1.A PROFILE OF POVERTY IN PAKISTANIFTIKHAR AHMED CHEEMA SENIOR POVERTY SPECIALIST NOVEMBER 2005 CENTRE FOR RESEARCH ON POVERTY REDUCTIONAND INCOME DISTRIBUTION PLANNING COMMISSION ISLAMABADPhone: 9202868, Fax: 9210254 www.crprid.org

2. Table of ContentsTable of contents............................................................................................................................. iiList of tables................................................................................................................................... ivList of figures.................................................................................................................................. vExecutive summary....................................................................................................................... vii1. Introduction .............................................................................................................................. 12. Data .......................................................................................................................................... 13. Methodology ............................................................................................................................ 2 3.1Choice of welfare indicator ............................................................................................... 2 3.2Consumption aggregate ..................................................................................................... 2 3.3Adjustment of consumption............................................................................................... 2 3.4Price adjustment ................................................................................................................ 3 3.5Poverty line........................................................................................................................ 3 3.6Choice of aggegator........................................................................................................... 44. Poverty comparison.................................................................................................................. 4 4.1Spatial poverty comparisom .............................................................................................. 4 4.2Poverty comparison by household characteristics........................................................... 154.2.1 Poverty by household size ............................................................................................... 154.2.2 Poverty by dependency ratio ........................................................................................... 174.2.3 Poverty by access to amenities ........................................................................................ 174.2.4 Poverty by access to land................................................................................................. 17 4.3Poverty by household head characteristics...................................................................... 184.3.1 Poverty by educational attainment of head...................................................................... 18 ii 3. 4.3.2 Poverty by literacy of household head ............................................................................ 204.3.3 Poverty by sex of household head ................................................................................... 204.3.4 Poverty by status of employment of hhold head ............................................................. 215. Characteristics of the poor...................................................................................................... 22 5.1Household size and dependency ratio ............................................................................ 23 5.2Ever attended school........................................................................................................ 24 5.3Gross and net enrolment rates ......................................................................................... 26 5.4Literacy rate..................................................................................................................... 27 5.5Highest class completed .................................................................................................. 27 5.6Immunisation ................................................................................................................... 29 5.7Maternal health care ........................................................................................................ 29 5.8Housing conditions .......................................................................................................... 30 5.9Percentage of income shares by poverty status ............................................................... 31 5.10 Durable goods.................................................................................................................... 316. Conclusion.............................................................................................................................. 32Appendix A: Confidence intervals for poverty measures by region and period.......................... 35Appendix B: Confidence intervals for poverty measures by province and region ,2001 .......... 