microsoft powerpoint - lectures 1 and 2 poverty and development3.23. (1)

7/31/2019 Microsoft PowerPoint - Lectures 1 and 2 Poverty and Development3.23. (1)

1/37

Breaking the Poverty TrapBreaking the Poverty Trap

Ronald U. Mendoza, Ph.D.Ronald U. Mendoza, Ph.D.Associate Professor of EconomicsAssociate Professor of Economics


2/37

Possible definitions of development

Alteration of the structure of production and

employment so that agri share declines andindustry/services share increases (measured by economic

output or GDP growth)

2

Source: Sen (1999).

Enhancement of human life and the freedoms people

enjoy (measured by, among others, human development

indicators)


3/37

Snapshot of Global Poverty

3

Source: http://go.worldbank.org/WE8P1I8250


4/37

Theories of Development

Theory

Harrod Domar Growth

Model

Lewis 2 Structure Model of

Development

Summary Context

Savings is needed to boost

investments and growth

1940s

Structural transformation

from a low productivity

rimar a ricultural sector

1950s-1960s

4

Dependency Theory

Neoclassical Growth

Framework

to a higher productivityindustrial sector

Underdevelopment due to

highly unequal international

capitalist system

1970s

Free markets and

dismantling of inefficient

government intervention

necessary

1980s-1990s


5/37

O-ring Theory of Development

5

High complementarity of parts so that one weak part has knock-on effects on other

parts/inputs and the final output/outcome.


6/37

Chinas Product Space (2007)

Industrial Structure Matters

Source: Felipe et al (2010).


7/37

Export Sophistication

What you export matters



8/37

Export Diversification (Number of products exported with revealed

comparative advantage)



9/37

Source: Schott (2008).


10/37

Source: Mayer et al (2004).


11/37

Trade Openness and Growth

Source: Mendoza (2010).


12/37

+AMDG


13/37

Poverty in the Philippines

25.0

30.0

35.0

40.0

22.0

22.5

23.0

23.5

24.0

24.5

nt

ns

13

Source: Balisacan (2011) drawing on data from the FIES (various years).

0.0

5.0

10.0

15.0

20.0

19.0

19.5

20.0

20.5

21.0

21.5

1991 1994 1997 2000 2003 2006 2009

Pe

rc

M

illi

No. of poor % of poor


14/37

Imbalanced poverty reduction across

regions

40

50

60

1991 2009

14

Source: NSCB.

0

10

20


15/37

Rising hunger incidence despite recent

high growth

20

25

30

15

Source: SWS (July 1998-Dec 2011).

0

5

10

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Overall Moderate hunger Severe hunger


16/37

Upper class

(0.3% or 53K familiesc)

Middle class

(22.8% or 4.2M familiesc)

Privateinsurance

Philhealth

PhP 256,564p.a. (cut off)

Php 1,738,211p.a. (cut off)

Food poor (7.9% or 1.5M familiesa)

Income poor only (13.0% or 2.4M familiesa)

Lower class (76.9%or 14.2M familiesc)

4Ps: 2.3M

familiesa,

Philhealth

for indigents




17/37

Why is poverty

persistent?


18/37

Economic growth is weakly

translated into poverty reduction

-1.5

-1

-0.5

0

llion(2001),41

opingCountries

ank(2009),East

1990-2006

rldBank(2009),

iland1990-200

6

ldBank(2009),

nesia1990-200

6

rldBank(2009),

nam1990-200

6

ldBank(2009),

pines1990-200

6

canandFuwa

),Philippines

988-1997

isacan(2007),

pines1988-200

3

Percent change in poverty incidence arising from 1% change in mean income

18Source: Figure adapted from Balisacan (2011). Scenarios based onauthors calculations.

-5

-4.5

-4

-3.5

-3

-2.5

-2 Ra

va

Devel

World

A

siW

T

ha

W

o

Indo

W

V

ie

W

or

Philip

Balisa

(20

0

1Bal

Philip

At 3% growth, and at 1.5% poverty elasticity of

growth, it will take the Philippines 360 years to

eliminate poverty.

At 8% growth, and at 1.5% poverty elasticity of

growth, it will still take the Philippines 130 years to

eliminate poverty.

At 10% growth (approximating Chinas) and 5%

poverty elasticity of growth (approximatingThailands), it will take 24 years to eliminate

poverty in the Philippines.


19/37

The poor face a poverty penalty in

the market economy

More expensive (and lower quality) goods and services for the poor:

Example of Credit Access

19

Source: Mendoza (2011, page 5).


20/37

The poor get hit harder by crises and

shocks

Example: Food price shocks hit the poor harder because it

constitutes a large share of their spending

0.6

0.7

0.8

0.9

20

Source: Data adapted from De Joyos and Lessem (2011).

