วันศุกร์ที่ 20 มกราคม พ.ศ. 2555

Poverty and Income Inequality in Asia


Poverty and distribution
บทความโดย วรรณพงษ์ ดุรงคเวโรจน์

  
          Percentage population living on less than $2 per day

Bangladesh         81.3 %                Nepal                   77.6  %
Laos                     76.8  %                Uzbekistan        76.7 %
India                    75.6 %                 Cambodia           57.8 %
Indonesia            50.6  %                Turkmenistan     49.6 %
Vietnam              48.4 %                Yemen                 46.6  %
Philippines         45.0  %                Sri Lanka            39.7  %
China                   36.3 %                 Thailand              11.5  %
Iran                      08 %                    Malaysia             07.8  %
Russia                  <2 %                    Turkey                <2 %



          Poverty, in broadest sense, means the inability to access for a minimal standard of living. It is “pronounced deprivation in well-being”. The poor are those who do not have enough income or consumption to put them above some adequate minimum threshold. Poor people often lack key capabilities (Sen), they may have inadequate income or education, or be in poor health, or feel powerless, or lack political freedoms.
          However, that definition – failure through circumstances to satisfy the necessary material conditions for well-being – leads us to the important distinction between absolute and relative poverty.
          Absolute Poverty is poverty judged by a common world standard or the number of people below a fixed real poverty threshold. It’s some who is destitute. According to a UN declaration, absolute poverty is a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services. For example, a homeless person is living in absolute poverty.
          Relative Poverty is poverty judged by the standard of the country or community within which the person concerned lives. It refers to a standard which is defined in terms of the society in which an individual lives and which therefore differs between countries and over time. For example where I live, someone earning 200 baht a day is living in poverty. But that person can probably live comfortably somewhere else with that income.
          However, the poverty standards and definitions vary across different countries. The threshold that each country varies called national poverty line - the poverty line deemed appropriate for a country by its authorities. National estimates are based on population-weighted subgroup estimates from household surveys. Definitions of the poverty line may vary considerably among nations.




          Despite sustained economic growth in many developing countries such as Hong Kong, Singapore, poverty still exists in Asia. A majority of the world’s poorest people today are in Asia - mainly because it holds a majority of the world's population. Of course some Asian countries like Japan and South Korea are not as poor as others like India and Cambodia, with Asian poverty being concentrated in South Asia. Overall, Asia faces more than 925 million people in2010 who struggle with basic needs of life including food, clothing, and housing that there are 578 million people in Asia that equal to 62.49% of world’s population live in Asia (United Nations Food and Agriculture Organization).



          The data and statistics affirm that gap between the rich and the poor has grown, rather than diminished, with sustained growth in income.
          Some of Asia has shown good progress on poverty in recent years, like China and South Korea. (in China good progress was notably helped in part by controls on population growth)  But Asia, holding the largest populations, still has many extreme poor. Asian farmers need to use more fertilizers, but they are too expensive for many to use.

          Inequality is a broader concept than poverty in that it is defined over the entire population, and does not only focus on the poor. When economy achieves economic growth and development, the benefits are ideally distribute to each one in the society. Unfortunately, this does not happen. Fruits of development always accrue to some members of the society more than others. The concept of inequality can be more easily defined. Economic inequalities refer to the uneven distribution of income across the population or individuals within society. The gap between the rich and the poor happens but it may be an inevitably consequence of growth and development. A high inequality can retard economic growth that the country is not fully using the skills and capabilities of all its citizens or it weakens social cohesion and lead to increased social tensions. Moreover, the high inequality raises a moral question about fairness and social justice.
         

          Measurement of poverty

1. Headcount Index
          It’s the proportion of poor people in the population or the headcount ratio (HCR).

HCR = q/n

Where q refers to the number of individual below a given poverty line, and n refers to the total number of individuals in country.

For example, Thai’s poverty line 2010 is 1,678 Thai Baht or approximately $54 per month.
There are 5.1 million individuals live below the poverty line. And our population is about 66 million people.

Thai’s HCR =5.1/66 = 7.72%

So, headcount here would show us that 7.72% of total population is in poverty.

2. Using the poverty line that called the international poverty line
          It can use to compare among many countries by some standard. The World Bank uses two lines for what can be called poverty (percentage of household live in $2 per day) and extreme poverty (percentage of household live in $1 per day)
          Nowadays, there is the national poverty line that stems from concerning about the difference in each country about population, economic condition and so on. So, the national poverty lines vary in each country.

          Measurement of Inequality

1. Using percentage share of income

          We divide the population into 5 groups (Quintiles) or 10 groups (deciles), and consider about what percentage share of income that each group receives. Ideally, each group has to get income or benefit equally, but it does not like this due to uneven distribution which leads to inequality.