36Appendix C: Hypothesis testing ................................................................................................ ...37References..................................................................................................................................... 40 iii 4. List of TablesTable 1: Poverty indices by province and region.......................................................................... . 6Table 2: Incidence of poverty by household characteristics......................................................... 16Table 3: Incidence of poverty by characteristics of the household head .................................... . 19Table 4: Household size, composition, and dependency ratio by poverty status ....................... . 23Table 5: Education indicators by poverty status,2001 ................................................................ . 25Table 6: Health indicators by poverty status,2001...................................................................... . 28Table 7: Housing conditions by poverty status,2001.................................................................. . 30Table 8: Main source of income by poverty status, 2001 ........................................................... . 31Table 9: Percentage of households with durable items by poverty status, 2001 ........................ .32 iv 5. List of FiguresFigure 1: Poverty rates over time.................................................................................................. . 5Figure 2: Headcount ratio and agricultural growth......................................................................... 7Figure 3: Incidence of povery by region....................................................................................... . 8Figure 4: Incidence of poverty and contribution to total poverty by region, 2001 ...................... . 8Figure 5: Incidence of poverty by province.................................................................................. . 9Figure 6: Incidence of poverty and contribution to total povery by province, 2001 .................. . 10Figure 7: Cumulative distribution functions of per adult equivalent consumption expenditure . 11Figure 8: Cumulative distribution functions of per adult equivalent consumption expenditure byregion, 2001 ................................................................................................................................ . 12Figure 9:Cumulative distribution functions of per adult equivalent consumption expenditure byprovince, 2001 .............................................................................................................................. 12Figure 10A: Cumulative distribution functions of per adult equivalent consumption expenditureby household size, 2001.............................................................................................................. . 13Figure 10B: Cumulative distribution functions of per adult equivalent consumption expenditurewith adult and different equivalent scales (equal weight), 2001 .................................................. 14Figure 10C: Cumulative distribution functions of per adult equivalent consumption expenditurewith adult and different equivalent scales(child=0.6), 2001....................................................... . 14Figure 11: Headcount by household size, 2001 ......................................................................... . 15Figure 12: Contribution to total poverty ..................................................................................... . 15Figure 13: Headcount ratio by dependency ratio, 2001.............................................................. . 17Figure 14: Headcount ratio by housing condition, 2001............................................................. . 17Figure 15: Headcount ratio by landownership, 2001.................................................................. . 18v 6. Figure 16: Headcount ratio by level of education of household head, 2001 ............................... 18Figure 17: Headcount ratio by literacy of household head, 2001 ............................................... . 20Figure 18: Headcount raio by sex of hhold head, 2001 ................................................................ 20Figure 19: Headcount ratio by status of employment of household head, 2001......................... . 21Figure 20: Headcount ratio by sector of employment of household head, 2001 ....................... . 21Figure 21: Headcount ratio by occupation of household head, 2001 ...............................................Figure 22: Dependency ratio by poverty status, 2001 ................................................................ . 23Figure 23: Percentage of population that has ever attended school by poverty status, 2001 ..... . 24Figure 24: Left primary school before completing primary level by poverty status, 2001 ........ . 24Figure 25: Gross enrolment rate by poverty status, 2001 ............................................................ 26Figure 26: Literacy by poverty status, 2001 ............................................................................... . 27Figure 27: Highest class completed by poverty status, 2001........................................................ 27Figure 28: Average number of years of schooling by consumption decile ................................. .28Figure 29: Percentage of children aged 12-23 months that have been fully immunised by povertystatus, 2001 ................................................................................................................................. . 