inter-generational transfer of household poverty in kwazulu natal: evidence from kids (1993 –...

Inter-Generational Transfer of Household Poverty in KwaZulu Natal: Evidence from KIDS (1993 – 2004)

Antonie PoolUniversity of the Free State

TIPS Conference, Cape TownOctober 2008

Outline of paper

Literature review

Data

Methods

Results

Conclusion and policy recommendations

Background & Literature

Poverty alleviation is focus of many policy frameworks (MDG’s, ASGISA)MDG’s ½ poverty by 2015ASGISA ½ poverty by 2014

56% of Africans & 15% of Indians still live in poverty (UNDP, 2004)

Poverty = when a person/household cannot attain a reasonable minimum level of economic wellbeing (Ravallion, 1994).

Require knowledge of poverty determinants to achieve goal of halving poverty by 2014

Problem is the existence of poverty traps 60% of SA’s poor households are caught in a structural poverty trap (Carter & May, 2001)

Inter-generational-transfer of poverty also a poverty trap

Aims of the study

What determines the poverty status of a Dynasty household?

What influence does the background (transitions) of a household have on the probability to be poor? (IGT poverty)

What can be done to ensure the goal of halving poverty by 2014 is reached – given the regression results?

Data

Kwa-Zulu Natal Income Dynamics Study (KIDS) data Longitudinal survey following a random sample of individuals who lived in KZN in 1993.

Survey done in 3 waves 1993 , 1998, 2004 In 1998 & 2004, only re-interviewed Africans & Indians

2004 Due to aging & effect of HIV/AIDS Include Next Generation & Foster households

Study focuses on all these wave To look at the determinants of poverty in Dynasty households and the role of Core characteristics.

Method Divided 2004 data between “core” & “dynasty” households

Where dynasty households represent the split-off “next generation” & ”foster” households of the core households

1558

1212

865

512

0

200

400

600

800

1000

1200

1400

1600

1800

1993 1998 2004

Core Households Dynasty Households

Method - continue

Income Poverty All those households that fall below the pre-defined poverty line

Poverty line = R250 p/person per month (2000 prices) (Van der Berg & Louw, 2004)

Used CPI to inflate poverty line to 1993, 1998 & 2004 value

Used adult equivalent household sizes

Compared household poverty line based on household expenditure

Method - continue

Regression analyses Firstly used Panel data to determine dynamic variables, followed by a cross sectional Probit model estimation

Indicate the effect of each independent variable on the probability that a Dynasty household is poor

(HHSize = 0.05 For every 1 additional member in the hh, the

probability to be poor increases by 5%)

This identify the distinction of core dynamics versus dynasty characteristics as the main determinants of poverty

Household level of poverty

27.78%

42.01%

31.17%

23.09%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Core (1993) Core (1998) Core (2004) Dynasty (2004)

Difference between 2004 dynasty- & 1993 core households significant at 10% level of significance. Differences between 2004 dynasty- & both the 1998 & 2004 core households significant at 1% level of significance.

Levels of education (1993Core & 2004 Dynasty)

NoS

choo

l

Prim

ary

Sec

onda

ry

Mat

ric

Pos

tSec

onda

ry

Dynasty

93Core

27.1% 42.6% 22.7% 6.6% 1.0%

30.0% 26.6% 24.8% 15.4% 3.2%

Poverty status of core households (1993-2004)

38.57%

52.24%

9.19%

0%

10%

20%

30%

40%

50%

60%

Never Poor Transitory Poor Chronically Poor

Regression Analyses - The model

P(Poverty i | X) = β1 DynastyCharacteristics + β2 CoreCharacteristics + β3 Differences + μi

Where Characteristics include: Household size Number of dependants

Migration Education

Sources of income

Regression Results – Dynasty Characteristics

(Poverty | X) Dynasty (dF/ dx) Dynasty (dF/ dx) (Education) (Income)

hhsize_Dynasty 0.0118 0.0219** Dependants_Dynasty -0.0076 0.0376** MigrationDummy_Dyn -0.0781* -0.0763** RemittanceReceiveDummy_Dyn -0.0496 NoSchool_Dyn 0.0701*** Primary_Dyn 0.0332* Secondary_Dyn 0.0013 Matric_Dyn -0.0211 PostSecondary_Dyn -0.1474*** EmploymentY_Dyn (R100) -0.0023* OtherY_Dyn (R100) -0.0083*** AgricultureY_Dyn (R100) 0.0025 RemmittanceY_Dyn (R100) -0.0189** Obs 573 573 Wald chi2 83.36 (0.0000) 70.75 (0.0000) Pseudo R2 0.2279 0.2275 Correctly classified 81.33% 79.93% Std.errors adjusted for clusters 355 355

