Consumption Bundle Aggregation in Poverty Measurement : Implications for Poverty and its Dynamics in Uganda
Summary (4 min read)
- During the past few decades, Uganda has experienced substantial economic growth.
- This growth has been attributed to the new government that has implemented a far-reaching economic reforms agenda, transforming Uganda into one of the most liberal economies in Africa south of the Sahara.
- Using the same methods the authors used to replicate o cial poverty gures in previous rounds of the UNHS, they estimate national headcount poverty to be 19.5 per cent in the UNHS 2012/13.
- To account for di erences in diets in di erent locations, the authors will construct di erent poverty thresholds for di erent spatial domains using the latest available nationally representative household survey (UNHS 2012/13).
- In other words, the authors will construct a detailed poverty pro le that takes dynamic aspects into account, de ning groups based on poverty transitions instead of a simple dichotomous poor/non-poor status (Boateng et al. 1992).
2 Poverty in Uganda: Trends and controversies
- During the 1990s, poverty in Uganda decreased substantially, falling by almost 40 per cent at the national level.
- This is because of the relatively high quality data available for this period.
- Even after correcting for income di erence, as regions that consume more expensive calories may do so simply because they have higher incomes, Appleton (2003) comes to the conclusion that the western region overtakes even the northern region as the poorest.
- Daniels and Minot (2014) use Demographic and Health Survey (DHS) data and methods related to poverty mapping and small area estimation to look at poverty trends across Uganda from 1995 to 2010.
- They nd that poverty indeed reduced over time, but much slower than o cial gures suggest.
3 Utility-consistent poverty lines using revealed
- From the above, the authors learn that one of the main weaknesses of the o cial poverty measures is that they are based on a poverty line that is constructed using a single food commodity bundle for the entire country.
- It is well known that in many instances - for example, if relative prices of basic commodities vary by region (or through time) and preferences permit substitution - the use of a single consumption bundle may yield inconsistent poverty comparisons (Tarp et al. 2002).
- The theory underlying absolute poverty lines is grounded in welfare economics and constrained utility maximization.
- Thus, any other bundle that yields the same level of utility (such as, for instance, the one chosen by the representative consumer in region r' ) should be equally expensive as or more expensive than the chosen bundle.
- One approach, which the authors will use in this paper, uses a minimum cross-entropy approach to adjust expenditure shares such that they meet revealed preference conditions (Arndt and Simler 2010).
4 A reassessment of poverty in Uganda
- The authors will mainly work with the four waves of the Uganda National Panel Survey (UNPS).
- This will then be compared to an analysis based on six separate spatial domains 7No UNPS survey has been done in 2012/13.
- The mapping from these basic caloric needs into basic needs consumption bundles is based on FAO (1986).
- The underlying poverty lines for the six spatial domains, in addition to a poverty line using only one spatial domain for comparison.
5 A pro le based on poverty dynamics
- Now that the authors developed a new set of poverty lines above, in this section, they will use the Uganda National Panel to construct pro les for di erent categories of households based on the evolution of their poverty status over time.
- These are households that are non-poor in all past waves but poor in all subsequent waves.
- If the authors weigh these households by population weights, the number of chronic poor individuals increases to 12.3 per cent.
- Next, 387 households have escaped poverty and 198 have fallen into poverty, corresponding to 19.0 and 8.2 per cent of the population, respectively.
- As such, the authors will also concentrate on characteristics that change only slowly over time, as opposed to those that may change signi cantly from year to year, such as crops cultivated.
- Location and well-being are often found to be correlated.
- One prominent economic reason is that in sparsely populated areas with a thin road network that is often in bad shape, transaction costs are high, affecting economic activity (Stifel and Minten 2008).
- More than 44 per cent of the people that are always above the poverty threshold live there.
- People living in the western region seem to be moving in and out of poverty more than people living in other regions.
- The median for the non-poor is about 50 minutes, as opposed to about 60 minutes for the chronic poor.
5.2 Household demographics
- The size and composition of the household are also variables that often feature in poverty regressions.
- This last feature may be captured better when using relating the di erent types of household in terms of poverty dynamics to dependency ratios.
- The underlying reasons should be sought in di erences between male-headed and female-headed households in terms of access to secure land tenure, labor, credit, technology, and extension services (e.g. Quisumbing and Pandolfelli 2010).
- Those that are never poor have small households and low dependency ratios.
- At the same time, households where the head is never married are clearly more likely to be non-poor, as are households where the head has divorced.
- While in general 35.8 per cent of Ugandans fall in the non-poor category, only 25.7 per cent of the Ugandan subsistence farmers are in the non-poor subgroup.
- It seems the group of vulnerable households is disproportionately represented within the group of subsistence farmers.
- Wage employment also seems to be an activity that is prevalent among the nonpoor.
- The most clear results are for those who mention their main source of income is property - virtually all are non-poor.
- People that depend on transfers are also non-poor.
- In traditional poverty pro les, the education level of the household head is often signi cant.
- Indeed, skills are important for the self-employed, and schooled labor is likely to be better rewarded.
- Education is also among the initial characteristics associated with chronic poverty in rural communities in Ethiopia (Dercon, Hoddinott, and Woldehanna 2012).
- Table 7 looks at the highest education level reported by the household head.
- Within the group of individuals in households that have always been poor, the share of households that are headed by someone without formal education is 37 per cent.
- Illness and health shocks have been reported to a ect poverty dynamics.
- At the other extreme, the authors nd that households that live in chronic poverty reported highest median distance to health facilities.
- Figure 5 looks at average days that household heads reported being inactive due to illness in the last six months in the 2005/06 UNPS wave conditional on subsequent poverty transitions.
- For most of the categories, the number of days lost is on average about 8.5 days.
- On the other hand, the households that report the highest number of days lost by the household head due to illness are those that are in the subgroup of households that eventually fall into poverty or are living in chronic poverty.
5.6 Shocks and Coping
- The poor are known to be more vulnerable to shocks, due to their lower ability to insure (Dercon 2004).
- The authors also look at how the households deal with shocks ex post conditional on their wealth dynamics category.
- A substantial share of the non-poor report to have been exposed to drought shocks, but this share is only about 5 percentage points lower than the overall share that reports drought-related shocks.
- Bad seed quality is reported more among the non-poor than average.
- This category also shows up relatively more in the category of households that slide into poverty.
- The authors reassess the evolution of poverty over the past ten years in Uganda.
- In addition, this poverty line relies on a single food consumption basket for Uganda, despite the fact that Uganda consists of a diverse set of regions, each with their own diets.
- These poverty lines are then tested to check if they obey revealed preference conditions.
- The fact that in this region, relatively few households are escaping poverty and relatively more households are falling into poverty needs attention.
- It now seems that the households that slide below the poverty threshold have a surprisingly high dependency ratio.
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Q1. What are the contributions in "Implications for poverty and its dynamics in uganda" ?
In this paper, the authors used the most recent available nationally representative household survey ( UNHS 2012/13 ) to construct a food basket that produces a certain minimum of calories that re ects the diets of the poorest households in that region.