29Figure 30: Pre and post natal care consulatation by poverty status, 2001 .................................. . 29Figure 31: Access to facilities (electricity,gas and telephone) by poverty status, 2001 ............. . 30vi 7. Executive SummaryThe objective of this paper is to present A Profile of Poverty in Pakistan which is useful forbroadening and deepening our understanding about different dimensions of poverty. Fivedata sets including HIES 1992-93, 1993-94, 1996-97 & PIHS 1998-99 & 2000-01, conductedby Federal Bureau of Statistics have been used for poverty analysis.Consumption aggregate has been used as a welfare indicator. It includes both actual andimputed expenditure. Some expenses such as taxes, fines and expenses on marriage orfuneral and durable items are not included in the consumption aggregate.While consumption expenditure is recorded at the household level, it needs to be measured atthe individual level. While adjusting household expenditure in order to get per adultequivalent consumption expenditure, a simple scale has been used. This scale weights 0.8 toindividuals younger than 18 years and 1 for all other individuals. Keeping in view the spreadof survey over a year, Paasches price index at primary sampling unit level has beencomputed in order to represent welfare indicator in real values.The poverty line Rs. 673.54 as notified by the Planning Commission vide letter No.1(41)/Poverty/PC/2002, dated 16.8.2002 has been used as a base poverty line. The basepoverty line has been adjusted over time by inflation rate between household surveys in orderto keep the poverty line constant. Foster, Greer and Thorbecke class of poverty measureshave been used as an aggregating index.This paper presents poverty estimates for 1992-93, 1993-94, 1996-97 1998-99 and 2000-01.The poverty estimates have increased over this period with the exception of 1996-97, where adecline has been observed. The incidence of poverty at national level was around 25 percentin 1992-93 which increased to 34 percent approximately in 2000-01. Similarly, poverty gapand severity of poverty increased over time. The factors responsible for this increase inpoverty rates are low GDP growth rate, public finance crisis, problem of external finance,decrease in formal employment opportunities, cut in subsidies and sharp rise in utility rates.The difference in the incidence of poverty between urban and rural areas has increased overthis period. Headcount ratio was 20 percent in urban areas in 1992-93 and it rose toapproximately 23 percent in 2000-01 depicting a moderate increase of 3 percentage pointsover this period. Rural areas depict a remarkable rise of around 12 percentage points invii 8. headcount ratio from 27.63 percent in 1992-93 to 39.26 percent in 2000-01. Poverty gap andseverity of poverty in urban and rural areas almost doubled during this period.Poor are concentrated in rural areas. It is important that rural livelihoods are improved inorder to ensure that growth benefits the poor. The policy agenda may involve improvementin access to land, agricultural productivity, price incentives and credit arrangements. There isalso a critical need for major improvement in rural infrastructure.PIHS 2000-01 has been used to identify the characteristics of the poor. Total dependencyratio is higher in poor households (115 percent) than non-poor (79 percent). The rate of everattended school is 57 percent for non-poor compared to 37 percent for poor. Similarly, alarge number of children in poor households leave school before completing primary level.Financial costs are more important as a reason for leaving before completing primary leveland never attended school for the poor. Primary gross enrolment rate for poor is about 54percent and 85 percent for non-poor. Primary net enrolment rate is 31 percent for poorcompared to 50 percent for non-poor. There are also wide differences between poor and non-poor with respect to gross and net enrolment rate at middle and matric level.Health indicators are also lower for poor than non-poor. The percentage of children aged 12-23 months fully immunized is 43 percent for poor whereas it is 60 percent for non-poor.About 23 percent poor women went for prenatal care consultation compared to 43 percent fornon-poor. Poor women mostly attend government hospitals/clinics in contrast to non-poorwho prefer private hospitals/clinics.Housing conditions are also worse for poor. Only 16 percent of poor population has access topiped water for drinking compared to 29 percent for non-poor. Similarly, 27 percent of poorlive in houses having flush toilet compared to around 55 percent of non-poor. In rural areas65 percent of poor dont have toilet in their house.There are three policy messages with respect to education. First, literacy rates may beimproved. Second, policy makers should find ways and means to increase enrolment ratesand reduce dropout rates. Third, simply an increase in enrolment rate will not be sufficient toreduce poverty level. Level of educational attainment must be improved at least to middlelevel in order to reduce poverty significantly.Though health indicators have improved over time still they are low particularly for poorpeople. This situation demands public policy to