Income diversification in Zimbabwe : welfare implications from urban and rural areas

The author examines, taking into account the urban-rural divides, the changes and welfare implications of income diversification in Zimbabwe following macroeconomic policy changes and droughts of the early 1990s. Data from two comparable national income, consumption and expenditure surveys in 1990-91 and 1995-96, which straddled a period of economic volatility and natural disasters, show that the percentage of households earning income from private and informal sources grew considerably, while that from government and formal sources declined in the aftermath of the drought and policy changes. The author finds that, in general, rural households tend to have a more diversified portfolio of income compared with their urban counterparts, and the degree of diversification decreases with the level of urbanization. However, there are important differences in the level of diversification within the rural and urban areas depending on wealth: While the relatively better-off households have a more diversified income base in rural areas, it is the poor who pursue multiple income sources in urban areas. A decomposition of changes in welfare indicates that the total contribution of income diversification is large and increased between 1990-91 and 1995-96 in both urban and rural areas. On the other hand, there were significant declines in returns to human and physical capital assets during the same period. The findings suggest that households with a more diversified income base are better able to withstand the unfavorable impacts of the policy and weather shocks. The fact that relatively better-off households have a more diversified income base following the shocks implies that the poor are more vulnerable to economic changes unaccompanied by well-designed safety nets.Rural Poverty Reduction,Inequality,Poverty Diagnostics,Economic Theory&Research

Rural vulnerability in Serbia

In the presence of risk and uncertainty, measures such as poverty rates are inadequate to analyze the well-being of poor households. The poor are not only concerned about the current low levels of their income or consumption, but also the likelihood of experiencing stressful declines in these levels in the future. Risks to livelihood are particularly important in rural areas where there is generally high dependence on agriculture and the environment. In this study, the author analyzes the nature, extent, and causes of rural vulnerability in Serbia using panel national household data from the 2002 and 2003 Serbia Living Standard Surveys. He measures rural vulnerability as a function of nonstochastic determinants of poverty as well as exposure to risk. While low levels of consumption (poverty) explain about 70 percent of vulnerability, the author identifies risk and uncertainty as crucial dimensions of rural life in accounting for the remaining 30 percent of household vulnerability. Households and regions with a greater share of their livelihood depending on agricultural activities are more at risk of vulnerability than those with a significantly higher share of their income coming from nonagricultural sources. Dependence on agricultural income is directly associated with higher aggregate risk, underscoring the agricultural sector's lopsided exposure to covariate shocks in general, and the negative impact of the 2003 drought in particular. Rural vulnerability to poverty and risk is also strongly associated with asset ownership and access to markets to mobilize them in time of need.Rural Poverty Reduction,Population Policies,Achieving Shared Growth,Services&Transfers to Poor

Child labor and school decisions in urban and rural areas

"Child labor is widespread in developing countries, but its causes are debatable. Poverty is considered the primary reason, but many theoretical and empirical analyses show that other factors, such as lack of access to credit, poor school quality, and labor market opportunities play equal or even greater roles in the decision to have children work. This study surveys the existing literature and, taking into account urban-rural divides, aims to shed light on the debate with empirical evidence from Nepal, Peru, and Zimbabwe. We find that while poverty drives child work and schooling in rural areas, it does not appear to significantly influence such decisions in urban areas. This suggests that policies such as trade sanctions or a ban on child labor in rural areas could have an adverse effect as child labor decisions in such areas are more likely a response to poverty and subsistence requirements. Similarly, improving access to credit has greater potential for alleviating child labor and enhancing school enrollment in rural than urban areas, particularly in Nepal and Zimbabwe. On the other hand, the availability of alternative childcare options appears to considerably decrease child labor and create conditions for higher school attendance rates in urban than in rural areas. Finally, evidence from all three countries indicates that efforts to bolster adult educational levels and wages will help curb the prevalence and intensity of child labor and improve the likelihood that children stay in school. " Author's AbstractChildren ,Education ,Urban population ,rural areas ,Poverty ,Labor market ,

