Bangladesh Poverty Assessment Report Assessing a decade of progress in reducing poverty, 2000-2010...

Bangladesh Poverty Assessment Report

Assessing a decade of progress in reducing poverty, 2000-2010

May 10, 2015

Iffath SharifWorld Bank

ObjectivesUsing data mainly from the 2000, 2005, and 2010 HIES the report aims to:

i)Identify sources of the continued improvement in poverty and structural elements that drove the observed changes

- Explain the economic forces underlying the qualitative differences in poverty patterns in 2000-2005

vs. 2005-2010

ii)Stimulate public discourse on key policy implications for further poverty reduction over the medium and long term

iii)Inform the development of future World Bank programsBangladesh Poverty Assessment 2013 2

Main Data Sources and Collaborations • 2000, 2005, and 2010 Household Income and Expenditure

Survey (HIES)– Collected by Bangladesh Bureau of Statistics with support from

the World Bank– Key poverty monitoring instrument– Multi-module survey covering a wide range of topics spanning

the wide spectrum of economic and social sectors

• Supplemental data sources include Labor Force Surveys, Demographics Health Survey, Monga Household Survey, etc.

• Background papers supported by the UK Department for International Development

Bangladesh Poverty Assessment 2013 3

2000-2010: A remarkable decade of progress

There has been steady and strong GDP growth over the last decade…

Source: Bangladesh Bureau of Statistics Bangladesh Poverty Assessment 2013 5

… and significant poverty reduction.

Source: HIES 2000, 2005 & 2010. Bangladesh Poverty Assessment 2013 6

Poverty reduced by 1/3 over a 10 year span.

From 2000 to 2010, steady decline in poverty ( > 1.7 points per year)

Number of poor declined from 63 million in 2000 to 47 million in 2010

Both MDG goals on poverty depth and on halving poverty headcount have been met

Poverty projections


Comparable rates of poverty reduction across rural and urban areas

Bangladesh Poverty Assessment 2013

Extreme poverty nearly halved (34% to 18%) but is pervasive in rural areas

8


Poverty patterns have dramatically changed across regions between 2000 and 2010

In the 2000-05 period, Eastern divisions had experienced significant reductions in poverty while Western counterparts had remained practically stagnant

In the 2005-10 period, Western divisions experience larger reductions in poverty and managed to reach levels of poverty that are close to those of their Eastern counterparts.

Impressive improvement in living conditions of the poor over the decade


• Phone ownership: increased from 0 percent in 2000 to 38 percent in 2010

• Type of wall of dwelling: increased from 17 percent in 2000 to 50 percent in 2010

• Electricity connections: increased from 10 percent in 2000 to 32 percent in 2010

Substantial achievement in health outcomes but limited improvement in nutrition outcomes

• Significant improvements in immunization rates, especially of the poor between 2005-2010

• However overall dietary diversity remained static across all deciles


Fully immunized children (< 5 years old)Non-poor Poor

2005 0.82 0.772010 0.96 0.95

Dietary diversity by decile

Growth and Distributional Changes

2000-2005: increase in pc consumption benefited the extreme rich and poor. 2005-2010: those below the 70th percentile of the per-capita consumption

distribution experienced the largest gains. “Pro-poor” growth over the decade higher than the growth rate of the mean.


Inequality has remained relatively stable

Over the decade, absolute differences in consumption percentiles have increased, but the ratios have stayed largely unchanged.

Gini coefficient unchanged: 0.31 (in 2000), 0.31 (in 2005), 0.30 (in 2010)Bangladesh Poverty Assessment 2012 13

Drivers of Poverty Reduction


Possible Sources of Poverty Reduction

– Demography: Changes in the population structure• 2000-10: Household size declined from 5.4 to 4.5

– Labor Income: Movements in employment, occupational choice, earnings and other characteristics of the work-force

• 2000-10: Agriculture shrinking as a proportion of GDP, from 24.6 to 19.8• 2000-10: Industry increasing as a proportion of GDP, from 24.7 to 28.9

– Non-labor Income: Changes in public transfers, private remittances and other non-labor incomes

• 2000-10: Remittances growing from under US$2 billion to US$11 billion


Micro-decompositionSouth Asia Seminar Series

Examining the Sources:Micro-decomposition of Poverty Reduction


Decomposing Poverty Reduction by:Income and Demography


Contribution to Poverty Reduction 2000-2010

Changes in income and the share of adult population played almost equal roles in poverty reduction over the decade.

Source: HIES 2000, 2005, and 2010

-14.2 -21.3 -30.8

49.3 58.1 66.8

64.963.2

64.0

-35

-15

5

25

45

65

85

105

Head count Gap Severity

Per

cen

tage

of

tota

l p

over

ty r

edu

ctio

n

Consumption Income Ratio Adult population Income

Changes in income and share of adult population played key roles in poverty reduction over the decade

Growth in labor income, mostly in the form of farm income contributed the most to poverty reduction over

the last decade

18

Cumulative Contributions to Poverty Reduction, 2000 – 2010 (percentage change in poverty)

Source: HIES 2000, 2005, and 2010.