focus particularly in rural areas on raising viii 9. health expenditure and aiming on prevention and control programmes, especially in the areaof reproductive health, child health, nutrition deficiencies and communicable and infectiousdiseases. ix 10. A Profile of Poverty in Pakistan1 IntroductionReducing poverty has the remained main objective of policy makers but it has gained moreimportance since the adoption of MDGs. In order to design poverty reduction strategies, it isvery important for policy makers to know who are the poor? How many poor are there? Wheredo they live and what is their social and economic profile? The main objective of this paper is toprovide baseline poverty profile by answering these questions. Poverty profile is useful forbroadening and deepening our understanding about the different dimensions of poverty andmeasuring the degree to which the government has been successful in reducing the poverty overtime.2 DataThis paper uses five data sets for poverty analysis i.e., HIES 1992-93, 1993-94, 1996-97 & PIHS1998-99 and 2000-01. The sample size of these household surveys is substantial enough to allowrepresentative estimates to be obtained for each province and region.Name of surveySample size Urban RuralOverallHIES 1992-9355869006 14592HIES 1993-9456329036 14668HIES 1996-9754478814 14261PIHS 1998-9955279152 14679PIHS 2000-0155369169 14705These household surveys conducted by Federal Bureau of Statistics provide comprehensiveinformation about household consumption expenditure and income. PIHS 1998-99 and 2000-01provide rich information about different socio-economic indicators that are essential for povertyprofiling. This paper uses PIHS 2000-01 for identifying different socioeconomic characteristicsof the poor and non-poor.Minor data cleaning has been made. In some cases data entry errors were observed. These dataentry errors were corrected simply by moving the decimal point in either direction throughcomputer programming in order to make data meaningful. Moreover, there were a few caseswhere quantities for food items were missing. In missing cases new values were obtained bydividing the value of that item by median unit price of that item within the primary samplingunit.1 11. The structure of the paper runs as follows. The next section describes the methodology ofestimating poverty rates, followed by section 4 wherein poverty comparisons are discussed.Section 5 explains socioeconomic characteristics by poverty status. The last section concludesthe paper.3 Methodology3.1Choice of welfare indicatorIn developing countries, consumption is more appropriate than income as welfare indicator.First, income is interpreted as a measure of welfare opportunity while consumption as a measureof welfare achievement. Second, it is generally believed that survey respondents are more willingto reveal their consumption pattern than their income. Third, consumption is measured betterthan income in developing countries because of difficulties in defining and measuring income forself-employed. Finally, income is subject to seasonal variability while consumption tends to beless variable. This paper uses consumption as a welfare indicator.3.2Consumption aggregateConsumption aggregate is comprehensive and consists of both actual and imputed expenditure. Itincludes not only actual purchases but also self-produced and consumed items or consumption ofitems that were received as gift or assistance or wage and salary in kind. Thus consumptionaggregate includes food items, fuel and utilities, housing (rent, imputed rent and minor repair),frequent nonfood expenses (household laundry and cleaning personal care products and services)and other nonfood expenses (clothes, footwear, education, and health related expenses).However, some expenses such as taxes, fines and expenses on marriage or funeral and durableitems are not included in the consumption aggregate because these are not related to livingstandards.3.3Adjustment of consumptionWhile consumption expenditure (food and nonfood) is recorded at the household level, welfareneeds to be measured at the individual level. The general practice is to divide household incomeor consumption expenditure by the total number of household members without making any2 12. adjustment for household composition. This methodology is not much convincing as it givesequal welfare ranking to two households with same total income/consumption and with samenumber of household members even if one of the households is dominated by adults and theother by children. Nutrition based adult equivalent scales, which differentiate, betweenhouseholds on the basis of sex and age are also used to transform the number of persons in ahousehold to adult equivalents. The application of nutrition based equivalent scales to anyexpenditure other than food expenditure is questionable. Its use is defendable when foodexpenditure occupies a comprehensive share of total expenditure. While adjusting householdexpenditure in order to get per adult equivalent consumption expenditure, this paper uses simpleequivalent scale that weights 0.8 to individuals younger than 18 years and 1 for all otherindividuals as food expenditure represents only about 50 percent of the total consumptionexpenditure.3.4 Price adjustmentIt is necessary to represent the welfare indicator in real values as households face different pricesduring the year