Transcript Growth, Poverty and Inequality in Eastern Europe and the Former Soviet Union

Growth, Poverty
and Inequality in
Eastern Europe and the
Former Soviet Union
April 11, 2006
Thematic Group on
Poverty Impact Analysis,
Monitoring and
Evaluation
Europe and Central Asia
Region
Poverty Reduction and
Economic Management Unit
1
Outline


Factoid: ECA comprises 28 countries and one
territory, population 473 mln.; 6 IDA countries, 4
IDA/IBRD
Report launched in October, 2005; over 25
presentations: Part I, client countries and
videoconferencing
Today:



Regional report series
Poverty and inequality data
 Demand for comparable data
 WDI, country (PA) figures, ECAPOV
Policy recommendations
 Overview of ECAPOV
 Living document: consultations
2
ECAPOV I and ECAPOV II


Updates 2000 Report
Reports on period since end of the
financial crisis in Russia
 What has been happening to
poverty during 1998-03?
 Why do we see the different
outcomes/impacts?
 What can be done to sustain
poverty reduction in the
future?
3
What did 2000 report tell us?
 Collapse in living standards
 Dramatic rise in inequality in CIS
 Absolute poverty widespread in CIS
 Highest risk of poverty faced by:
 children
 rural households
 excluded groups (e.g. Roma, IDPs,
refugees)
 Working households: largest share of
poor
 Non-income poverty growing
 Growing gap between CIS and CEE,
SEE holding middle ground
4
What 2005 report tells us?

Over 40 million people in ECA moved out of poverty
during 1998-2003



Access to and quality of public services continue to
be unequal





Poverty down from 20 to 12 percent, driven by
rebound growth in CIS
Poverty reduction helped by moderation of
inequality in CIS
Progress on health status mixed
Quality of education is falling and disparities
(rich/poor, rural/urban) persisting
Access to infrastructure services – water,
electricity, clean fuels - mixed
Strong spatial dimension to poverty and access
To end poverty by 2015 (sub-region specific
definitions): growth rates will need to be higher than
currently forecast
5
Regional reports series :
repositioning efforts
+
6
Data
Main source- primary records from household surveys (HBS, LSMS, IHS)
between 1997/8 and 2002/3
•Regular, official, representative
•Compliant to international standards
•Allows benchmarking to other countries

Poverty:
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Source: ECA Archive
On-going regional
studies
 Fiscal database

22 countries ECA over
1998-2003
 3 benchmark countries
 1998-2003 (11 countries
comparable for entire
period)




PERs, IMF…
Sectoral
Strategies, PAs,
PSIAs…
 Country studies

Method: basic needs
Consumption
 Same definitions
 Same poverty line
Policies:

2
8
9
A poverty line of $ 2.15 a day is used
9
Greece
National poverty lines, $ a day/ person
8
Portugal
7
ECA
Countries
6
Hungary
Bulgaria
5
4
Latvia
Ukraine
3
Tajikistan
2
Non-ECA
Countries
1
Nigeria
0
1
Burkina
Faso
10
Level of consumption per capita, $ a day/person
100
10
Note: Latest available year (2002 or 2003), all values in 1993 US$
Hu
ng
ar
y
Be
lar
us
Po
lan
Uk d
lra
in
Bu e
lga
r
Lit ia
hu
an
ia
Ru
ss
Ro ia
ma
nia
Tu
rk
ey
Al
ba
Ka
nia
za
kh
Uz st an
be
kis
tan
Ge
or
g
Ar ia
me
nia
M
Ky
rg oldo
yz
va
Re
pu
b
Ta lic
jik
ist
an
Percent Poor (below $ 2.15 a day per capita)
PPP changes poverty counts in ECA
PPP 1993
PPP 1996
4
PPP 2000
80%
60%
40%
20%
0%
Hu
n,
19
98
Be
l, 2
0
Po 00
l, 1
9
Uk 99
r,
19
9
Bu 9
l2
00
Lit 1
,2
0
Ru 00
s,
2
Ro 000
m,
20
Tu 00
r,
20
Al 00
b,
20
Ka 02
z,
20
Uz 01
b,
20
Ge 00
o,
20
01
Ar
m,
19
Mo 9 8
l, 2
0
Ky 01
r,
20
T a 01
j, 1
99
9
Percent Poor (below $ 2.15 a day per capita)
WDI and ECAPOV poverty counts
PPP 1993, ECAPOV
Note: Latest available year for ECAPOV II and WDI
PPP 1993, WDI
100%
80%
60%
40%
20%
0%
4
ECAPOV II : Comparable data on
poverty and inequality


