Inter-Generational Transfer of Household Poverty in KwaZulu Natal: Evidence from KIDS (1993 – 2004) Antonie Pool University of the Free State TIPS Conference, Cape Town October 2008

Outline of paper  Literature review  Data  Methods  Results  Conclusion and policy recommendations

Background & Literature Poverty alleviation is focus of many policy frameworks (MDG’s, ASGISA) MDG’s  ½ poverty by 2015 ASGISA  ½ poverty by % of Africans & 15% of Indians still live in poverty (UNDP, 2004) Poverty = when a person/household cannot attain a reasonable minimum level of economic wellbeing (Ravallion, 1994). Require knowledge of poverty determinants to achieve goal of halving poverty by 2014 Problem is the existence of poverty traps  60% of SA’s poor households are caught in a structural poverty trap (Carter & May, 2001)  Inter-generational-transfer of poverty also a poverty trap

Aims of the study  What determines the poverty status of a Dynasty household?  What influence does the background (transitions) of a household have on the probability to be poor? (IGT poverty)  What can be done to ensure the goal of halving poverty by 2014 is reached – given the regression results?

Data  Kwa-Zulu Natal Income Dynamics Study (KIDS) data  Longitudinal survey following a random sample of individuals who lived in KZN in  Survey done in 3 waves 1993, 1998, 2004 In 1998 & 2004, only re-interviewed Africans & Indians  2004  Due to aging & effect of HIV/AIDS  Include Next Generation & Foster households  Study focuses on all these wave  To look at the determinants of poverty in Dynasty households and the role of Core characteristics.

Method  Divided 2004 data between “core” & “dynasty” households Where dynasty households represent the split-off “next generation” & ”foster” households of the core households

Method - continue  Income Poverty  All those households that fall below the pre-defined poverty line Poverty line = R250 p/person per month (2000 prices) (Van der Berg & Louw, 2004) Used CPI to inflate poverty line to 1993, 1998 & 2004 value Used adult equivalent household sizes Compared household poverty line based on household expenditure

Method - continue  Regression analyses  Firstly used Panel data to determine dynamic variables, followed by a cross sectional Probit model estimation Indicate the effect of each independent variable on the probability that a Dynasty household is poor (HHSize = 0.05  For every 1 additional member in the hh, the probability to be poor increases by 5%) This identify the distinction of core dynamics versus dynasty characteristics as the main determinants of poverty

Household level of poverty Difference between 2004 dynasty- & 1993 core households significant at 10% level of significance. Differences between 2004 dynasty- & both the 1998 & 2004 core households significant at 1% level of significance.

Levels of education (1993Core & 2004 Dynasty)

Poverty status of core households ( )

Regression Analyses - The model

Regression Results – Dynasty Characteristics * 10% level of significance; **5% level of significance; *** 1% level of significance

Regression Results – Core Characteristics

* 10% level of significance; **5% level of significance; *** 1% level of significance Regression Results – Pooled models

* 10% level of significance; **5% level of significance; *** 1% level of significance Regression Results – Intergenerational Transfer of Poverty (ITP) (Poverty | X)(dF/dx) hhsize_Dynasty0.0302** Dependants_Dynasty0.0350* TransitoryPoor0.1487*** ChronicallyPoor0.4131*** Obs446 Wald chi (0.0000) Pseudo R Correctly classified80.04% Std.errors adjusted for clusters276

* 10% level of significance; **5% level of significance; *** 1% level of significance Regression Results – Intergenerational Transfer of Poverty (ITP) (Poverty | X)(dF/dx) NoSchool_Dynasty0.0771*** Primary_Dynasty0.0430*** Secondary_Dynasty Matric_Dynasty PostSecondary_Dynasty ** TransitoryPoor0.1134** ChronicallyPoor0.3239*** Obs446 Wald chi (0.0000) Pseudo R Correctly classified81.17% Std.errors adjusted for clusters276

Conclusion & Policy recommendations  Household size and the number of dependants in a household have an influence on the probability that a household will be poor.  Surprisingly, employment income has only a small impact on the probability that a household will be poor (Remittance income influence larger) (Maybe due to educational and unemployment profile of group)  Background & change over time (especially in the level of education) play a determinant role in the poverty status of a household  Most important determinant of household poverty is inter- generationally transferred – poverty trap that needs ultimate attention  Those households exposed to IGT poverty – Long-term problem. In these cases, the most important focus must be on education.

Further research:  Interact core/dynasty characteristics to explain why dynasty/core households escaped poverty or not?  The role of migration and net-remittances in poverty.

Thank You