of the survey. Laspayers price indices as calculated by the Federal Bureau ofStatistics are not suitable for using price adjustment because these indices dont considerdifferences between urban and rural areas or between provinces. Paasches price index calculatedat the primary sampling unit has been used in order to convert the welfare indicator in realvalues. Though, household income and expenditure surveys dont always provide information onprices but it is still possible to calculate spatial price index by means of unit values that areobtained by dividing expenditure per food and fuel items by quantity consumed. Paasches priceindex has been calculated at the primary sampling unit level by using the median prices andaverage budget shares in each primary sampling unit.3.5 Poverty lineUsing PIHS 1998-99, Federal Bureau of Statistics estimated absolute poverty line Rs. 673.54 oncalories 2350 per adult equivalent per day with calorie based approach. This poverty line wasnotified, as national poverty line by Planning Commission vide Letter No. 1 (41)Poverty/PC/2002, dated 16.8.2002. This paper uses Rs. 673.54 as a base poverty line for the 3 13. whole country (urban and rural areas) for poverty analysis. This poverty line has been adjustedfor other years in the analysis by the inflation rate between the two household surveys so that thebase poverty line remains constant and poverty measures are consistent and comparable overtime and across regions. It is highlighted that the level of inflation between two householdsurveys is calculated using monthly official consumer price index computed by the FederalBureau of Statistics. While conducting household survey, different percentages of interviewstake place in different months and these facts need to be considered when inflation rate betweentwo household surveys is computed.3.6 Choice of aggregatorAfter the finalization of poverty line, one has to choose the aggregating index. The most popularused measures of poverty are the Foster, Greer and Thorbecke class of poverty measures. Theseinclude headcount ratio, poverty gap and severity of poverty. Headcount ratio is defined as theproportion of population below the poverty line. It is easy to calculate but it does not take intoaccount depth of poverty. Poverty gap reflects the average short fall of the incomes/consumptionof the poor expressed as a share of the poverty line. It considers depth of poverty but does nottake into account the distribution of income amongst the poor. Severity of poverty is the squareof poverty gap. It is sensitive to distribution of among the poor as more weight is given to thepoorest below the poverty line.4 Poverty comparison4.1 Spatial poverty comparisonNational povertyIt is useful to examine how poverty rates vary across regions and over time. Comparison ofpoverty across regions helps in targeting poverty alleviation programmes to meet the needs of thepoor while over time it is useful for policy makers to monitor the effectiveness of pastprogrammes in reducing the intensity of poverty among various socioeconomic groups of thepoor.4 14. Though this paper presents poverty estimates for 1992-93, 1993-94, 1996-97, 1998-99 and 2000-01 but the main focus is on 2000-01.There are three main poverty measures that are used for poverty analysis. They includeheadcount, poverty gap and severity of poverty.The poverty estimates have increased over Figure 1: Poverty rates over timethis period with the exception of 1996-97 40.0034.46 31.08 28.17where a decline has been observed. The30.0025.4625.78% 20.00incidence of poverty at national level was10.004.275.22 4.38 6.587.031.10 1.44 1.142.062.13around 25 percent in 1992-93 which has 0.00 1992-93 1993-941996-971998-99 2000-01increasedsignificantlyover time,Head countPoverty gap Severity of povertyamounting to 34 percent approximately in2001, indicating an increase of 9 percentage points.The last two surveys (PIHS 1998-99 & 2000-01) reveal that the proportion of population underpoverty line has increased from 31.08 percent to 34.46 percent depicting an increase of 3.38percentage points. Changes in headcount ratio between years are statistically significant exceptbetween 1992-93 and 1996-97 when, they are statistically insignificant (Appendix C).Similarly, a substantial rise in poverty gap and severity of poverty occurred between 1992-93and 2000-01. Poverty gap was 4.27 percent in 1992-93 compared to 7.03 percent in 2000-01.Severity of poverty has increased from 1.10 percent to 2.13 percent over this period. Changes inpoverty gap and severity of poverty between years are statistically significant except between1992-93 & 1996-97 and 1998-99 & 2000 (Appendix C).Between 1998-99 and 2000-01 poverty gap increased form 6.58 percent to 7.03 percent andseverity of poverty from 2.06 percent to 2.13 percent. A sharp rise in headcount compared to thepoverty gap and severity of poverty over the last two surveys reveals that a substantial proportionof poor population lies close to the poverty line and they are most likely to cross it in thepresence of better performance of the economy.5 15. Table 1: Poverty indices by province and regionRegion and1992-93 1993-94 1996-97 1998-99 2001-02 province HIESHIESHIESPIHSPIHSHeadcount ratioUrban areas19.9915.39 15.84 21.37 22.69Punjab 21.2417.01 16.61 24.24 23.33Sindh16.6511.33 11.77 15.57 20.06NWFP 24.3725.31 26.92 27.13 29.05Balochistan30.4415.62 