Philippines - Poverty assessment (Vol. 2 of 2) : Methodology

20498 vol. 2 May 31, 2001 PHUIPPINTES POVE RTY AsSESSMENT Volume II: METHODOLOGY The World Bank X X 1 2 e ~~~~~~~~j i   PHILIPPINES POVERTY ASSESSMENT Volume II: Methodology May 31, 2001 Poverty Reduction and Economic Management Unit East Asia and Pacific Region The World Bank  Currency Equivalents (As of May 31, 2001) Currency Unit Peso $1.00 50.58 Pesos 1.00 peso = $0.019 Fiscal Year January 1 - December 31 Jemal-ud-din Kassum Vice President, EAP Vinay Bhargava, EACPF Country Director Homi Kharas, EASPR Sector Director Tamar Manuelyan Atinc, EASPR Task Manager ii  Abbreviations and Acronyms ADB Asian Development Bank APIS Annual Poverty Indicators Survey ASEM Asia-Europe Summit ARMM Autonomous Region of Muslim Mindanao CARL Comprehensive Agrarian Reform Law CARP Comprehensive Agrarian Reform Program CBPIMS Community-Based Poverty Indicators Monitoring System CDA Cooperative Development Authority CDF Cumulative Distribution Function CHED Commission on Higher Education CIDSS Comprehensive and Integrated Development of Social Services CMP Community Mortgage Program CPI Consumer Price Index DAR Department of Agrarian Reform DECS Department of Education, Culture and Sports DENR Department of Environment and Natural Resources DHS Demographic and Health Survey DILG Department of Interior and Local Government DOH Department of Health EGS Employment Guarantee Scheme ERAP Enhanced Retail Access for the Poor FGT Foster-Greer-Thorbecke FIES Family Income and Expenditure Survey GASTPE Government Assistance to Students for Private Education GDP Gross Domestic Product GNP Gross National Product HDI Human Development Index IMF International Monetary Fund IRA Internal Revenue Allotment LG Livelihood Groups LGC Local Government Code LFS Labor Force Survey LGU Local Government Unit MBN Minimum Basic Needs MBN-CBIS Minimum Basic Needs-Community-Based Indicator System MOOE Maintenance and Other Operating Expenditures MTPDP Medium-Term Philippine Development Plan hii  ABBREVIA TIONSANDACRONYM5 NA National Accounts NAPC National Anti-Poverty Commission NCR National Capital Region NEAT National Elementary Achievement Test NEDA National Economic and Development Authority NFA National Food Authority NGO Non-Government Organization NPR National Protection Rate NSAT National Secondary Achievement Test NSCB National Statistical Coordination Board NSO National Statistics Office OL Operation Leasehold OLS Ordinary Least Square OLT Operation Land Transfer PD Presidential Decree PO People's Organizations GR Quantitative Restrictions SIR Slum Improvement and Resettlement SRA Social Reform Agenda SUC State Universities and Colleges SWS Social Weather Stations UNDP United Nations Development Programme US United States WTO World Trade Organization iv  Table of Contents PROFILE OF THE POOR 1 Who Are the Poor 4 Household characteristics 4 Determinants of living standards 8 Regional dimension and social indicators 9 What Does It Mean To Be Poor 9 Access to Public Services 11 Endnotes 13 GROWING OUT OF POVERTY? 15 Consumption Poverty 16 Growth, Inequality and Trickle down? 17 Sustained Poverty Reduction? 18 Income vs. Consumption Poverty 19 Social Indicators and Self-rated Poverty 20 Rural-Urban Trends 22 Sectoral Composition of Poverty 24 Regional Disparities 25 Endnotes 31 SOCIAL SERVICES AND THE POOR 33 Education, Labor Markets, and Poverty 33 Patterns of expenditure on education 34 Educationalattainment 36 Labormarket outcomes 39 Health Services and the Poor 45 Endnotes 49 TARGETEDPOLICIESANDTHE POOR 54 Rice Policy 55 Agricultural protection 55 NFA domestic market operations 56 Land Reform and Housing 57 Intergovernmental Transfers 64 Endnotes 70 THE CRISIS AND THE POOR 72 Welfare Impact of the Crisis 73 Government and Household Response 79 Endnotes 86 ANNEX A. CONSTRUCTING ABSOLUTE POVERTY LINES: ADISCUSSION OF METHODOLOGY 90 Household Surveys 90 Poverty Lines 91 Food thresholds 92 Non-food component 93 Real Expenditures and Cost-of-Living Indices 94 ANNEXB. POVERTYAND SOCIAL INDICATORS 100 v  TABLE OFCONTENTS TABLES Table 1.1: Poverty in the Philippines 2 Table 1.2: Who are the poor? 4 Table 1.3: Poverty by class of worker, 1 997 4 Table 1.4: Poverty by sector of employment, 1997 5 Table 1.5: Poverty profile and household characteristics, 1997 7 Table 1.6: Spatial and household characteristics and living standards, 1997 8 Table 1.7: Pattern of spending and behavior for the poor 10 Table 1.8: Housing condition by expenditure decile, 1997 10 Table 1.9: Households and transfers, 1997 10 Table 1.10 : Private transfers benefit the poor, 1 997 11 Table 1.11: Public services and the poor, 1998 11 Table 1.12: Distribution of public infrastructure, barangay level information, 1 998 12 Table Al.1: Definition of variable used in the log consumption model (Table 1.6) 12 Table 2.1: Average living standards, poverty and inequality, 1985-1997 16 Table 2.2: Evolution of select social indicators 21 Table 2.3: Living standard, poverty, and inequality by locality, 1985-1997 23 Table 2.4: Decomposition of inequality in per capita consumption, 1988-97 26 Table 2.5: Convergence of poverty and living standards across provinces, 1988-97? 