* 10% level of significance; **5% level of significance; *** 1% level of significance


Regression Results – Core Characteristics(Poverty | X) Core (dF/dx) Core (dF/dx)

(Education) (Income) hhsize_93Core 0.2213 0.0071 Dependants_93Core -0.0391 0.0086 DiffDependants_9304 -0.0450** 0.0049 NoSchool_93Core -0.1815 Primary_93Core -0.1898 Secondary_93Core -0.2336 Matric_93Core -0.2988 PostSecondary_93Core -0.3065 DiffNoSchool_9304 0.0520*** DiffPrimary_9304 0.0220 DiffSecondary_9304 0.0102 DiffMatric_9304 -0.0083 DiffPostSecondary_9304 -0.0511 EmploymentY_93Core (R100) -0.0137*** SubsidyY_93Core (R100) -0.0696 OtherY_93Core (R100) -0.0220** AgricultureY_93Core (R100) 0.0008 RemittanceY_93Core (R100) 0.0045 DiffEmploymentY_9304 (R100) -0.0004 DiffSubsidyY_9304 (R100) -0.0417 DiffOtherY_9304 (R100) -0.0048* DiffAgricultureY_9304 (R100) 0.0026 DiffRemittanceY_9304 (R100) 0.0014 Obs 446 446 Wald chi2 37.95 (0.0003) 45.66 (0.0000) Pseudo R2 0.1169 0.1230 Correctly classified 76.01% 75.34% Std.errors adjusted for clusters 276 276


Regression Results – Pooled models

(Poverty | X) (dF/dx) (dF/dx) (Education) (Income)

hhsize_Dynasty 0.0250 0.0283* Dependants_Dynasty -0.0137 0.0375** NoSchool_Dynasty 0.0674** Primary_Dynasty 0.0287 Secondary_Dynasty -0.0054 Matric_Dynasty -0.0108 PostSecondary_Dynasty -0.1626*** hhsize_93Core -0.0021 Dependants_93Core 0.0174 DiffNoSchool_9304 0.0243*** DiffPrimary_9304 -0.0029 DiffSecondary_9304 0.0012 DiffMatric_9304 -0.0144 DiffPostSecond_9304 -0.0894* EmploymentY_Dynasty (R100) -0.0022* OtherY_Dynasty (R100) -0.0065** AgricultureY_Dynasty (R100) 0.0004 RemittanceY_Dynasty (R100) -0.0226** hhsize_93Core -0.0026 Dependants_93Core 0.0057 DiffEmplY_9304 (R100) 0.0000 DiffSubsidyY_9304 (R100) -0.0065 DiffOtherY_9304 (R100) -0.0009 DiffAgricY_9304 (R100) 0.0007 DiffRemittanceY_9304 (R100) -0.0045 Obs 446 446 Wald chi2 76.90 (0.0000) 50.77 (0.0000) Pseudo R2 0.2582 0.2337 Correctly classified 79.60% 78.92% Std.errors adjusted for clusters 276 276


Regression Results – Intergenerational Transfer of Poverty (ITP)

(Poverty | X) (dF/dx)

hhsize_Dynasty 0.0302 **

Dependants_Dynasty 0.0350 *

TransitoryPoor 0.1487 ***

ChronicallyPoor 0.4131 ***

Obs 446

Wald chi2 53.29 (0.0000)

Pseudo R2 0.2056

Correctly classified 80.04%

Std.errors adjusted for clusters 276


Regression Results – Intergenerational Transfer of Poverty (ITP)

(Poverty | X) (dF/dx)

NoSchool_Dynasty 0.0771 ***

Primary_Dynasty 0.0430 ***

Secondary_Dynasty 0.0074

Matric_Dynasty 0.0149

PostSecondary_Dynasty -0.1436 **

TransitoryPoor 0.1134 **

ChronicallyPoor 0.3239 ***

Obs 446

Wald chi2 75.73 (0.0000)

Pseudo R2 0.2537

Correctly classified 81.17%

Std.errors adjusted for clusters 276

Conclusion & Policy recommendations

Household size and the number of dependants in a household have an influence on the probability that a household will be poor.

Surprisingly, employment income has only a small impact on the probability that a household will be poor (Remittance income influence larger) (Maybe due to educational and unemployment profile of group)

Background & change over time (especially in the level of education) play a determinant role in the poverty status of a household

Most important determinant of household poverty is inter-generationally transferred – poverty trap that needs ultimate attention

Those households exposed to IGT poverty – Long-term problem. In these cases, the most important focus must be on education.

Further research:

Interact core/dynasty characteristics to explain why dynasty/core households escaped poverty or not?

The role of migration and net-remittances in poverty.

Thank You

inter-generational transfer of household poverty in kwazulu natal: evidence from kids (1993 –...

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