22.98 22.94 26.18Rural areas27.6333.54 30.17 35.13 39.26Punjab 25.3732.95 27.89 34.62 35.86Sindh28.5630.24 19.22 34.00 45.07NWFP 34.9138.22 42.36 43.72 43.61Balochistan26.2136.75 41.61 21.34 37.45Overall25.4628.17 25.78 31.08 34.46Punjab 24.2528.55 24.66 31.62 32.24Sindh23.2921.50 15.39 26.01 35.32NWFP 33.6236.37 40.23 41.28 41.47Balochistan26.7734.36 37.69 21.55 35.49Poverty gapUrban areas 3.43 2.742.414.274.55Punjab3.71 3.222.605.045.23Sindh 2.74 1.821.602.793.32NWFP4.41 4.204.515.665.22Balochistan 4.82 2.143.533.954.52Rural areas 4.60 6.255.257.558.04Punjab4.40 6.474.907.537.48Sindh 5.03 5.183.037.27 10.03NWFP4.94 6.537.339.477.86Balochistan 4.28 6.728.023.766.35Overall 4.27 5.224.386.587.03Punjab4.21 5.574.246.816.83Sindh 4.02 3.632.295.327.41NWFP4.87 6.196.948.917.47Balochistan 4.35 6.207.073.796.03Severity ofpovertyUrban areas 0.890.69 0.601.291.35Punjab0.950.87 0.681.581.68Sindh 0.700.40 0.330.730.84NWFP1.291.05 1.131.891.35Balochistan 1.130.43 0.941.031.14Rural areas 1.181.76 1.392.382.44Punjab1.151.90 1.332.392.34Sindh 1.401.47 0.722.333.19NWFP1.111.63 1.892.982.09Balochistan 1.071.70 2.291.021.53Overall 1.101.44 1.142.062.13Punjab1.091.61 1.132.152.15Sindh 1.090.97 0.521.642.27NWFP1.131.55 1.782.821.98Balochistan 1.081.56 2.011.021.466 16. In absence of any formal modeling of determinants of poverty due to very few discontinuousobservations, one can conjecture that the following factors may be responsible for an increase inpoverty during this period are low GDP growth rate, public finance crisis, problem of externalfinance, decrease in formal employment opportunities due to privatization of government ownedenterprises and downsizing in public sector, cut in subsidies and sharp rise in utility rates.When we analyze the dip in poverty rates in 1996-97 we get some piece of information that maybe helpfulin understanding the Figure 2: Headcount ratio and agriculture growthsituation. Given the primary role ofagriculture sector in the rural economy, 40 15 30 10its performance is likely to be critical in%5% 200explaining the observed trends in rural10 -5 0-10poverty.Agriculturegrowth rate293 -94 -95 -96 -97 -98 -99 -00 -01 -02 1-9 2- 3 4 5 6 7 8 9 0 1appears to affect poverty with one-year1 99 199 199 199 199 199 199 199 199 200 200lag as is evident from the Figure 2. A Headcount(left scale) Agriculture growth rate (right scale)good performance of agriculture in1995-96 may be one of the causes leading to reduction in poverty in 1996-97. Moreover, wagerates also have an effect on poverty. Weighted average of nominal growth of labour wages(unskilled labour) in the construction sector in the 12 biggest cities of Pakistan was remarkablyhigher in 1996 and 1997 compared to other succeeding years. The rate of growth was around 17percent in 1996 and 1997 followed by 5.79 percent in 1998, 6.52 percent in 1999, and 4.12percent in 2000 and 1.70 in 2001. Furthermore, household size in 1996-97 was lower than 1993-4 by 0.2 person. Apparently it is underestimated in rural Sindh where very few householdsindicated servants and other relatives as household member when the definition of householdmember is the same for all these household surveys. Rural poverty in Sindh is underestimated asit is 19 percent in 1996-97 compared to 30 percent in 1993-94 and 34 percent in 1998-99.Poverty comparison by urban and rural areasPoverty reduction policies aim to reach disadvantaged groups and backward areas effectively andefficiently. Poverty profile is useful in targeting development resources towards poor areas. 7 17. Which region should be given priority in targeting? Poverty estimates provide an easy answer tothis question. Incidence of poverty indicates Figure 3: Incidence of poverty by regionthat rural areas have more poverty than urban 50areas and rural poverty has increased faster 39.26 40 33.5435.1327.63 30.17than urban poverty. The difference in the30 % 2021.37 22.6919.99 10 15.36 15.84incidence of poverty between urban and rural0areas was around 8 percentage points in 1992-1992-93 1993-94 1996-971998-99 2000-0193, which doubled in 2000-01. Headcount ratio Urban Ruralwas about 20 percent in urban areas in 1992-93and it rose approximately to 23 percent in 2000-01 depicting a moderate increase of 3 percentagepoints over this period. Even between 1998-99 and 2000-01 incidence of poverty in urban areasincreased marginally from 21.37 percent to 22.69 percent. Similarly, poverty gap and severity ofpoverty experienced slight rise over the period.Rural areas depict a remarkable rise of around 12 percentage points in headcount ratio from27.63 percent in 1992-93 to 39.26 percent in 2000-01. Poverty gap and severity of povertyalmost doubled during this period. Changes in poverty rates between urban and rural areas arestatistically significant over the period (Appendix C).The magnitude of regional contributions to national poverty depict that about 81 percent of allthe poor are concentrated in rural areas while the share of rural areas in total population is 71percent (Figure 4).Poor are concentrated in rural areas. It is important that rural livelihoods are improved in orderto ensure that growth benefits the poor. Figure 4: Incidence of poverty and contribution tototal poverty by region, 2001This implies that agriculture growth is aprecondition in order to improve the 120 100 10080.94livelihoods of the poor in rural areas80%6039.26 