SAGA Progress Report-2006-Appendix 3

SAGA
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SAGA PROGRESS REPORT (12/05-12/06) &
UPCOMING WORKPLAN (11/06-11/07)

APPENDIX III – TENTATIVE OUTLINE FOR SYNTHESIS VOLUME
Poverty and Well-Being in Africa: A Bottom-Up, Multidimensional, Dynamic Approach

I. Introduction

II. Poverty and Well-being

A. Background and Motivation

1. Theory – multidimensional poverty (Sen)

2. Practice – what to measure?

a. Money metric measures (income/expenditure) good place to start

b. Limitations of income/expenditures

i) Household level – ignores intra-household and individual outcomes

ii) Doesn’t take into account public good

iii) Ignore issues of vulnerability and role of assets and wealth

c. Other measures should be weakly correlated with income; at least partially not “purchaseable”

d. What data are usually available?

i) Education

ii) Health

iii) Multiple dimensions – we tend to focus on relatively narrow aspects of health

iv) Freedom and enfranchisement

v) Happiness

3. Practice - how to measure?

a. Univariate methods – FGT; comparison of distributions (dominance testing/growth incidence curves)

b. Multivariate methods

i) Motivation

ii) Methods

c. Qualitative methods

4. Relationship of poverty to inequality

a. Ravallion-Datt type decompositions

b. Applications to incomes and distributional changes in non-income dimensions

c. Discussion on intra-hh aspects

i) Difficulties of defining needs of individuals

ii) Examples from nutrition and health

B. Descriptive results

1. Univariate poverty profiles for Africa (drawn from literature review, but will have to produce some of the non-income profiles ourselves)

a. Cross-sections

b. Changes over time

2. Multivariate poverty profiles (same as above)

C. Determinants of well-being

1. Income/Expenditures (?)

a. Literature review of cross-section and panel regressions (any experiments?)

b. Add some of our own, especially non-income and assets

i) Models of ht/age, school attainment, etc

c. Focus on size of coefficients, not just statistical significance

i) Differences of coefficients for same outcome across countries

ii) Differences across dimensions for different outcomes within country

2. Health (ditto)

3. Education (ditto)

4. Intra-household results

D. Micro-meso-macro variance decompositions – country/community/individual

1. For some variables, we can generate Africa-wide data for well-being measures

2. Check to see where most variation comes from - a prior is that it is micro

3. This part might go better in the background and motivation section

III. Dynamics of Poverty and Well-Being

A. Motivation: Why worry about dynamics of poverty and well-being?

1. Standard poverty measures extremely useful, but inherently retrospective and static … sometimes the more valuable/relevant question is who gets ahead and who falls behind?

2. Transitions important – can help reveal qualitative difference between polarized societies and mobile societies; hopelessness

3. Temporal risk ubiquitous and affects behavior … if protection of subjects is a key responsibility of states, evidence on how shocks affect people is important for the design and evaluation of policy interventions. Introduces the concept of vulnerability.

4. Widespread invocation of “poverty traps” term and concept (Sachs etc.) w/o much precision as to what poverty traps are, why they exist or what to do about them?

B. Dynamics and Vulnerability: Measurement issues and results

1. Descriptive dynamic poverty measures, various techniques in use:

a. Transition matrices across multiple metrics:

i) Income/expenditure poverty (Fields, etc.)

ii) Productivity/yields (Randrianarisoa)

iii) Assets (Lybbert et al., Carter et al., Barrett et al.)

iiii) Education (e.g., drop outs)

iv) Health and nutrition (e.g., disease state transitions? Anthropometric measures)

b. Mobility measures (Fields, Morduch, etc.)

c. Recursion diagrams/regressions

d. Technology adoption/market participation dynamics

e. Intergenerational transmission studies (any? Bowles and South Africa)

2. Vulnerability measures: incorporation of risk and state dependence

a. Christiaensen (thesis, J Afr Econ paper)

b. Morduch, Dercon, Ligon, etc.

c. Existing studies focus on income, expenditures or “utils” … any on other indicators? (health – Dillon? , education, wealth?)

3. Poverty traps and dynamic asset poverty line

a. Concepts and theories (e.g., Carter and Barrett): threshold-based multiple equilibria, low-level unique equilibria (e.g., geographic poverty traps)

b. Issues: social exclusion, credit constraints, high fixed costs of market/technology access

c. Generalizations of FGT and vulnerability measures based on DAPT

d. Are there really poverty traps? [Various methods of testing]

i) Parametric and nonparametric recursion estimation on flows or stocks;

ii) Decomposition of income changes

iii) Indirect method of searching for asset smoothing adoption/participation studies (untapped big gains)

iv) Evidence from Ethiopia (Carter, Mogues, Little; Dercon and Krishnan; Lybbert et al., Hoffmann); Ghana (Udry, Stephens); Kenya (Barrett et al.; Kristjanson and Krishna); Madagascar (Barrett et al., Moser and Barrett); South Africa (Carter et al.); Tanzania (Dercon); Uganda (Krishna et al.); Zimbabwe (Hoddinott) …but continuing uncertainty

C. Determinants of Dynamics of Poverty and Well-Being: generally underexplored still

1. Empirical results: what are the correlates of persistent poverty?

a. Low initial asset stocks (livestock, education, hh labor, etc. ) – JDS Feb 2006

b. Weak market access, esp. for finance

c. Social exclusion (Ethiopia, South Africa, Ghana, etc.)

d. Ability (Ethiopia)

e. Repeated serious shocks – esp. health?