Small-scale irrigation dams, agricultural production, and health - theory and evidence from Ethiopia

The author looks at the feasibility and potential of instituting small-scale irrigation dams to reduce Ethiopia’s dependence on rainfed agriculture and the associated food insecurity. He develops a theoretical framework to assess the welfare implications of irrigation development programs and provides empirical evidence from microdam construction and reforestation projects in northern Ethiopia. The author pays particular attention to health-related costs of establishing small-scale irrigation dams in areas prone to waterborne diseases. While the theoretical analyses imply that the net welfare impacts of irrigation dams cannot be known a priori due to potential health costs, the empirical evidence shows that current agricultural yield and farm profit have increased in villages with closer proximity to the dams than in those more distant. The increased disease incidence due to standing pools of water has, however, led to significant declines in the returns from investment in irrigation water. Households with poor health are less likely to adopt productivity-enhancing as well as resource-conserving technologies, which are crucial for achieving the ultimate goal of sustainable agricultural development. The ensuing sickness has also led to reduction in labor allocation to off-farm activities. The findings underline the importance of weighing beforehand the magnitude of potential economic benefits against health costs of water development programs. The overall evidence, however, suggests that carefully designed irrigation dams could significantly improve agricultural production and food security, particularly in areas where waterborne diseases pose negligible risk to health or can be cost-effectively controlled.Water Conservation,Economic Theory&Research,Labor Policies,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Economic Theory&Research,Housing&Human Habitats,Regional Rural Development

Azerbaijan's household survey data : explaining why inequality is so low

While the Azerbaijan household income and expenditure survey (HIES) data satisfy most empirical regularities expected in a typical household survey data, the inequality measures based on the data are unusually low. For example, for the latest three years for which we have data (2002 - 2004), the consumption Gini coefficient (the commonly used summary measure of inequality) is in the range of 16 - 18 percent. This is among the lowest Gini coefficients ever observed in any country, and is extremely low even with the standard of countries generally considered as most equal in the world. Azerbaijan, a transitional economy with a significant natural resource base, is unlikely to be the most equal country in the world. The objective of this paper is to investigate why inequality measures are unusually low in the Azerbaijan household survey data. The author presents a methodology for diagnosing and identifying the potential sources of low inequality in the data, including cluster analysis at the primary sampling unit level. The main inference from the findings of the cluster analysis is that the observed low inequality indices are not due to poor supervision of the interviewers and the data collection process. The author finds that the main culprits for the observed low inequality in the HIES data are (1) the low participation rates of wealthy households in the household surveys, and (2) the widespread availability of well-targeted public and private transfers.Rural Poverty Reduction,Poverty Impact Evaluation,Services&Transfers to Poor,Inequality,Consumption

The dynamics of ownership of durable goods in Bulgaria : from economic crisis to EU membership

The paper uses repeated cross-sections of Bulgaria's household survey data (1995, 1997, 2001, and 2003) and a comparable list of durable goods to investigate the dynamics and distribution of durable goods over time, including during the economic crisis of 1996-1997 and the subsequent period of relatively robust economic growth leading up to European Union membership. It examines the dynamics of the ownership of durable goods by wealth classes, geographic locations, and various ethnic groups, including the Roma. In the aggregate, there was convergence between the poorest and the richest classes in the ownership of durable goods between 1995 and 2003, with the poorest class making a significant gain between 2001 and 2003 after having lost some ground between 1995 and 2001. There was also convergence in the ownership of durable goods between urban and rural residents. However, there appear to be some diverging tendencies between Bulgarians and the minority ethnic groups, particularly in the ownership of relatively more expensive goods such as personal computers and cars.Economic Theory&Research,Debt Markets,Currencies and Exchange Rates,Access to Finance,Investment and Investment Climate

Reform and Inequality during the Transition: An Analysis Using Panel Household Survey Data, 1990-2005