Current consumption per capita used as welfare
indicator
 Uniform approach to correct for inflation and regional
price differences
 Excludes rental payments (issues of imputation), health
care (issues of elasticity/catastrophic spending), and all
durables purchases
 Uniform cleaning/correction for outliers
 Uses standard classification by items (COICOP)
Household and individual characteristics (education, health,
employment) as well as non-income indicators (water) are
uniformly defined and linked to consumption poverty
13
WDI/ECAPOV I : Comparable data
on poverty and inequality

Take pre-existing aggregate: from PAs, publications,
direct data estimates (selecting one that is closer to the
“consumption”)
Issues: what is available
 Issues: correction for price differences
 Illustrations:

• Country X: Imputations for consumption from stock/bulk
purchases
• Country Y: Does not collect consumption data, only income
data are available
• Country Z: Has high inflation, round-year data collection, but
no correction for price changes within the year


When unit records data not available – POVCAL on
grouped data
Apply uniform poverty line
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Issue: data source for poverty
Low Income
Middle Income
CPI, SNA
Upper Middle
CPI, SNA
CPI, SNA
Poverty?
HBS?
HBS
LSMS
LSMS?
Poverty
HBS
L.S. Surveys (Q of life etc)
Poverty?
Poverty
15
Poverty monitoring: Data
Frequency
Coverage
Consistency Access
Albania
LSMS
LSMS
LSMS
LSMS
Armenia
IHS
IHS
IHS
HIS
Azerbaijan
HBS
HBS
HBS
HBS
Belarus
HBS
HBS
HBS
HBS
Bosnia and Herzegovina
LSMS/HBS
LSMS/HBS
LSMS/HBS
LSMS/HBS
Bulgaria
IHS
IHS
IHS
IHS
Croatia
HBS
HBS
HBS
HBS
Czech Republic
HBS
HBS
HBS
HBS
Estonia
HBS
HBS
HBS
HBS
FYR Macedonia
HBS
HBS
HBS
HBS
Georgia
IHS
IHS
IHS
IHS
Hungary
HBS
HBS
HBS
HBS
Kazakhstan
HBS
HBS
HBS
HBS
UNMIKosovo
LSMS/HBS
LSMS/HBS
LSMS/HBS
LSMS/HBS
16
Poverty monitoring: Data
Frequency
Coverage
Consistency
Access
Latvia
HBS
HBS
HBS
HBS
Lithuania
HBS
HBS
HBS
HBS
Moldova
IHS
IHS
IHS
IHS
Poland
HBS
HBS
HBS
HBS
Romania
IHS
IHS
IHS
HIS
Russian Federation
HBS
HBS
HBS
HBS
Serbia and Montenegro
LSMS/HBS
LSMS/HBS
LSMS/HBS
LSMS/HBS
Slovak Republic
HBS
HBS
HBS
HBS
Slovenia
HBS
HBS
HBS
HBS
Tajikistan
LSMS
LSMS
LSMS
LSMS
Turkey
HBS
HBS
HBS
HBS
Turkmenistan
LSMS/HBS
LSMS/HBS
LSMS/HBS
LSMS/HBS
Ukraine
HBS
HBS
HBS
HBS
Uzbekistan
HBS
HBS
HBS
HBS
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Outline
Today:

Poverty and inequality data
 Demand
for comparable data
 WDI, country (PA) figures, ECAPOV

Policy recommendations
 Overview
of ECAPOV
 Living document: consultations
20
Baseline: ECAPOV I
Recommendations for Public Action
to Reduce Poverty



Large variation in policy, performance,
income and vulnerabilities across
countries
Forward-looking policy agenda has to be
country and region-specific
But common themes exist; and less
advanced reformers have much to gain
from experience of those further on the
transition path.
21
Key Building Blocks



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Build effective and
inclusive institutions
Tackle state capture; build
communities; give voice
Provide conditions for
shared growth
Stimulate labor demand and
private sector environment;
build capabilities of the poor
Protect the poor and
vulnerable
 Help the destitute; ensure
long-run equality of
opportunity for poor children;
balance protection, efficiency
Reduce inequality and
enhance opportunities
for the poorest
Reduce rents;measure to aid
those at bottom, lagging
regions; anti-discrimination
22
Advanced Reformer; High Income
(e.g. Poland, Hungary, Czech Rep.)
Shared growth
Capabilities
Protection
 Improve competition
policies
 Privatize infrastructure
monopolies/utilities
 Rationalize personnel
and facilities
 Improve incentives for
cost containment