27 Table A2.1: Trend and seasonal components of variables in the analysis 28 Table A2.2: Correlates of self-rated poverty 28 Table A2.3: Correlates of self-rated poverty lines 29 Table A2.4: Sectoral poverty profile, 1985-1997 30 Table 3.1: Government spending in education, 1997 34 Table 3.2: Direct private cost of education, by education level and income quintile 38 Table 3.3: Rates of return to education and experience 39 Table 3.4: Rates of return to education and experience, by gender 41 Table 3.5: Total government spending on health 45 Table 3.6: Health status and the poor 46 Table 4.1: Nominal protection rates of major agricultural commodities 55 Table 4.2: NFA rice procurement and distribution 56 Table 4.3: NFA rice distribution and poverty across regions 57 Table 4.4: Land distribution status by land type and mode of coverage, 1972-1997 60 Table 4.5. Original tenure status of households who benefited from land reform, 1972-1988 61 Table 4.6: Determinants of income, 1985 and 1998 61 Table 4.7A: Transition matrix for movement in land tenure status between 1971 and 1988 63 Table 4.7B: Transition matrix for movement in land tenure status between 1988 and 1998 64 Table A4.1: Socio-economic characteristics and land tenure status in sample villages across three generations 67 Table A4.2: Household income, assets, and production structure, in sample villages, 1985 and 1998 68 Table A4.3: Impact of the land reform on human capital formation, asset accumulation, and long-term productivity and income 69 i  TABLE OFCONTENTS Table 5.1: Indicators of economic activity and household impact during the crisis 73 Table 5.2: The incidence of crisis-related economic shocks 74 Table 5.3: Impact of the crisis on consumption poverty and inequality 76 Table 5.4: Impact of economic crisis and El Nino 77 Table 5.5: Impact of the crisis on income poverty and inequality 78 Table 5.6: Timeline of the crisis and response 79 Table 5.7: Social sector expenditures, 1997-98 (in 1995 million pesos) 80 Table 5.8: Household responses to crisis 81 Table 5.9: Employment impact of the crisis 82 Table A5.1: Descriptive statistics of model variables (1998 APIS) 84 Table A5.2: The estimated consumption and income models (1998 APIS) 85 Table Annex A.1: Estimates of food thresholds and poverty Lines: Absolute cost-of-basic-needs approach (1997, pesos per capita per year) 95 Table Annex A.2: Mean expenditure, cost-of-living index and living standard, by province (1997, pesos per capita per year) 97 Table Annex A.3: Regional cost-of-living indices (NCR 1997 = 100) 99 Table Annex B.1: Consumption distribution in the Philippines, 1985-1997 101 Table Annex B.2: Income distribution in the Philippines, 1985-1997 102 Table Annex B.3: Provincial living standard and poverty, 1997 1 03 FIGURES Figure 1.1: Poverty and household size in the Philippines, 1997 6 Figure 1.2: Poverty thresholds and household size 6 Figure 1.3: Poverty and social indicators, 1997 9 Figure 2.1: Annual rate of decline in poverty incidence in East Asia, mid-1 980s to the mid-i 990s 16 Figure 2.2: Pro-poor growth in East Asia (mid-1980s to the mid-1990s)? 17 Figure 2.3: Growth and poverty reduction,1988-97 18 Figure 2.4: Income and consumption inequality, mid-80s and mid-90s 18 Figure 2.5: Evolution of growth, inequality and poverty in the Philippines: 1985-97 19 Figure 2.6: Pro-poor growth in the Philippines,1985-97? 19 Figure 2.7: Income vs. consumption poverty: does it matter? 20 Figure 2.8: Income vs. consumption growth and inequality: does it matter? 