Using for the first time household survey data from 26 post-Communist countries, covering the period 1990-2005, this paper examines correlates of unprecedented increases in inequality registered by most of the economies. The analysis shows, after controlling for country fixed effects and type of survey used, that economic reform is strongly negatively associated with the income share of the bottom decile, and positively with the income shares of the top two deciles. However, breaking economic reform into its component parts, the picture is more nuanced. Large-scale privatization and infrastructure reform (mostly consisting of privatization and higher fees) are responsible for the pro-inequality effect; small-scale privatization tends to raise the income shares of the bottom deciles. Acceleration in growth is also pro-rich. But democratization is strongly pro-poor, as is lower inflation. Somewhat surprisingly, the analysis finds no evidence that greater government spending as share of gross domestic income reduces inequality.Inequality; transition; economic policy

Reform and inequality during the transition: An analysis using panel household survey data, 1990-2005

Using for the first time survey data from 26 post-Communist countries, covering the period 1990-2005, the paper examines correlates of unprecedented increases in inequality registered by most of these economies. We find that, after controlling for country-fixed effects and type of survey used, economic reform (measured by the EBRD index) is strongly negatively associated with bottom deciles’ income shares and positively with income shares of the top two deciles. However, once economic reform is broken into its different component parts, the picture is more nuanced: large-scale privatization and infrastructure reform (mostly consisting of privatization and higher fees) are responsible for this pro-inequality effect while small-scale privatization tends to raise income shares of the bottom deciles. Acceleration in growth is also pro-rich. On the other hand, democratization (measured by the Polity measure) is strongly pro-poor, as is lower inflation. Somewhat surprisingly, we find no evidence that higher government spending as share of GDI reduces inequality.Inequality, transition, economic policy

Child labor and school decisions in urban and rural areas

"Child labor is widespread in developing countries, but its causes are debatable. Poverty is considered the primary reason, but many theoretical and empirical analyses show that other factors, such as lack of access to credit, poor school quality, and labor market opportunities play equal or even greater roles in the decision to have children work. This study surveys the existing literature and, taking into account urban-rural divides, aims to shed light on the debate with empirical evidence from Nepal, Peru, and Zimbabwe. We find that while poverty drives child work and schooling in rural areas, it does not appear to significantly influence such decisions in urban areas. This suggests that policies such as trade sanctions or a ban on child labor in rural areas could have an adverse effect as child labor decisions in such areas are more likely a response to poverty and subsistence requirements. Similarly, improving access to credit has greater potential for alleviating child labor and enhancing school enrollment in rural than urban areas, particularly in Nepal and Zimbabwe. On the other hand, the availability of alternative childcare options appears to considerably decrease child labor and create conditions for higher school attendance rates in urban than in rural areas. Finally, evidence from all three countries indicates that efforts to bolster adult educational levels and wages will help curb the prevalence and intensity of child labor and improve the likelihood that children stay in school. " Author's AbstractChildren ,Education ,Urban population ,rural areas ,Poverty ,Labor market ,

PRODUCTIVITY AND LAND ENHANCING TECHNOLOGIES IN NORTHERN ETHIOPIA: HEALTH, PUBLIC INVESTMENTS, AND SEQUENTIAL ADOPTION

The adoption of more efficient farming practices and technologies that enhance agricultural productivity and improve environmental sustainability is instrumental for achieving economic growth, food security and poverty alleviation in sub-Saharan Africa. Our research examines the interaction between public investments, community health, and adoption of productivity and land enhancing technologies by households in the northern Ethiopian state of Tigray. Agricultural technology adoption decisions are modeled as a sequential process where the timing of choices can matter. We find that time spent sick and opportunity costs of caring for sick family members are significant factors in adoption. Sickness, through its impact on household income and labor allocation decisions for healthcare and other activities, significantly reduces the likelihood of technology adoption. Our findings suggest that agencies working to improve agricultural productivity and land resource conservation should consider not only the financial status of potential adopters, but also their related health situation.Research and Development/Tech Change/Emerging Technologies,