34.46because agriculture accounts for about4022.69 19.062023 percent of GDP, 41 percent of labour0 OverallRuralUrbanforce and provides a livelihood forHeadcount Contribution to total povertyabout two-third of population. Thepolicy agenda may involve improvement in access to land, agricultural productivity, priceincentives 8 18. and credit arrangements. There is also a critical need for major improvement in ruralinfrastructure improved water supply, better irrigation and road facilities, communications andmore effective research and extension activities. Moreover, the inequality in land distribution andthinness of agricultural labour markets suggest that the non-formal sector is very important forenhancing the earning power of the poor. So public policy should also improve opportunities inthe labour-intensive non-formal sector.Poverty comparison by provincePoverty increased in all provinces from 1992-93 to 2000-01. Headcount ratio was highest inNWFP (33.62 percent) in 1992-93 and it maintains its position in 2000-01 with 41.47 percent.Incidence of povertyincreased sharply inFigure 5: Incidence of poverty by provinceSindh and Balochistan between 1998-9950and 2000-01. In Sindh headcount ratio40 30 %increased from 26.01 percent to 35.3220 10depicting a rise of 9 percentage points over 0this period. Balochistan experienced a steepPunjabSindhNWFP Balochistanrise of 14 percentage points in headcount1992-93 1993-94 1996-971998-99 2000-01ratio over this period from 21.55 to percent 35.49 percent. This sharp rise in poverty in Sindh andBalochistan is the outcome of drought that affected badly the rural areas of these two provincesduring this period. Rural poverty rose steeply in Sindh and Balchistan between 1998-99 and2000-01 from 34 percent to 45 percent and 21 percent to 37 percent respectively. Changes inheadcount ratio in rural areas between 1998-99 & 2000-01 are statistically significant in Sindhand Balochistan (Appendix C).Drought had more significant effect on rural areas in Sindh and Balochistan than on Punjab andNWFP. Between 1998-99 and 2000-01 production of wheat and rice decreased by 17 percentand 13 percent respectively in Sindh, that affected rural poverty (Pakistan Statistical Yearbook2002). Balochistan was also badly affected by drought and it experienced steep rise in ruralpoverty from 21 percent in 1998-99 to 37.45 percent in 2000-01.9 19. Poverty remained stable in Punjab and NWFP between 1998-99 and 2000-01. Between these twoyears production of cotton, wheat and rice increased by 29 percent, 17 percent and 18 percentrespectively in Punjab. In NWFP wheat production decreased but this reduction was offset byincrease in maize crop (Pakistan Statistical Yearbook 2002). Changes in poverty rates arestatistically insignificant in Punjab and NWFP between the last two surveys (Appendix C).As far as the contribution tototal poverty is concerned, Figure 6: Incidence of poverty and contribution tototal poverty by province, 2001Figure 6 indicates that Punjab 120province contributed around 52 100.00 100percent to totalpoverty, 8052.48 % 60 41.47followedbySindh (26.16 40 34.4632.2435.32 35.4926.1616.80percent),NWFP (16.80 20 4.560percent) and Balochistan (4.56 OverallPunjabSindhNWFP Balochistanpercent).Theevidence HeadcountContribution to total povertysuggests that poverty reductionstrategies should focus on rural Punjab and rural Sindh that are the habitat of majority of the poorpopulation.Checking the robustnessIn order to design poverty reduction strategies, policy makers are interested in whether povertyhas increased or decreased and which areas/regions have more poverty. Sensitivity analysisanswers these questions. Sensitivity analysis is undertaken by comparing the ranking ofcumulative distribution functions of welfare indicator over time or region. The lines show thefraction of population on the vertical axis whose per equivalent adult consumption is less orequal to the amount indicated on the horizontal axis. If a cumulative distribution function forexample A in one year or one region attaches a higher proportion of the population to each peradult equivalent consumption level compared to another cumulative distribution function forexample B then distribution A has more poverty than distribution B independent of anypoverty line. The finding of more poverty in distribution A is robust.10 20. Figure 7: Cumulative distribution functions of per adult equivalent consumptionexpenditure Pihs01Pihs99 Hies97Hies94 .8 .6F ctio o co su p n ra n f n m tio2001.41998-99 1993-94.2 1996-9702505007501000Per adult equivalent consumption expenditureThe Figure 7 presents the cumulative distribution functions of the welfare indicator for differentyears where per adult equivalent consumption expenditure is expressed at the prices of 2000-01.The cumulative distribution functions present robust results as the curves dont cross each other.Ranking of these distributions dont change what ever poverty line is used.It shows that the distribution of per adult equivalent consumption expenditure for 1996-97 liesentirely below and to the right of other distributions followed by 1993-94, 1998-99 and 2001. Inother words, poverty was lowest in 1996-97 and highest in 2001 whatever poverty line is set.Focussing on inter-region distribution in 2001, distribution of rural areas dominates thedistribution of urban areas indicating more poverty in rural areas than urban areas (Figure 8).Cumulative distribution functions of provinces (Figure 9) cross each other at several points and itis not possible to distinguish their welfare rankings. 