20 Figure 2.9: Subjective poverty and seasonally adjusted real GDP per capita 21 Figure 2.10 Subjective poverty lines and real GDP per capita 22 vWi  TABLE OF CONTENTS Figure 2.11: Urban-rural disparities: mean living standards, inequality and poverty, 1985-97 23 Figure 2.12: Sectoral shares in the number of poor and the aggregate poverty gap, 1985-97 24 Figure 2.13: Sectoral development of the economy,1984-98 25 Figure 2.14: Change in poverty incidence across provinces, 1988-97 26 Figure 2.15: Evolution of poverty and living standards across regions, 1988-97 27 Figure 3.1: Public spending on education 35 Figure 3.2: Tertiary scholarships 35 Figure 3.3: Gross secondary enrollment and income, various countries 36 Figure 3.4: Educational attainment, ages 15-1 9 Figure 3.5: Educational attainment by birth cohort 36 Figure 3.6: Educational attainment, ages 15-19, by gender and place of residence, 1998 37 Figure 3.7: Proportion currently enrolled, ages 6-14, by wealth group, 1998 37 Figure 3.8: Average years of schooling attained, by age and income quintile, 1 998 37 Figure 3.9: Mean log hourly wages, by education and experience 43 Figure 3.10: Net present value of lifetime wage earnings, by educational attainment and discount rate 44 Figure 3.11: Public health spending benefits the poor overall, 1998 46 Figure 4.1: Share of rice in total consumption and net consumption of rice, by deciles, 1997 55 Figure 4.2: Housing and land reform: the tale of two 'targeted' programs 58 Figure 4.3: Land redistribution without extension services ? 62 Figure 4.4: Cultivated versus owned-land, 1985 and 1998 63 Figure 4.5: IRA allocations are unrelated to poverty 65 Figure 4.6. Poverty and economic classification of provinces 65 Figure 5.1: Change in the cumulative distribution function due to the crisis 77 Figure 5.2: Percentage change in the cumulative distribution function due to the crisis 77 Figure 5.3: The relative magnitudes of income and consumption shocks 79 BOXES Box 1.1: Choosing a welfare measure 2 Box 3.1: Decentralization, redistribution and the provision of social services 48 Box 4.1. Land reform in the Philippines 59 Box 4.2: The design of a system of intergovernmental grants 66 viii  PROFILE OF THE P 1.1 A quarter of the Filipino populatio about 18.2 mnillion Filipinos, were deemed to b in 1997 (Table 1. 1). The rural povertyincidence at 37 percent while the urban incidence is about 12 pr cent. The national poverty gap index is estim-ated at 6.4 percent which, with a headcount index of 25 percent, implies that on average the consumption of the poor is about three- quarters of the poverty line. 1.2 These poverty estimates are based on data from the 1997 Family Income and Expenditure Sur- vey (FIES), and are constructed using consumption per person as a measure of welfare (see Box 1.1). The poverty line is based on a given standard of living, which is fixed across space and time. Provin- cial povertylines are constructed following the widely used cost of basic needs approach. This involves: (i) setting a food bundle in each province based on the average consumption pattern of a reference group of poor households fixed ntionally in terms of their . per capita consumption; (ui) adjusting this bundle to satisfythe minimumnutritional requirement of 2,000 calories per person per day, (iii) valuing the adjusted bundle at consumer prices prevailing in each prov- inceto derive provncial foodpovertylines;(iv)con- structing the non-food poverty line for ec rv ince as the non-food spending of those hueo4 whose toual spending is in the neighborhodfth food threshold; and, (v) finally deriving the provin- cial poverty lines as the sum of food and non-food - \ poverty lines. The approach fixes the standard of living used for provincial compan'sons but not the composition of the consumption bundle used in each X province. Differences in composition may arise as a result of spatial differences in tastes or relative prices faced by households.'  PHILIPPINES POVERTY ASSESSMENT Table 1.1: Poverty in the Philippines 1.3 The estimates of poverty based on this ap- Headcount Poverty Squared poverty proach are substantiallylower than the official esti- index gap index gap index mates. For instance, the official incidence of pov- (Incidence) (Depth) (Severity) erty for 1997 is 36.8 percent (NSCB, 1999a). The 1997 25.1 6.4 2.3 difference is mostly due to the higher official pov- Rural 36.9 10.0 3.6 erty lines, rather than the use of per capita income Urban 11.9 2.6 0:9 as the measure of welfare in the official estimates. 