Institutions/
Equality


 Reduce contingent
liabilities
 Enhance labor mobility
 Deepen financial sector
 Upgrade quality of
health and education
 Legitimize private
financing & protect
access of poor
Pension reform (multi-  Means-tested cash
pillar w/ minimum)
benefits.. Priorities:
poor children; rural.
Reform disability
pensions (e.g. Poland)  De-institutionalization
Support environment
 Anti-discrimination
for NGOs, communities  Decentralization, but
“Raise” the bottom: skill
address regional
upgrading; min. wages
disparities
23
Less Advanced Reformer;
Middle Income (e.g Russia, Romania)
Shared growth
Capabilities
Protection
Institutions/
Equality
 Introduce hard budget
constraints
 Remove barriers
entry/exit (SMEs)
 Agriculture/land reform
 Rationalize personnel
and facilities
 Improve incentives for
cost containment
 Reformed PAYG with
benefit/contribution link
minimum pov. benefit
 Replace UE Insurance
with flat/severance
benefit
 Reduce corruption
 Strengthen institutional
checks and balances;
political accountability
 Achieve sustainable
fiscal deficits
 Reorient public exp. to
social sectors and
infrastructure
 Upgrade quality of
health and education
 Legitimize private
financing & protect
access of poor
 Categorical benefits
(means-tested?)
 Eliminate privileges/
replace utility subsidies
(cash benefit/lifeline)
 De-institutionalization
 Build civil society
 Support communities
 Anti-discrimination
 Improve tax collection
24
Less Advanced Reformer;
Lower Income (e.g. Caucasus, Tajikistan)
Shared growth
Capabilities
Protection
Institutions/
Equality
 Introduce hard budget
constraints
 Remove barriers
entry/exit (SMEs)
 Agriculture/land reform
 Rationalize personnel
and facilities
 Increase spending &
improve incentives for
cost containment
 Flat pension (prepare
for intro funded pillar)
 Replace UE Insurance
with UE Assistance
 Reduce corruption
 Strengthen political
accountability;
institutional checks and
balances
 Increase revenues
 Reorient public exp. to
social sectors and
infrastructure
 Upgrade quality of
health and education
 Legitimize private
financing & protect
access of poor
 Limited cash benefit
 Self-targeting
 Eliminate privileges
 Introduce lifeline .
 Build civil society
 Support communities
 Anti-discrimination
 Improve tax collection/
compliance
25
ECAPOV II: strategic
shift
26
Poverty will be around for some time to
come..
Using GEP consumption



growth rates and
assuming no inequality
change…
…by 2007: 21 million
less poor but…40 million
still poor and100 million
economically vulnerable
Prospects of meeting
MDGs (especially
health) difficult – except
for EU-8
27
Sustained poverty reduction not
guaranteed
Russia
 To
end poverty by 2015
(sub-region specific
definitions): growth rates
will need to be higher than
currently forecast…
 …but high growth rates
are not guaranteed…..



Poor CIS: debt and dependence on a
few sectors
Resource rich CIS: need for
diversification
CEE and SEE: fiscal vulnerabilities
 ..and
many vulnerable to
economic downturns
140
120
100
80
60
40
20
1997
1998
1999
2000
Povert y head-count (1999=100)
2001
2002
2003
Real GDP (1999=100)
Romania
140
120
100
80
60
40
20
1997
1998
1999
2000
Povert y head-count (1999=100)
2001
2002
2003
Real GDP (1999=100)
28
Impact
of growth in reducing poverty may
fall
 Unique
constellation of factors in CIS- inequality may
not continue to decline
Regional
disparities are wide
 Capital
cities major beneficiaries of growth- in many
countries poverty in capitals virtually eliminated
 Over
time, increasing relative risk of poverty in rural
areas and a concentration of poor in rural areas.
 Secondary cities often closer to rural areas than to
capital
 Disparities in non-income dimensions are also very
large
29
So, what more needs to be done?

Accelerate shared growth
 Promote
enterprise reform
 Boost growth and productivity in agriculture
 Promoting opportunities for those in lagging towns and
regions

Strengthen public service delivery
 Increase
quality and equity of education services
 Increase access and quality of health care
 Manage reform of utilities
30
So, what more needs to be done?

Enhance social protection
 Continue
to strengthen social safety by increasing
efficiency while staying within available public
resources
 Targeted interventions for marginalized groups and
minorities
 Ensure adequate minimum wages sensitive to labor
market constraints

Monitor progress
 Maintain
efforts to improve quality and coverage, and
address non-response
31
 Provide open access
www.worldbank.org/eca/ecapovertyreport
32