11 21. Figure 8: Cumulative distribution functions of per adult equivalent consumptionexpenditure by region, 2001UrbanRural .6 Rural Fraction of population .4Urban .2 0250 500750 1000Per adult equivalent consumption expenditureFigure 9: Cumulative distribution functions of per adult equivalent consumption expenditure by province, 2001PunjabSindhNWFPBalochistan.8 Balochistan.6 Fraction of consumptionNWFP.4Sindh Punjab.20250500750 1000 Per adult equivalent consumption expenditure 12 22. It is argued that use of different equivalent scales change correlation between poverty andhousehold size. To answer this issue, we compare the cumulative distribution functions ofhousehold of different composition and again compare them by applying different equivalentscales. As expected Figure 10A presents robust results indicating poverty increases as thehousehold size rises. Households with 1-2 persons are richer than other households. On the otherside households with persons 8 and/or above have higher poverty. These results dont changewhat ever poverty line is used.In Figure 10B households with two adults and varying number of children are compared andeach individual has equal weight. While in figure 10C children under age 18 have weight 0.6meaning children below 18 years need 60 percent of the consumption of an adult.The Figure 10B and 10C depict that household with two adults and no children are richer. As thenumber of children increases, poverty also increases. The results hold true throughout thedistribution. The distributions dont cross each other suggesting that larger households are poorerand use of different scales dont reverse the ranking.Figure 10A: Cumulative distribution functions of per adult equivalent consumption expenditure by household size, 2001 hhsize1hhsize2 hhsize3hhsize4.8 8 + Persons 5-7 Persons.6 Fraction of population3-4 persons.4.2 1-2 Persons0 250 5007501000 Per adult equivalent consumption expenditure13 23. Figure 10B: Cumulative distribution functions of per adult equivalent consumption expenditure of households with adult and different equivalent scales, 2000-01 (Equal weight) hhsize1hhsize2 hhsize3hhsize4.8 2 adults + 5 children.6 2 adults + 4 children Fraction of population 2 adults + 3 children 2 adults + 2children.4.2 2 adults + 1 child 2 adult0 250 500 750 1000Per capita consumption expenditureFigure 10C: Cumulative distribution functions of per adult equivalent consumptionexpenditure of households with adult and different equivalent scales, 2000-01 hhsize1hhsize2 hhsize3hhsize4.8hhsize5hhsize6.62 adults + 5 childrenFraction of population 2 adults + 4 children2 adults + 3 children.42 adults + 2 children.22 adults0 250500 7501000 Per adult equivalent consumption (children=0.6 ) 14 24. PIHS 2001 is the latest household survey available and it provides rich information aboutdifferent socioeconomic indicators. This data set has been used to identify the differentdimensions of poverty and characteristics of the poor.4.2 Poverty comparison by household characteristicsTable 2 presents head count ratio by household characteristics, which are useful for povertycomparison.4.2.1Poverty by household sizeThe impact of household size on poverty is well established. As the household size increases sodoes poverty. PIHS 2001 corroborates that larger households have higher incidence of povertythan smaller ones. The incidence of poverty is highest (49 percent) in households consisting of11 persons or higher and it is lowest (2.72Figure 11: Headcount ratio by household size, 2001percent) if household size is one. Head UrbanRural Overall60count ratio increases monotonously as the50household size increases. There are wide40%30differences in the incidence of poverty when20compared by urban and rural areas. Larger 100households are likely to have more young 12 3 45 6 7 8910 >=11children, which pose financial burden on theHousehold sizehouseholds due to high cost of educationand health.Another way of looking at the distribution ofFigure 12: Contribution to total povertypoverty is in terms of the contribution of 35different size of households to national 30Poverty. Table 2 indicates that households 25 20consistingof 11 persons or greater % 15contribute 34 percent approximately to total 10 5national poverty whereas households with 012345 6 7 8 9 10>=11size 6 or lower contribute around 16 percent.Household sizeSince larger households tend to have higher 15 25. Table 2: Incidence of Poverty by household characteristics, 2001Household UrbanRural OverallPercentage of: Characteristicsareasareas PopulationPoorNon-poor Household size 1 Person00.00 04.50 02.72 00.16 00.0100.24 2 Persons 00.69 04.27 03.23 01.37 00.1302.02 3 Persons 03.17 12.01 09.47 02.89 00.7903.99 4 Persons 05.08 16.34 13.30 05.85 02.2607.74 5 Persons 09.28 21.36 17.21 09.23 04.6111.66 6 Persons 14.33 25.88 22.44 11.97 07.8014.17 7 Persons 19.09 39.73 33.88 13.47 13.2413.59 8 Persons 20.84 43.80 37.05 12.60 13.5512.10 9 Persons 30.93 44.66 40.99 10.79 12.8409.71 10 Persons34.39 51.95 46.65 07.99 10.8206.50 >=11 Persons37.23 54.06 49.42 23.68 33.9618.27 Overall 22.69 39.26 34.46100.00100.00 100.00 Dependency ratio Ratio = 1.0 05.93 10.99 10.0001.1900.34 01.64 1.0< Ratio