1998 (projection)* 27.8 7.6 2.9 For instance, the application of basic needs pov- 1999 (projection)* 26.3 6.9 2.5 erty lines (underlying Table 1.1) to per capita in- Note: rhehead ountindexmeasuresthe share opopulation wthconsumption (income) coe ields a headcount of 22.1 percent (Balisacan, levels belowthepovertythireshold Thismeasure gives the prevalence of poverty butis c e silent on howpoorthepoorare Thepovertygapiidexisdefinedasthe meandistance 1999a). On the other hand, the official regional pov- belowthepoveitylineasapropoition of thatline (where the non-poorare countedashaving zerpovedrtygaps),andgivesameasureofthe 'depth'ofpoveityThesquaredpovertf,gap erty lines are 15-68 percent higher than the basic indexis defined asfthemean of the squaredproportionate poveitygaps, is sensitive to used thisReport. higher astfnbutionbelowthepovertfyihe, andretiectsthe 'severityofpoverfyAllpoverty,mea- needs povertyimes uR The sures are exprssedaspercentages 'Projectionsbasedon I997FIES data andgrowth official poverty lines reflect the use of a relatively rates foragriculture, industry and services sectors for 1998 and t999 taken from the national accounts. The projections assume no change in relative inequalities within more expensive food bundle, which corresponds Source Staffestimatesbasedon 1997FlESdataandnatonalaxcountsdatafromNSCB. to the aTerag food bundle within a region rather Box 1.1: Choosing a Welfare Measure Identification of the poor requires the use of an indicator of a household or individual's standard of living. Several such indicators are used in the literature on poverty. One popular approach uses consumption or income as the relevant indicator; this so called 'money metric utility' approach conceives well-being as the ability to fulfill certain preferences which are represented in terms of equivalent income or consumption. Much of the analysis in this report is based on this approach. Income or Consumption? Both measures are used in the literature and by various countries in tracking poverty. There are some conceptual as well as practical reasons to favor a consumption-based standard over one using income. First, income may overestimate or underestimate living standards. If a person can borrow or use his savings, his level of living is not constrained by current income. Even in underdeveloped regions, households typically have some ability to buffer their welfare against temporary variations in income thorough saving or borrowing. Second, a strong case can be made for preferring consumption over income as a broad indicator of welfare based on practical data considerations. It is more difficult to acquire accurate information on income than on consumption. For example, one has to undertake multiple household visits or use recall data to obtain reasonably accurate estimate of annual income whereas consumption over, say, the previous few weeks can provide a satisfactory measure of welfare. Moreover, households may understate their incomes to avoid future problems with tax agencies - a common practice especially among self-employed professionals. The difficulty also extends to imputing "incomes" of households, which consume part of their production, such as the case for the large majority of the farming population. Owing partly to cost considerations, the survey instrument used by statistical agencies to acquire information on households is often short on details needed to accurately estimate "net income" from own-production activities, especially farming. It is useful to supplement income/consumption based measures of welfare with others which are derived from a capabilities- based approach to welfare; the most commonly used ones relate to educational attainment and measures of health. In this framework, education and health are important not only because they influence well-being in the income space but also because they are desirable in their own right. An individual who dies prematurely or suffers from severe ill health is thus deemed poor in the capabilities space. This report also makes use of non-income indicators of well being. Other approaches to welfare emphasize the ability to participate in activities and enjoy living standards that are customary or widely accepted in society (social exclusion approach) and are akin to the concept of relative deprivation. Further, the poor themselves appear to focus prominently on social deprivation, as exemplified by the lack of dignity, self respect, security and justice, in defining poverty. In a participatory study conducted at 486 sites in 23 countries, poor people were asked to analyze and share their ideas of well-being and ill-being. Well-being was variously described as happiness, harmony, peace, freedom from anxiety, and peace of mind whereas people described ill-being as lack of material things, as bad experience, and as bad feeling about the self. The self-rated poverty indices analyzed in this report come closest to measuring this aspect of deprivation. Moreover, the report's discussion of inequality with respect to assets and their returns is also grounded in part in a concern over relative deprivation. The analysis of these wider dimensions of well being in this report is nonetheless limited, for want of readily available and reliable data. Source: WodBanOhk20O0f), Balisacanwf.999b). 