Working paper abstract

#2012-064

Chronic and transitory poverty in the Kyrgyz Republic: What can synthetic panels tell us?

Franziska Gassmann & Mira Bierbaum

The Kyrgyz Republic has enjoyed remarkable success in poverty reduction in recent years. Poverty headcounts were halved between 2005 (63.9 per cent) and 2008 (31.3 per cent), before they slightly increased again to 33.7 per cent (2010). However, these aggregate figures mask individual or household trajectories into and out of poverty. Additionally, the question arises as to who has remained poor for an extended duration, i.e. has been chronic poor. Since the panel component of the Kyrgyz Integrated Household Survey suffers from shortcomings, a synthetic panel based on repeated cross-sections is created to investigate poverty persistence and dynamics between 2005 and 2010, following an approach proposed by Dang, Lanjouw, Luoto, and McKenzie (2011).

The share of chronic poor ranges between 23.6 per cent-31.5 per cent; that is to say, 74.8 per cent-80.2 per cent of the people classified as poor in 2010 have experienced it for an extended duration. At least two chronic poverty traps are identified: Spatial disadvantages occur in the rural oblasts of Jalal-Abad, Talas, and Naryn that are characterized by adverse topography and low levels of human capital. Moreover, poor work opportunities, particularly employment in informal, low-paid sectors with high income-insecurity, hinder escapes from poverty. These spatial and social traps coincide. Few people fell into poverty between 2005 and 2008, but the picture is more volatile in the years following the fuel and food crisis and the global financial and economic crisis. People employed in informal sectors are more vulnerable to economic downturns, leading to questions regarding the scope, extent and level of existing social safety nets.

Keywords: chronic and transitory poverty, synthetic panel, Kyrgyz Republic