1. Making Transition Work for Everyone: Poverty and Inequality in ECA
4/28/2019
Making Transition Work for Everyone: Poverty and Inequality in ECA
Poor woman with winter food supply; rural Tajikistan

2. Why a Study on Poverty and Inequality?
4/28/2019
Why a Study on Poverty and Inequality?
Beginning of transition, we expected poverty would increase, but be shallow and short-lived…but:
Poverty increased dramatically: from 2% in 1988 to an estimated 21% in 1998!
Inequality also increased: five CIS countries have levels of inequality approaching the most unequal countries in Latin America (greater than Peru)
Poverty is pain; it feels like a disease. It attacks a person not only materially but also morally. It eats away one’s dignity and drives one into total despair (a woman from Moldova)

3. The Experience of Poverty in ECA
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The Experience of Poverty in ECA
Fall in living standards in context of profound changes in political, social and economic life
Voices of poor: lack of income or income insecurity is number one concern
Psychological pain as devastating as material hardship
Poverty is not easy to discuss
Imagine traveling along in a car for seventy years, and suddenly the road disappears and your car crashes. You don’t know where to go --Kyrgyz Republic

4. 4/28/2019
How Many Poor?
Absolute poverty significant in IDA countries and Russia; but relative poverty is a problem everywhere

5. 4/28/2019
Who is at Greatest Risk?
Households with unemployed heads (especially in Central Europe)
Multi-child households but NOT the elderly
Rural households (especially in Central Europe)
Some localized areas or regions (e.g. Northeast Romania; East Ukraine; Imereti region Georgia ).
But the majority of the poor are working, and live in urban areas.
Unemployed man engaged in petty trade; Armenia.

6. 4/28/2019
Children are at greater risk than elderly, especially in Central Europe

7. Capabilities of the Poor Endangered
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Capabilities of the Poor Endangered
In some countries poor children not attending school, poor areas not well served
Corruption a growing problem in health and in education, hurts the poor most
Insufficient attention to nutritional deficiencies, communicable diseases
My children cannot go to school because, without them, I wouldn’t be able to gather enough cardboard every day (Moldova).
Poor woman with stomach cancer, Armenia. Cannot afford health care.

8. Why Did Poverty Increase?
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Why Did Poverty Increase?
Output collapse key-- but magnitude varied across region
Collapse of output experienced by households as decline in employment and wages
….but also as a fall in social transfers (especially in CIS)
Increasing inequality also important factor
Decline output  Falling Wages and Incomes (especially marked in CIS).

9. 4/28/2019
Increases in Inequality: Small in Central Europe, Larger in FSU Countries

10. What Explains the Rise in Inequality?
4/28/2019
What Explains the Rise in Inequality?
Not reforms per se  countries further on reform path have lower inequality
In CSB, rising education premiums and emergence of entrepreneurs …. but taxes and transfers dampened increase
But not the case in the CIS.

11. What About the Increase in Inequality in the CIS?
4/28/2019
What About the Increase in Inequality in the CIS?
Rising education premiums explain very little of inequality in CIS.
Causes lie elsewhere:
widespread corruption and rents
capture of the state by vested interests that have influenced policy to their advantage
resulting collapse of formal wages and income opportunities
Result: polarized society where entrenched economic interests control policy agenda  leads to very unequal outcomes .

12. Public Action to Reduce Poverty
4/28/2019
Public Action to Reduce Poverty
Large variation in policy, performance, income and vulnerabilities across countries
Forward-looking policy agenda has to be country and region-specific
But common themes exist; and less advanced reformers have much to gain from experience of those further on the transition path.

13. Key Building Blocks Build effective and inclusive institutions
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Key Building Blocks
Build effective and inclusive institutions
Provide conditions for shared growth
Protect the poor and vulnerable
Reduce inequality and enhance opportunities for the poorest
Tackle state capture; build communities; give voice
Stimulate labor demand and private sector environment; build capabilities of the poor
 Help the destitute; ensure long-run equality of opportunity for poor children; balance protection, efficiency
Reduce rents;measure to aid those at bottom, lagging regions; anti-discrimination

14. Advanced Reformer; High Income (e.g. Poland, Hungary, Czech Rep.)
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Advanced Reformer; High Income (e.g. Poland, Hungary, Czech Rep.)

15. Less Advanced Reformer; Middle Income (e.g Russia, Romania)
4/28/2019
Less Advanced Reformer; Middle Income (e.g Russia, Romania)

16. Less Advanced Reformer; Lower Income (e.g. Caucasus, Tajikistan)
4/28/2019
Less Advanced Reformer; Lower Income (e.g. Caucasus, Tajikistan)