SLIDE 1 Poverty and vulnerability to poverty in Ecuador: a microsimulation approach
Mauricio Cuesta Zapata Instituto de Altos Estudios Nacionales, Quito, Ecuador. m.cuesta@iaen.edu.ec
Institute for Social and Economic Research, University of Essex, Colchester, UK . hxjara@essex.ac.uk
SLIDE 2 Motivation
- Over time people might flow in and out of poverty as a result of adverse economic
shocks
- The concept of vulnerability to poverty considers the probability of being affected
by such shocks
- In developing countries, vulnerability to poverty is often not considered due to
data limitations
SLIDE 3
Poverty
ex-post measure of deprivation of some of life’s basic needs, such as food, shelter, clothing, education, health care and social security among other dimensions of wellbeing
Vulnerability
ex-ante measure of the person's well-being, which reveals future expectations and risks of their realization: loss of production, price increase, illness, unemployment
SLIDE 4 ≤ =
+ +
n consumptio current t h h t h n consumptio future t h h t h t h
e x c z e x c v ) , , , ( | ) , , , ( Pr
, 1 , 1 ,
α β α β
Vulnerability (vh,t)
where,
h
x is a vector of observable household characteristics
t
β describes the state of the economy
h
α time invariant household level effect, and
t h
e , idiosyncratic factors (shocks)
SLIDE 5 ( )
[ ]
) ( ), ( Pr
1 , 1 , , + +
= =
t h t h t h
c V c E f poor become v
This would be done using longitudinal data (where the same households are tracked over a number of periods) of sufficient length Using cross-sectional data we estimate using a three-step feasible generalized least squares (FGLS). (Amemiya, 1977).
SLIDE 6 Methodology
- We use ECUAMOD, the tax-benefit microsimulation model for
Ecuador
- ECUAMOD uses household representative microdata from the
National Survey of Income and Expenditures of Urban and rural Households 2011/2012 for 39,617 households and 153,341 individuals
SLIDE 7 Estimation strategy
We estimate poverty and vulnerability to poverty by constructing a series of repeated cross-sections for years 2011 to 2016 using ECUAMOD based on ENIGHUR 2011/2012
- No large labour market changes over this period
- Focus on the role of the tax-benefit system
SLIDE 8
The typical household head (HHH)
Female Male Age median age (years) 50 45 Education not completed primary 29% 20% primary 23% 29% ethnicity Mestizo 79% 79% Indigenous 6% 7% Marital status Separated 32% Widowed 27% Married 57% Single 34% Social security No social security 68% 57% Social security general 24% 32%
SLIDE 9 The tax policy benefits
1% 0% 1% 1% 1% 1% 1% 2% 3% 90% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 2 3 4 5 6 7 8 9 10 Poorest Richest
Decile
Share of paid taxes
0% 0% 1% 2% 2% 4% 6% 9% 18% 58% 0% 10% 20% 30% 40% 50% 60% 70% 1 2 3 4 5 6 7 8 9 10 Poorest Richest
Decile
Social insurance contribution
SLIDE 10 The tax policy benefits
92% 88% 78% 69% 61% 43% 31% 15% 3% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 2 3 4 5 6 7 8 9 10 Poorest Richest
Decile
Simulated Benefits
SLIDE 11
The vulnerability results
N Mean Standard deviation Minimum Maximum poor-no-vulnerable 15% 93,2 38,7 155,5 poor-vulnerable 20% 89,9 37,4 155,3 no-poor-vulnerable 25% 340,6 240,8 155,61 2.296 no-poor-no-vulnerable 40% 512,2 844,4 155,55 31.544
SLIDE 12 Poverty and vulnerability to poverty
23% 23% 24% 24% 24% 11% 11% 9% 9% 8% 34.7% 33.8% 32.6% 32.7% 31.5%
0% 5% 10% 15% 20% 25% 30% 35% 40% 2012 2013 2014 2015 2016 No poor and vulnerable Relative poverty (disposable income < realtive poverty line) Total HHH population to be assisted (poor+vulnerable)
SLIDE 13 Concluding remarks
- Microsimulation techniques can be used to estimate vulnerability to
poverty based on cross-sectional data
- In Ecuador:
- Around 20% of the population is identified as poor and vulnerable
- Around 25% of the population is identified as non-poor but vulnerable
SLIDE 14 Next steps
- Exploit the advantages of ECUAMOD to simulate the effect of
increasing benefit amounts for certain population groups:
- Poor and vulnerable
- Non-poor but vulnerable
- Account for changes in the labour market in a rigorous way (e.g. as in
nowcasting exercises using EUROMOD)
SLIDE 15
ECUAMOD