47.1

25.4

16.9

11.2

8

5.1

2.9

0.4

-8

-9

-20 -10 0 10 20 30 40 50

Other

Residual Non-farm

Residual Farm

Sector

Education

Occupation

International Remittances

Returns non-farm

Demographics

Returns Farm

Contribution of each income component to poverty reduction: 2000-2010

• Returns to farm and non farm endowments accounted for 64% of the reduction

• Demographic changes helped to reduce poverty by 25%

• International remittances accounted for 11% decline in poverty

19

Cumulative Contributions to Poverty Reduction, 2000 – 2010 (percentage change in poverty)

Source: HIES 2000, 2005, and 2010.

47.1

25.4

16.9

11.2

8

5.1

2.9

0.4

-8

-9

-20 -10 0 10 20 30 40 50

Other

Residual Non-farm

Residual Farm

Sector

Education

Occupation

International Remittances

Returns non-farm

Demographics

Returns Farm

20

Increase in rural real wages coincided with food price shocks of 2007-08


Agriculture declining but nevertheless employs half of workforce and provides 45% of total

household income

Source: Own estimations based on HIES 2000, 2005 & 2010


A reduction in fertility led to lower dependency ratio …

22Bangladesh Poverty Assessment 2012

• Bangladesh will soon be at the replacement level of fertility• Household structure has changed whereby nuclear families dominate • Increased proportion of elderly living on their own

…resulting in important demographic changes and labor market implications

• A swelling of youth population will have to enter the workforce: between 2010- 2015 an estimated 10 million to enter the labor market; and another 11 million to enter by 2020

• Increased female labor force participation while contributed to poverty reduction remains a challenge

• Demographic dividend window to end by 2040, suggesting the rise of an aging population in the next 20 years


Female labor force participation, by decile

Population growth and working age population

There are bottlenecks to continued job creation in industry and services

• Inadequate access to electricity, corruption and access to finance are key business constraints

• These constraints appear much more significant compared to the rest of South Asia

• Inadequately trained workforce also appears relatively more of a challenge


Major business constraints

Seasonality, shocks and coping mechanisms

25

Income seasonality is still a problem, particularly in Rangpur

26

.2

.25

.3

.35

Boro Aus Monga Aman Boro Aus Monga Aman

Rangpur region Rest of the country

2000 2005 2010


…and so is seasonality in consumption in areas affected by seasonal deprivation


During the lean season:

•Per capita household expenditure declined significantly at all income levels.

•Poorest 40 percent of the population could not smooth calorie intake over the three seasons.

Global food price shocks affected the rural extreme poor disproportionately in the short run

Consumption changes from the rice price shocks

Immediate effect

Medium term effect

Extreme poor, rural

-22% -8%

Non-poor, rural

-4% -10%

• Food price volatility is an additional source of vulnerability

• Impact analysis of 2008 food price shock suggest the poor are the most adversely affected in the short term

• Medium term labor market adjustment (i.e. increases in nominal wages) largely equalizes the impact of higher food prices along the wealth distribution


Dhaka

Sylhet

Chittagong

RajshahiKhulna

Barisal

Safety net coverage doubled between 2005-2010 with largest increase in poorest regions …


Source: HIES 2010.

• A third of poor are not covered by SSN programs

• A majority of safety net beneficiary is non poor

• Transfers are inadequate, falling from 22% in 2005 to 11% of the total consumption of poor households in 2010

• If allocated to the poor, the total safety net budget can reduce poverty by roughly 4.3 percentage points

Source: HIES 2005 and 2010

Access to SSN by Quintile

30

… Yet the potential of safety nets to reduce household poverty remain largely untapped

Performance of all SSNs

2005 2010

Coverage of the poor (%)

20.9 34.4

Leakage (%) 44.3 59.8


Microfinance is important for coping with shocks and mitigating extreme poverty

• Conditional on experiencing a shock, households report the use of savings and loans to cope with shocks rather than safety nets

• This is consistent with the relative size of the sectors

• Microfinance participants experienced a decline in extreme poverty

Annual disbursement by MFIs

Savings mobilized by MFIs

Major Policy Implications Raise Household Income

•Facilitate pro-poor growth via investments in agriculture to increase productivity and consequently rural labor income

•Ensure returns to labor in manufacturing and services keep pace with productivity growth in these sectors

•Increase female labor force participation (e.g. create “female friendly” jobs, work environments, and reduce the incidence of early marriage)


Major Policy Implications

Manage the Demographic Transition •Develop the relevant skills of the swelling working age population for gainful employment both at home and overseas

•Prepare for aging out of the demographic dividend by putting in place programs and policies that protect the elderly in a fiscally sustainable manner


Major Policy ImplicationsProtect Household Income and Improve Human Capital

Formation via Targeted Programs

•Implement safety nets that are better timed, targeted, and tailored to the needs of the poor

•Enhance human capital formation via conditional transfers to (i) promote early childhood development that integrates nutrition, early stimulation and pre-school education, and (ii) build skills and improve the employability of poor youth


Thank you

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