2. Empirical results: differentiated impacts of shocks

a. Health shocks and transitions (Kenya, Uganda)

b. Natural disasters – drought/flood (Burkina Faso, Ethiopia, Kenya, Zimbabwe)

3. Dynamic relations between dimensions of well-being

a. In most models, these various welfare measures are jointly determined, often with lags

b. Try to paste together a dynamic model that allows us to trace through the impact of a shock to yi,t on the other y’s at time>t

c. A prior is that education will be the most persistent. Estimate using parent-to-child transition probabilities

d. Maybe this goes in section III

IV. The Meso Level in Understanding Poverty and Well Being

A. What is the Meso-Level? Institutions that aggregate and reconcile heterogeneous signals from micro-level agents (consumers, producers, employers, suppliers), that facilitate or impede coordination among agents, or that intermediate resource flows to/from central government.

1. Markets and marketing institutions: spot and forward markets, contractual arrangements (network effects often important)

2. Nonmarket institutions: local governments, formal community groups and NGOs, informal social networks: examples: schools, producer coops, health services

B. The Missing Middle: why worry about the meso-level?

1. Emphasis on decentralization of provision of essential public goods and services and of management of common property resources. Does this resolve, exacerbate or merely displace problems of governance? Subsidiarity and classic public finance questions.

2. Critical assumption that policy signals (e.g., real/relative price changes, public services policies) transmit from nation states and beyond (macro level) to micro decision-takers not always true. Similarly, fallacy of composition problem plagues micro level phenomena (e.g., technology adoption) when markets don’t effectively transmit excess demand/supply and nonmarket institutions don’t resolve contested claims effectively (e.g., land and conflict). Analogous issues for nonmarket institutions and transmission of standards (e.g., for health, education) and impeding transmission of disease, violence.

3. Possibility of spillovers: both positive (e.g., controlling crime reduces marketing margins and improves terms of trade for rural poor) and negative (e.g., producer-level disincentives in dysfunctional coops, social norms concerning funeral sacrifices). Crowding-in vs. crowding-out investment/interventions. Reinforcing feedback and fractal poverty traps: failures at one scale of analysis reinforce failures at other scales. (Barrett and Swallow 2006 WD)

4. Coordination problems are commonplace and often lead to multiple equilibria

C. Nonpecuniary Constraints and Incentives

1. Nonmaterial preferences – social solidarity and implicit taxation, power relations, religious prohibitions, gender roles (Platteau book, Barrett book)

2. Evolving social norms and imperfect behavioral constraints (electronic dog collar analogy) – circumcision rites, remarriage of widows, funeral sacrifices, etc. (Carter and Castillo working paper, Platteau, Barrett)

D. Transmission

1. Prices and markets (intermediation costs, spatial and intertemporal arbitrage problems, grades and standards assurances) (Moser, Barrett and Minten 2006 working paper; Negassa and Myers AJAE forthcoming, Fafchamps and Gavian JAfrEcon 1998)

2. Grades and standards: barriers to entry, value-added (Neven et al. WD forthcoming, Barrett WD 1997)

3. Health policy and disease epidemiology

4. Reputation (credit, marketing) (Fafchamps book, Platteau book)

E. Resolving Market Failures: realizing economies of scale, resolving asymmetric information problems

1. Contract enforcement/monitoring (Fafchamps book, Platteau JDS 1994)

2. Microfinance: credit and insurance, credit rating agencies

3. Marketing coops

4. Auctions vs. dyadic markets

5. Coordination problems in technology adoption (striga control, SRI, etc.Barrett 2005 chapter)

F. Provision of Essential Public Goods and Services – sometimes by private firms, community groups or informal social networks, not always by government

1. Crucial asset protection functions: safety/security – police protection and crime (Madagascar – Fafchamps and Moser JAfrEcon 2004, Fafchamps and Minten EDCC 2001, Kenya), resource tenure security, disaster response, curative/preventive health care

2. Asset building: education, roads, electricity, communications.

3. Information flow – new technologies, market opportunities, establishing common (Bandiera and Rasul EJ 2006, Conley and Udry Yale working paper, Moser and Barrett Ag Econ 2006)

4. Knowledge (e.g., farmer field schools)

5. Management of common property (soil and water conservation, forests, rangelands, etc.): rules and rules enforcement (Baland and Platteau 1998 AJAE, Nugent and Sanchez AJAE 1998)

V. Policy and Poverty: Principles of a Bottom up Approach

A. Consider dynamics, multiple dimensions of poverty, behavior responses, multiplier effects, etc.

B. Received wisdom and controversies (taking as point of departure that governments got prices right and no acute macro distortions)

1. Issues such as:

a. Getting markets to effectively transmit prices to producers/consumers

b. Lowering transaction costs through investments in infrastructure

c. Micro-credit

d. Universal primary education/gender discrimination

i) High returns

ii) Role facilities/pedagogy

e. Preventative health measures– focus on infectious disease (vaccination, de-worming, malaria nets, HIV behavior change, etc.

f. Combating < 2 years of age child malnutrition – UNICEF framework/Bank report

g. Decentralization

h. Empowering the poor

i) Evidence based on review seminal reports:

i. WDRs from 1990 onward

j. HDRs

k. State of World’s Children report (UNICEF)

l. World Food Survey reports (FAO)

m. MDGs/Sach’s book

i) How academic literature, and especially our research informs/supports/contradicts these pronouncements

C. Micro-macro Linkages and bottom-up apporaches

1. Accounting mechanisms – pro poor growth literature

2. Cross-country regressions, eg., work of Easterly and others

3. Externalities, e.g.

a. Public health/epidemiology literature

b. Education

4. Non-linearities, e.g., credit constraints

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