• The sample size is around 3,000 interviews per round.
• The WMS collects a consumption aggregate similar to the one collected in the IHS. Poverty
persistence analysis is performed using the ranking coming from this consumption aggregate,
applying the poverty rates obtained from the IHS.
Acknowledgments
Azevedo, Joao Pedro; Viviane Sanfelice and Minh Cong Nguyen (2012) Shapley Decomposition by Components of a
Welfare Aggregate. World Bank. mimeo.
Cancho, Cesar; Natsuko Kiso and Paul Corral (2016) Welfare Impact of Macroeconomic Events: The Case of
Georgia and Azerbaijan in the Aftermath of the 2015-16 Currency Devaluations. Paper prepared for the South
Caucasus Programmatic Poverty Assessment TA FY16.
Inchauste, Gabriela; Joao Pedro Azevedo; B. Essama-Nssah; Sergio Olivieri; Trang Van Nguyen; Jaime Saavedra-
Chanduvi and Hernan Winkler (2013) Understanding Changes in Poverty. The World Bank Group.
Oaxaca, R. (1973) Male-female wage differentials in urban labor markets. International economic review, Vol. 14, No.
3, pp. 693-709.
Ravallion, Martin and Gaurav Datt (1996) How Important to India's Poor Is the Sectoral Composition of Economic
Growth? The World Bank Economic Review 10 (1): 1-25.
Sinha, Nistha; Paul Andres Rodas Corral; Rodrigo Salcedo DuBois and Cesar Cancho (2016) Impact of Structure of
Growth and Income on Rural Poverty in Georgia. Paper Prepared for South Caucasus Programmatic Poverty
Assessment TA FY15-16.
Vakis, Renos; Rigolini, Jamele and Leonardo Lucchetti (2015) Left Behind: Chronic Poverty in Latin America and the
Caribbean - Overview. Washington, DC ; World Bank Group.
References
Thank you.
53