Poverty and Inequality in Asia: 1965-2014 Guanghua Wan Fudan - PowerPoint PPT Presentation

Poverty and Inequality in Asia: 1965-2014 Guanghua Wan Fudan University

The Rise of Asia 60% 57,7% 56,4% 50% 40% 36,0% 35,5% 33,9% 30% 22,3% 20% 16,4% 15,6% 10% 1700 1820 1870 1913 1950 1973 2003 2010 Nayyar (2013), ADB (2011), Fogel (2007)

Asia: A winner in fighting poverty

Asia: A loser in containing inequality 0,40 0.34 0,35 0,30 0,10 Theil Index 0.24 0,25 0,05 0,20 0,15 0,24 0,10 0,19 0,05 0,00 1996 2008 1990s Latest Within Between

The Labor Share in GDP 0,8 China Hong Kong 0,7 Indonesia India 0,6 Iran Japan South Korea Laos 0,5 Sri Lanka Mongolia 0,4 Malaysia Philippines 0,3 Singapore Thailand 0,2 Taiwan 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Year

The Poverty-Growth-Inequality Triangle Fast growth • Lift all boats => reducing poverty, hold inequality constant • Raise inequality (Kuznets 1955) => increase poverty ------------------------------------------------------------------------------- ΔP = 0.5{ [𝑸 𝒁 𝑼 ; 𝑱 𝑼 − 𝑸( 𝒁 𝟏 , 𝑱 𝑼 )] + [𝑸 𝒁 𝑼 , 𝑱 𝟏 − 𝑸(𝒁 𝟏 ; 𝑱 𝟏 )] } + 0.5{ 𝑸 𝒁 𝟏 , 𝑱 𝑼 − 𝑸 𝒁 𝟏 ; 𝑱 𝟏 + 𝑸 𝒁 𝑼 ; 𝑱 𝑼 − 𝑸 𝒁 𝑼 , 𝑱 𝟏 = {Growth Component} + {Inequality component}

Data • To maximize consistency, consumption data from the Penn World Table (PWT version 9) • Observations are measured in 2011 $ (PPP of ICP) • Inequality data from WIID of WIDER • $1.9/$3.2 poverty lines, using PWT national accounts data • World Bank uses household survey data

The Poverty Profile: Asia

Sub-regional Poverty

Inequality Profile of Asia

…. and its components 0.8 0.8 0.6 0.6 Theil index Theil index 0.4 0.4 0.2 0.2 0.0 0.0 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Year Year Total Between Total Within

Sub-regional Inequality East Asia East Asia 0.8 0.8 0.6 0.6 Theil index Theil index 0.4 0.4 0.2 0.2 0.0 0.0 1965 1975 1985 1995 2005 2014 1965 1975 1985 1995 2005 2014 Year Year Total Within Total Between

Sub-regional Inequality Southeast Asia Southeast Asia 0.5 0.5 0.4 0.4 Theil index Theil index 0.3 0.3 0.2 0.2 0.1 0.1 1965 1975 1985 1995 2005 2014 1965 1975 1985 1995 2005 2014 Year Year Total Within Total Between

Sub-regional Inequality South Asia South Asia 0.4 0.5 0.4 0.3 0.3 Theil index Theil index 0.2 0.2 0.1 0.1 0.0 0.0 1965 1975 1985 1995 2005 2014 1965 1975 1985 1995 2005 2014 Year Year Total Between Total Within

Sources of Poverty Reduction ($3.2) Asia 10 5 Percent (%) 0 -5 -10 1977 1982 1987 1992 1997 2002 2007 2012 Year Growth effect Inequality effect

Sources of Poverty Reduction ($1.9) Asia 5 Percent (%) 0 -5 -10 1977 1982 1987 1992 1997 2002 2007 2012 Year Growth effect Inequality effect