0

0.1

0.2

0.3

0.4

0.5

East Asia and the

Pacific

Cambodia Indonesia Lao PDR Philippines Thailand Vietnam

Population Average Among extreme poor


21/37

Rising prices of basic commodities and

the gradual erosion of purchasing

power

50

60

70

80

90

Average prices

(before 2003):

Galunggong Php31Rice Php 16

Diesel Php 9

Average prices

(after 2003):

Galunggong Php57Rice Php 27

Diesel Php31

2121

Source: Bureau of Agricultural Statistics, Department of Energy

0

10

20

30

40

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Galunggong (per kg) Well Milled Rice (per kg) Diesel (per liter)


22/37

About 1.2 million young workers will

join the labor force each year from

2010 to 2040

100

120

140

160

22Source: Mahurkar and Mendoza (Forthcoming) using data fromBLES.DOLE.GOV

0

20

40

60

80

2010 2015 2020 2025 2030 2035 2040

Total Population Working Age


23/37

Yet job creation remains anemic and

favors the skilled

6

8

10

GROWTH OF JOBS BY IMPLIED SKILL LEVEL, 2001-2009

23

-2

0

2

4

2001

2002

2003

2004

2005

2006

2007

2008

2009

PERCE

N

High Medium Low

Source: Mahurkar and Mendoza (Forthcoming) using data fromBLES.DOLE.GOV .


24/37

Starting (and growing) a business in

the Philippines is still tough

Entrepreneurs in Thailand, on average, take 7

procedures, 32 days, 5.6 % GNI per capita to start

a business.

Vietnam: 9 procedures, 44 days, and costs

12.11 % GNI per capita to start a business.

24

Source: World Bank (2010).

pp nes: proce ures,

days, and 30.3 % GNI percapita to start a business.


25/37

PUBLIC GOODSREPRODUCTIVE HEALTH

POLICY

POVERTY REDUCTION

POLICIES (POLICIES TOEMPOWER)

SOCIAL SAFETY NET

(POLICIES TO PROTECT)

INFRA AND PPPs


26/37

Do dynastic politicians keep people

poor? Or do poor people keep on

voting for dynasties?

Percentage of Dynastic

Legislators

Actual Count

LUZON 64% 81 of 126VISAYAS 80% 37 of 46

MINDANAO 66% 37 of 56

26

Source: Mendoza, Beja, Venida and Yap (2012).

CAR 43% 3 of 7

70% of our legislators belong to dynastic families; and almost 80% of our youngest

legislators (aged 26-40) belong to dynastic families.

Dynastic legislators are richer by PhP 10 million, on average, compared to non-dynastic

legislators (after removing one outlier).On average, a dynastic legislator has net wealth of about PhP 50 million this is 255

times larger than the annual mean family income in the country (PhP 195,000).

Dynastic legislators hail from the poorest parts of the countrydistricts with dynastic

legislators have 5 percentage points more poverty incidence.


27/37

How representative is your

Representative?

200.0%

250.0%

300.0%

Growth in Wealth between 2010 and 2007(Sample of 101 Legislators from the 15th Congress)

Over half of the sample experienced SALN

growth that beat the Philippine Stock Exchange

Source: Authors calculations based on data from Mendoza, Beja,Venida and Yap (2012).

-100.0%

-50.0%

0.0%

50.0%

100.0%

150.0%

Cagas

Belmonte

Cam

pos

Arnaiz

Suarez

Jalo

sjos

A

silo

Em

ano

Arago

Merc

ado

Ortega

Fernan

dez

Amatong

Go

Durano

Ga

rcia

Mend

oza

Un

gab

Villafuerte

Gonz

ales

Balind

ong

Magsaysay

Angping

Rem

ulla

Rom

ulo

Ga

rcia

Laz

atin

Fua

Alvarez

Datuman

ong

Salimban

gon

Caja

yon

Kho

Umali

G

olez

Roman

Ga

rcia

Lagdameo

Agga

bao

Valencia

Lagman

Crisologo

Ong

Arroyo

DelRos

ario

Bravo

Miraflores

Ro

bes

Enverga

San

Luis

Alm

ario

average grow ur ng e per o .


28/37

Increasing possibility of a conflict trap:

Conflict is recurrent

50

60

70

80

90

100

28

Source: World Bank (2011, page 58).

0

10

20

30

40

1960s 1970s 1980s 1990s 2000s

Conflict onsets in countries with no previous conflict (%total) Conflict onsets in countries with previous conflict (%total)

Total number of conflict onsets


29/37

Factors Behind Conflict and Violence:

Links to Poverty and Inequality

29

Source: World Bank (2011, page 74).


30/37

Selected References

Balisacan, A. 2011. What does it really take to move the Philippines out of poverty? Presentation to the

Mindanao Bridging Leaders Program, 21 July 2011.

Collier, P. 2007. The bottom billion: Why the poorest countries are failing and what can be done about it. Oxf

Oxford University Press. Department of Social Welfare and Development. Pantawid Pamilyang Pilipino Program Program

Implementation Status Report, Q2 2011. [Available at: http://www.dswd.gov.ph ].

