Poverty transitions, shocks, and consumption in rural Bangladesh,

1996-97 to 2006-07

Agnes Quisumbing

Poverty, Health, and Nutrition Division

International Food Policy Research Institute

Introduction• Bangladesh → impressive reductions in poverty in the

last decade

• Population living in poverty: fell from 51% in 1995 to 40% in 2005 (BBS 2006)

• Substantial improvements in non-monetary indicators of the poorest (Sen and Hulme, 2006).

• However, more than 36 million people live below the food poverty line (BBS, 2006)

• Reducing poverty—and lifting the extreme poor out of poverty—remains a major development challenge

Casual observation suggests that there have been many changes over the past decade…

And some of these changes are more subtle…but quite important

Some individuals/households have clearly been able to move out of poverty, and others, not.

Why are some people still in poverty, while others been able to move out?

Understanding poverty dynamics in rural Bangladesh

We use data from the CPRC-DATA-IFPRI longitudinal study (1996/97 to 2006/07) to:

1. estimate poverty transition categories (chronic poor, moving up, falling into poverty, never poor)

2. analyze the determinants of belonging to a given poverty transition category

3. analyze the determinants of per capita consumption

We take into account the role of initial household characteristics and shocks

We also draw on qualitative work undertaken prior to the survey, and after the survey, to enrich our interpretation of resultsData available at: http://www.ifpri.org/dataset/chronic-poverty-and-long-term-impact-study-bangladesh

Poverty and poverty transition categories

Agricultural technology(1996-2006)

Poverty headcount

Poverty in baseline survey 62%

Poverty in 2006/2007 13%

Poverty transitions

Chronic poor 11%

Falling into poverty 2%

Moving out of poverty 51%

Never poor 36%

Initial household characteristics affect chronic poverty and hh consumption

• The probability of chronic poverty is negatively associated with schooling & the value of non-land assets

• Higher proportions of young children and older people are also associated with being chronically poor and lower per capita consumption

Most common shocks experienced by households over the last 10 years, 1996-2006

Shocks also affect chronic poverty and household consumption

• Death of the main income earner and illness-related income loss have the biggest negative impact on per capita consumption

• Floods are not significant—possibly because of effective emergency assistance mechanisms

The double whammy

Life histories interviews are useful both for triangulating the poverty transitions observed in the household survey data and for understanding the drivers of consumption changes and movements into and out of poverty.

Life histories showed that the combination of dowry expenses and illness expenses (associated with aging parents) pushed households into chronic poverty

Policy implications--1

• Need for policy interventions to increase access to and improve quality of education

• Need to provide poor with opportunities to build up and trade up assets and protect asset base from shocks

• Required protection from shocks may differ for men and women: women’s assets tend to be drawn down by illness shocks

Policy implications--2

• How to address issue of dowries and illness shocks• Addressing dowries is controversial, although worldwide

dowries have tended to decline as investments in girls’ human capital increase (can we wait?)

• Providing instruments to cope with illness is less controversial (microinsurance)

• NGOs and civil society organizations may pave the way in changing gender norms around dowries, and in providing ways to manage risk