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BDS Current Issue Volume XXXVII March-June 2014 Num. 1&2

Microfinance Growth and Poverty Reduction in Bangladesh: What Does the Longitudinal Data Say?

Author: Shahidur R. Khandker & Hussain A. Samad

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This study investigates the long-term effects of microcredit programs, which have been operating in rural Bangladesh for over 20 years, on household income, expenditure, and poverty. The analysis shows that continuous participation in microcredit programs has helped participant households earn higher income and consume more, thereby lifting many of them out of poverty. Our estimates suggest that poverty reduction, in particular the reduction of extreme poverty, due to microcredit intervention accounts for more than 10 percent of the total reduction in extreme poverty in rural Bangladesh over the 2000-2010 decade.

Household Food Security in Bangladesh: Going beyond Poverty Measures

Author: Atonu Rabbani

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In this paper, we analyze changes in the dietary diversity scores of the Bangladeshi population over time. Our results show that although there was a clear increase in real per capital consumption expenditure in Bangladesh between 2005 and 2010, the dietary diversity of Bangladeshis showed no sign of improvement over the same period. Moreover, while poor families typically report a lower dietary diversity than non-poor households, irrespectively of their poverty status, households in Bangladesh limit their food consumption to an inadequate number of food items. Unlike dietary diversity, dietary vulnerability is significantly more prevalent among poor households, suggesting that point-in-time measures of consumption are likely to underestimate chronic deprivation in dietary quality. Given the importance of dietary adequacy and vulnerability, particularly among women and children, we conclude that the policy dialogue should pay special attention to the dietary patterns of the Bangladeshi population, going beyond the focus on short-term expenditure-based measures of nutritional status.

Household Exposure to Food Price Shocks in Rural Bangladesh

Author: Hanan G. Jacoby & Basab Dasgupta

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Recent food price volatility has led to concerns about the exposure of the rural poor in Bangladesh to food price shocks. Yet, higher prices could also lead to improved terms of trade for sellers and higher rural wages for agricultural workers, both of which are likely to benefit the poor from rural areas. Our analysis shows that rural wages in Bangladesh responded positively to higher crop prices over the last decade. Moreover, using a general-equilibrium-consistent welfare index that accounts for such wage gains, we show that far from falling hardest on the poor the burden of higher food prices has been closer to being distributionally neutral.

Inflation for the Poor in Bangladesh: A Comparison of CPI and Household Survey Data

Author: Lea Giménez & Dean Jolliffe

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In most countries, the consumer price index (CPI) is used to measure inflation and is typically based on national-level price data reflecting purchasing patterns of the average consumer. Adjusting for inflation allows one to compare consumption levels over time in real values. In principle, the same information can be provided by changing the values of “cost-of-basic-needs” (CBN) poverty lines. Poverty lines should ideally reflect the minimum cost of meeting some fixed measure of basic needs or some fixed level of utility. Currently, in Bangladesh, a substantial divergence exists between inflation, as measured by the CPI, and the increasing cost of minimum needs, as measured by changes in national poverty lines over time. It is not clear, a priori, which measure of changing costs is better suited for the purposes of the analyses undertaken in the assessment of poverty. This paper uses the Household Income and Expenditure Survey (HIES), a nationally representative household survey, to assess which of the two measures is more informative in the case of Bangladesh. Our survey-based evidence indicates that the changing costs of living, as experienced by the average Bangladeshi, are better proxied by the changes in poverty lines. 

Understanding Poverty Reduction in Bangladesh: A Micro-Decomposition Approach

Author: Gabriela Inchauste & Sergio Olivieri

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We quantify the contributions to poverty reduction observed in Bangladesh between 2000 and 2010. In contrast to methods that focus on aggregate summary statistics, the method adopted in this paper generates entire counterfactual distributions to account for the contributions of demographics, labor and non-labor incomes in explaining poverty reduction. We find that the most important contributor to poverty reduction was the growth in labor incomes, stemming from non-farm employment in the first half of the decade, and from farm employment during the second half of the decade. Labor income growth was driven by higher real wage premiums, pointing to productivity increases and an increase in the relative price of labor as the driving forces behind poverty reduction. Lower dependency rates and the benefits of a growing work force also helped to reduce poverty. Finally, non-labor income contributed to poverty reduction, albeit to a smaller extent, particularly in the form of international remittances. Going forward the main challenges will be to continue to provide jobs to a growing workforce and to ensure that new job creation is resilient to sudden changes in relative prices.

Bangladesh, a Middle Income Country by 2021: What Will It Take in terms of Poverty Reduction?

Author: Lea Giménez, Dean Jolliffe & Iffath Sharif

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The Vision 2021 and the associated Perspective Plan 2010-2021, adopted by the Government of Bangladesh, lay out a series of development targets for 2021. Among the core targets identified to monitor the progress toward the Vision 2021 objectives is that of attaining a poverty headcount of 14 percent by 2021. The purpose of this paper is to answer the following question: Given Bangladesh’s performance in poverty reduction over the last decades, can we expect the proportion of the country’s population living in poverty to be 14 percent by 2021? Using data from the last three Household Income and Expenditure Survey, we examine changes in poverty rates during 2000-2010, estimate net elasticity of poverty reduction to growth in per-capita expenditure, and then project poverty headcounts into the future. Our poverty projections based on the last three HIES surveys suggest that Bangladesh will achieve its MDG goal of halving its poverty headcount to 28.5 percent by 2015 significantly ahead of schedule. Attaining the Vision 2021 poverty target of 14 percent by 2021, however, is less certain as it requires a GDP growth of at least 8 percent, or more than 2 percentage points higher than that observed in recent years.

A Decade of Progress in Reducing Poverty: An Introduction to the Special Issue.

Author: Dean Jolliffe, Mustafa Mujeri & Iffath Sharif

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The 2000-2010 decade is perhaps the most remarkable period in Bangladesh’s history in terms of growth and poverty reduction. During this period, the real GDP growth in Bangladesh was nearly 6 percent per year on average and the poverty headcount rate fell by about 1.7 percentage points per year, from 49 percent in 2000 to 31.5 percent in 2010. During this decade, Bangladesh also attained the depth-of-poverty Millennium Development Goal (MDG) target of 8 percent at least five years ahead of schedule, and was set in the right path for achieving the first poverty MDG goal of halving the poverty headcount to 28.5 percent by 2015. The country experienced similar improvements in other socio-economic indicators, consistently achieving better health outcomes, improved access to services, better living conditions, and increased literacy. Not too long ago being referred to as the “basket case,” the country now sets eyes on a new goal, that of becoming a middle income country by 2021.

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