The Impact of Inequality on Poverty (in millions) Poverty- Poverty- Poverty Poverty- Poverty- Poverty Period t 0 – t 1 Gini t 1 – Gini t 0 Economy reducing increasing brought by reducing increasing brought by Gini t 0 Gini t 1 (US$3.20) (US$3.20) inequality (US$1.90) (US$1.90) inequality 1973 – 2010 Bangladesh 0.00 3.97 3.97 0.00 16.57 16.57 32.44 41.56 9.12 − 0.10 − 0.06 − 10.83 2003 – 12 Bhutan 0.10 0.00 0.06 0.00 46.78 35.95 1981 – 2013 China 0.00 212.57 212.57 0.00 114.18 114.18 31 47.3 16.3 − 0.3 1966 – 2011 Hong Kong 0.00 0.00 0.00 0.00 0.00 0.00 49 48.7 1984 – 2014 Indonesia 0.00 12.80 12.80 0.00 4.73 4.73 30.98 37.34 6.36 1965 – 2012 India 0.00 32.22 32.22 0.00 15.94 15.94 31.9 34.1 2.2 − 4.33 − 2.06 − 10.07 1986 – 2009 Iran 4.33 0.00 2.06 0.00 47.42 37.35 1985 – 2008 Japan 0.00 0.02 0.02 0.00 0.00 0.00 35.92 36.18 0.26 − 1.47 − 1.13 − 7.74 1994 – 2012 Cambodia 1.47 0.00 1.13 0.00 38.5 30.76 − 0.58 − 0.58 − 6.43 1965 – 2012 South Korea 0.58 0.00 0.58 0.00 37.13 30.7 1992 – 2012 Laos 0.00 0.29 0.29 0.00 0.23 0.23 34.31 37.89 3.58 1973 – 2012 Sri Lanka 0.00 1.35 1.35 0.00 0.55 0.55 37.67 46.29 8.62 − 0.02 − 4.31 2002 – 10 Maldives 0.02 0.00 0.01 0.00 -0.01 41.31 37 − 0.01 − 1.16 1995 – 2014 Mongolia 0.01 0.00 0.00 0.00 0.00 33.2 32.04 − 1.39 − 0.59 − 12.77 1979 – 2014 Malaysia 1.39 0.00 0.59 0.00 51 38.23 1984 – 2010 Nepal 0.00 0.58 0.58 0.00 0.99 0.99 30.06 32.84 2.78 − 3.96 − 1.10 − 2.6 1987 – 2013 Pakistan 3.96 0.00 1.10 0.00 33.3 30.7 − 4.39 − 2.89 − 4.01 1965 – 2012 Philippines 4.39 0.00 2.89 0.00 48.78 44.77 − 0.04 − 0.02 − 2.5 1966 – 2011 Singapore 0.04 0.00 0.02 0.00 49.8 47.3 − 1.12 − 0.68 − 4.1 1969 – 2013 Thailand 1.12 0.00 0.68 0.00 41.95 37.85 − 0.06 − 0.02 − 1.8 1968 – 2013 Taiwan 0.06 0.00 0.02 0.00 32.6 30.8 1992 – 2014 Viet Nam 0.00 2.06 2.06 0.00 1.06 1.06 35.65 37.59 1.94 — — — — -17.47 265.86 248.40 Total -9.17 154.26 145.09

Initial Inequality & Growth Elasticity of Poverty Growth elasticity-US$3.20 Growth elasticity-US$1.90 .8 .8 .6 .6 Percentage Percentage .4 .4 .2 .2 0 0 30 35 40 45 50 30 35 40 45 50 Initial Gini Initial Gini

Initial Inequality & Growth Elasticity 25 30 35 40 45 50 0,0 -0,1 -0,2 -0,3 Growth elasticity -0,4 -0,5 -0,6 Central and West -0,7 East -0,8 South -0,9 Southeast -1,0 The Pacific Initial Gini No. of obs 124 R2 0.2574 Adj R2 0.2513 Variable Coefficient Std. Error t stat P-value Gini 0.0218 0.0034 6.5 0.000 Constant -1.2277 0.1247 -9.84 0.000

Initial and Overall Inequality m1 m2 Gini_WIID Gini_WIID 0.667 *** (0.035) 0.668 *** (0.039) Initial Gini coefficient 12.204 *** (1.401) 12.751 *** (1.835) Constant Country dummy N N Year dummy N Y N 327 327 Adjusted R 2 0.482 0.470

Inequality Modelling

Inequality Modelling

Globalization and Inequality 1965 — 80 1981 — 2014 50 50 45 45 Trade 40 Gini Gini 40 35 35 30 30 25 0 100 200 300 400 0 100 200 300 400 500 Trade (% GDP) Trade (% GDP) 1965 — 80 1981 — 2014 50 50 45 45 FDI 40 Gini Gini 40 35 35 30 30 25 0 2 4 6 8 10 -20 0 20 40 60 FDI (% GDP) FDI (% GDP)

Land Reforms in Asia Afghanistan The land reform law proposed in 1975 limited individual holdings to a maximum of 20 hectares of irrigated, double-cropped land. Larger holdings were allowed for less productive land. However, the government lacked the technical data and organizational bodies to pursue related programs after it was announced. After the 1978 Saur Revolution, the government canceled gerau and other mortgage debts of agricultural laborers, tenants, and small landowners with less than two hectares of land. China In October 1947, the government launched land reform campaigns that established control in North China villages. In the mid-1950s, a second land reform during the Great Leap Forward compelled individual farmers to join collectives. A third land reform beginning in the late 1970s re-introduced the family-based contract system known as the Household Responsibility System. India The 1949 Constitution left the adoption and implementation of land and tenancy reforms to state governments. Land reform legislation in India consisted of four main categories - tenancy reform, abolition of intermediaries, land ceiling, and land consolidation. Japan The first land reform was passed in 1873. It established the right of private land ownership in Japan for the first time and was a major restructuring of the previous land taxation system. Another major land reform was carried out in 1947. Between 1947 and 1949, around 38% of Japan's cultivated land was purchased from the landlords under the reform program and re-sold at extremely low prices to the farmers.