De Joyos, R and R Lessem. 2011. Food shares in consumption: New evidence using Engel curves in the

developing world. Mimeo. [Available at: https://mywebspace.wisc.edu/rlessem/web/engel.pdf].

Habito, C. 2010. An Agenda for High and Inclusive Growth in the Philippines. Manila: ADB. [Available at:

http://www.adb.org/documents/reports/agenda-high-inclusive-growth/agenda-high-inclusive-growth.pdf]. Mahurkar, P and RU Mendoza. 2012. Anatomy of Anti-Poor Growth: Insights from Recent Employment Tren

Mimeo. AIM Policy Center.

Mendoza, R.U. 2011. Why do the poor pay more? Exploring the poverty penalty concept. Journal of

International Development23(1):1-28.

World Bank. 2011. World Development Report 2011: Conflict, Security and Development. Washington,

D.C.:World Bank. National Statistical Coordination Board (NSCB). 2009. 2009 Official Poverty Statistics.[Available at:

http://www.nscb.gov.ph ].

Sen, A. 1999. Development as Freedom. New York: Knopf.

Virola, Romulo, et. al. 2010. The Pinoy Middle-Income Class is Shrinking: Its Impact on Income and

Expenditure. Paper presented during the 11th National Convention on Statistics (NCS), EDSA Shangri-La Hotel,

October 4-5, 2010.


31/37

ADDITIONAL SLIDES

+AMDG


32/37

Policies and Reforms to Promote High

and Inclusive Growth

Habito (2010):

1. Quality appointments to government posts and zero tolerance for corruption;

2. Strong and credible transparency and accountability systems; and intensified

decentralization;

. er an eeper pu c par c pa on n governance; an s ream ne governmen

procedures to lower cost of business and speed up public services;

4. Democratization of the economy through asset reforms and competition policies;

5. Boost tax revenues by improving ICT systems in BIR, prosecuting tax evaders and reformi

excise taxes on alcohol and other products;

6. Narrow the infrastructure gap;

7. Enterprise development with a focus on MSMEs.


33/37

Policies and Reforms to Promote High

and Inclusive Growth

Balisacan (2011):

1. Create productive employment opportunities, including through Infrastructure to promotconnectivity, especially between leading/urbanizing & lagging/rural areas; and Institution

facilitating transactions in the marketplace (in order to lower the cost of doing business)

. e uce e g nequ y n access o oppor un es .e. g pr or y on e uca on, ea

including family planning services)

3. Rebuilding institutions, including civil service, & good governance in pursuit of inclusive

growth


34/37

Poverty Elasticity of Growth

1.855

1

1.5

2

2.5

Poverty Elasticity of Growth Based on Income Poverty Headcount and

Average Annual GDP Growth, 2000-2006

34

-1.652 -1.636

-1.306

-0.806 -0.755-0.643 -0.586

-0.515 -0.469

-0.158 -0.157

0.154

-2

-1.5

-1

-0.5

0

0.5

Indonesia(

2002-2005)

Pakistan(

2002-2005)

China,PR(

2002-2005)

Malaysia(

1997-2004)

Thailand(

2002-2004)

VietNam(

2002-2006)

SriLanka(

1996-2002)

Nepal(

1996-2004)

Bangladesh(

2000-2005)

Cambodia(

1994-2004)

India(

1994-2005)

Philippines(

2003-2006)

Mongolia(

2002-2005)

Source: Habito (2010)


35/37

Poverty elasticity of growth

-0.49

-0.37 -0.37-0.32

-0.29 -0.28

-0.13

-0.4

-0.2

0

Malaysia

Singapore

Thailand

VietNam

Nepal

Mongolia

China,PR

Cambodia

Philippines

Pakistan

Bangladesh

India

Myanmar

Indonesia

SriLanka

Poverty Elasticity of Growth Based on Human Development Index and

Average Annual GDP Growth, 2000-2006

35

-1.46

-1.23

-1.19 -1.18

-1.02

-0.9

-0.79

-0.58

-1.6

-1.4

-1.2

-1

-0.8

-0.6

Source: Habito (2010)


36/37

Food shares for selected Asian

countries

0.5

0.6

0.7

0.8

0.9

36Source: De Hoyos and Lessem (2008)

0

0.1

0.2

0.3

0.4

East Asia and

the Pacific

Cambodia Indonesia Lao PDR Philippines Thailand Vietnam

Popu at on Average

Among moderate poor

Among extreme poor


37/37

Food shares per region

0.5

0.6

0.7

0.8

Population Average

37Source: De Hoyos and Lessem (2008)

0

0.1

0.2

0.3

0.4

East Asia and

the Pacific

Eastern

Europe and

Central Asia

Latin America

and the

Caribbean

Middle East

and North

Africa

South Asia Sub-Saharan

Africa

Developing

World

Among moderatepoor

Among extreme

poor

microsoft powerpoint - lectures 1 and 2 poverty and development3.23. (1)

Documents