Ideally

Income Category
Percentage share of income
Lowest Quintile
20%
Second Quintile
20%
Third Quintile
20%
Fourth Quintile
20%
Highest Quintile
20%















Income Category
Percentage share of income
Lowest Quintile
1.6%
Second Quintile
N/A
Third decile
N/A
Fourth decile
N/A
Fifth decile
N/A
Sixth decile
N/A
Seven decile
N/A
Eight decile
N/A
Ninth decile
N/A
Highest decile
42.6%
Highest Quintile is higher than lowest Quintile about 25 times.

China - 2008
Income Category
Percentage share of income
Lowest decile
3.5%
Second decile
N/A
Third decile
N/A
Fourth decile
N/A
Fifth decile
N/A
Sixth decile
N/A
Seven decile
N/A
Eight decile
N/A
Ninth decile
N/A
Highest decile
15%

Highest Quintile is higher than lowest quintile about 4.3 times








Singapore - 2008

Income Category
Percentage share of income
Lowest decile
4.4%
Second decile
N/A
Third decile
N/A
Fourth decile
N/A
Fifth decile
N/A
Sixth decile
N/A
Seven decile
N/A
Eight decile
N/A
Ninth decile
N/A
Highest decile
23.2%
Highest Quintile is higher than lowest quintile about 5.27 times

Japan – 2008

Income Category
Percentage share of income
Lowest decile
1.9%
Second decile
N/A
Third decile
N/A
Fourth decile
N/A
Fifth decile
N/A
Sixth decile
N/A
Seven decile
N/A
Eight decile
N/A
Ninth decile
N/A
Highest decile
27.5%
Highest Quintile is higher than lowest quintile about 14.5 times




2. Lorenz Curve and Gini Coefficient.
          Lorenz curve gives information on the distribution of income. It’s a rough index of income inequality.



          The horizontal axis gives the percentage of households. The vertical axis gives the percentage of nation’s income. The green line or 45-degree line is called line of equal distribution or egalitarian line. Along this line, the percentage of population gets the same percentage of nation’s income. For example, the top 10 percent of household get 10 percent of nation’s income. Or the lowest 90% of households has 90% of nation’s income.
          Note that no nation has a Lorenz curve such as green line. The degree of inequality typically prevails. The blue line shows the actual distribution of nation’s income among population. For example, at circle on the top blue line, it may be 80% of population has 65% of nation’s income.



          From the information in Lorenz Curve, we can get the Gini index, which measure the degree of inequality for any income distribution bu calculate the ratio of area between the Lorenz curve and 45-degree line.



So, Gini Index (G) = Area A/ Area A + Area B

          If the Gini coefficient were equal to zero, the Lorenz curve would be the 45-degree line. The closer to zero, the more equal about income distribution.
          Gini Coefficients are often calculated for pretax and posttax income distribution. If the Gini coefficient is lower for the posttax, it means that taxes have served the function of reducing income inequality.
For example, on average in 2000s,

Japan’s Gini coefficient pretax is 0.462
Japan’s Gini coefficient posttax is 0.329
It means that imposition achieve the target of reducing inequalities.

For Thailand, Gini coefficient is 0.52 in 1994 and 0.48 in 2010.

Case Study : China Inland and Coastal Inequality
China 2010 ranks the world's 2nd largest economy. It is the world's fastest-growing major economy with consistent growth rates of around 9% over the past 30 years since 1980. At that time, economic reforms initiated after 1978 began to generate significant and steady growth in investment, consumption and standards of living.
           China is also the largest exporter and second largest importer of goods in the world. The country's per capita GDP  was $7,544  in 2010. Especially, the provinces in the coastal regions of China tend to be more industrialized  while regions in the hinterland are less developed.


Two sector : agriculture and industry
The two most important sectors of the economy are agriculture and industry. The two sectors differs in many terms including technology, labor productivity, and incomes that have advanced rapidly in industry than in agriculture.
Agricultural output follows the effects of weather, while industry is directly influenced by the government. The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas
Government Policies to widen the gap



5 Policies to reduce inequalities
-         China Western Development for increasing economic situation of the western provinces through capital investment and development of natural resources.
-         Revitalize Northeast China, to renew the industrial bases in Northeast China covered the three provinces of Heilongjiang, Jilin, and Liaoning
-         Rise of Central China Plan to boost the development of its central regions. It covers six provinces: Shanxi, Henan, Anhui, Hubei, Hunan, and Jiangxi.
-         Third Front, focused on the southwestern provinces.                
-         Go Global, to encourage its enterprises to invest overseas

Case Study 2 : Global Distribution of Income
The way to reduce inequality is to concern internationally through the process of globalization
Also, other ways to reduce global income inequalities are
- Open Economy in overall sectors
- Land reform
- Inherence tax
- Welfare state
- Green Revolution
- Technological process
- International consensus 
- MDGs (Millennium Development Goals)

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