1. Dynamics of Regional Poverty and Real Wages: Policy Implications for Development Interventions Professor Shamsul Alam Member(Senior Secretary) General Economics Division Planning Commission Dr. Kazi Iqbal, Senior Economist, SSIP,GED 1

2. Motivation Regional poverty dynamics and its drivers have received very little attention in the literature - Lack of appropriate data - Poor understating of the role of regional variations of poverty dynamics in the preparation of regional policies and development interventions At aggregate level we have no dearth of Studies : -Aggregate level analysis often masks some important regional facts -Spatial analysis is an important tool for local and regional planning 2

3. Objective of the study Uncover some stylized facts about the regional poverty dynamics Illustrate some stylized facts about the regional wage dynamics Association between regional poverty and wage dynamics 3

4. Data Sub-district wise poverty data: BBS-WFP (2005, 2010) Wage data: -Aggregate data : Monthly Statistical Bulletin, BBS -Sub-district level: Community Modules of HIES, 2005 and 2010 -District Statistics, 2011 (BBS, 2013) 4

5. Stylized facts about the sub-district level poverty dynamics Based on: Maps of changes in poverty (upper and lower lines) 20 most poverty stricken sub-districts (lower poverty line), 2010 and 2005 20 most poverty stricken sub-districts (upper poverty line), 2010 and 2005 20 sub-districts with highest proportion of extreme poor in total poor, 2010 and 2005 Top 20 sub-districts with highest rate of poverty reduction in 2005-2010 Top 20 sub-districts with highest increase in poverty in 2005-2010 5

6. Changes in poverty (lower and upper lines) 6

7. Table: Top 20 poverty stricken Sub-district (lower poverty line), 2010 and 2005 7

8. Table: 20 most poverty stricken Sub-districts (upper poverty line), 2010 and 2005 8

9. 1.Regional distribution of changes in poverty rate is more or less same for both upper and lower poverty lines. 2.In the North-west region poverty rate has decreased in almost all sub-districts. 3.A substantial number of sub-districts experienced an increase in moderate and extreme poverty. 4.Increase in Poverty is higher in the Eastern part than in the Western part of the country. 9

10. 5. There are three distinct regions where poverty has increased significantly–greater Sylhet region, Mymensingh region and Meghna Basin. 6. Though the rate of poverty has declined, North-west is still the most poverty stricken region in the country. 7. Most of the poor are extreme poor in greater Sylhet region. 8. Hill-track region is no longer in the list of twenty most poverty stricken sub-districts. 10

11. Wage Dynamics: Aggregate and regional Real wage in agriculture 11

12. Now an agricultural labor can buy about 10 kg of coarse rice with his daily wage, which was below 6 kg of rice just about five years ago. Economy may have reached ‘Lewis’ tipping point’ (Lewis, 1954), beyond which the wage increases very fast. The shrinking share of households with main occupation of agricultural wage labor indicates strongly about the waning of surplus labor (Hossain and Bayes, 2009). 12

13. Three major factors behind this sharp increase in the real wage I. Tightening of rural labor market Reallocation of labor from farm to non-farm Reallocation of labor from wage-labor to own-farm II. Increase in labor productivity mechanization of agriculture, adoption of HYV/hybrid crops and modern irrigation systems Real wage is catching up the higher productivity of labor (Osmani, 2015) III. Stable and moderate food inflation 13

14. Regional wage dynamics: Some stylized facts There is a wide variation of real wage across regions Mean (8.54 kg of coarse rice), standard deviation (3.36), highest (Gurudaspur of Natore 22.5), lowest (Durgapur of Netrokona 4.29 kg ) [BBS, 2011] 14

15. Stylized facts…. Some sub-districts of Chittagong and Natore have the highest real wages Real wages in Northern sub-districts are among the lowest There are distinct pockets of high and low real wages 15

16. Association between poverty and real wages 16

17. Regression results: dependent variable: poverty rate 17

18. Regression results OLS results for 2005: One more kilogram (rice) increase in real wage is associated with reduction of poverty by about 2 percentage points. OLS results for 2010: one more kg (rice) increase in real wage is associated with 1-1.5 percentage point reduction in poverty. Panel: One kg (of coarse rice) increase in real wage is associated with about 4 percentage point decrease in poverty rates 18

19. Conclusion and policy implications for development interventions Spatial poverty dynamics is an important tool for effective development intervention. Spatial distribution of rural real wages can be a good indicator for intervention. Ranking of the sub-districts in terms of poverty and its dissemination among development practitioners are important for greater attention. It is imperative to understand why poverty pockets exist for effective intervention. Knowledge on regional distribution of safety nets is essential for understanding regional poverty and this may be studied further. Knowledge on regional distribution of ADP is essential for understanding regional poverty and this may also be studied further. Local level poverty estimates should be used with care. Top-down Planning and governance structure may be resource wasting and time consuming to redress regional Poverty Pockets. 19

20. Thanks 20