2  1: PROFIL E OF THE POOR than the food bundle of the poor in the region.' lute poverty, the poverty threshold vanies from Similarly, the differential between the official and household to household based on their own per- basic needs poverty lines tends to be greater for ception of their povertystatus. The main reasonwhy the richer regions,3 again reflecting the relatively self-rated poverty incidence is so much higher than more expensive food bundles typically consumed the income or consumption-based poverty is that in the richer regions. Since the allowance for basic the self-rated poverty thresholds are generally con- non-food expenditure (i.e., the non-food poverty siderably higher than the thresholds used for esti- line) is tied to the food threshold itself, the higher mating income/consumption poverty Thus, for in- food poverty line under the official approach fur- stance, for the National Capital Region (NCR), the ther translates into a higher overall poverty thresh- median self-rated poverty threshold for June-Sep- old. tember 1997 was PhP10,000 per month, while the basic needs and the official 1997 poverty lines for 1.4 1997 is the most recent year for which the NCR were PhP4,495 and PhP6,077 per month re- FIES data are available.4 However, projections for spectively 1998 and 1999 can be made using these data and the sectoral growth rates available from the national 1.6 There are also very large urban-rural dif- accounts. Assuming that relative inequalities within ferentials in the self-rated poverty thresholds. For sectors do not change and that average consump- June-September 1997, the median urban threshold tion growth for households in a given sector mir- for NCR (Metro Manila) was twice as high as the rors the growth of value added within that sector, median threshold in each of Luzon, Visayas and the projected levels of poverty for 1998 and 1999 Mindanao regions. Since there are urban areas are shown in Table 1.1. The poverty estimnates indi- within these regions, the typical urban-rural differ- cate that with the contraction due to the crisis (a 2.7 ential would be even higher. This differential seems percent decline in per capita GDP in 1998), the inci- to be significantly higher than the cost of living dence of poverty increased in 1998 to 27.8 percent,5 differential implied bythe official or the basic needs while subsequent recovery (a 1.1 percent increase in poverty lines. The official NCR poverty line was per capita GDP during 1999) helped bring the pov- 24 percent higher than Luzon poverty line, 53 per- erty incidence down though still somewhat higher cent higher than the Visayas line and 35 percent than its pre-crisis level. The agricultural sector played higher than the Mindanao line. Similarly with the an important role in both the contraction and the basic needs poverty lines, these differentials were subsequent recovery The growth rates of value 21, 42 and 42 percent, respectively Thus, the ur- added in agricultural, industrial and service sectors ban-rural differential in self-rated poverty thresh- were -6.8, -1.9, and 3.5 percent, respectively during olds is two to five times higher than the cost of 1998, and 6.7, 0.5, and 3.9 during 1999. living differential, and it almost certainlyreflects the higher aspirations of city dwellers. Some of these 1.5 Boththe povertyestirates reported in Table higher aspirations may also be fueled by the rela- 1.1 and the official povertyestimates in turn are sub- tively higher levels of inequality in urban areas; ur- stantially below the estimates of self-rated poverty ban Gini indices of per capita consumption in 1997 based on surveys conducted by the Social Weather were about 30 percent higher than the Ginis in ru- Stations (SWS) .6 The average rates of self-rated pov- ral areas. If urban people aspire for higher living ertyincidence for the years 1997 through 1999 were standards, it is not surprising then to find that the 59.3, 61.0 and 61.7 percent, respectively. Self-rated rural-urban differentials in self-rated poverty rates poverty is based on households responses to the are considerablynarrower (55 percent urban against question as to where they would place their fanily 70 percent rural during March-October 1999) than on a card mnarked "not poor," "on the line," and those implied by the non-self-rated poverty mea- "poor" (SWS, 1999). This is not a rneasure of abso- sures. 3  PHILIPPINES POVERTY ASSESSMENT WHO ARE THE POOR? educational attainment and experience, sex, civil sta- tus, and economic sector of employrnent, at least in 1.7 Povertyinthe Philippines is stillalargelyrural the short term. But the educational attainment of phenomenon despite rapid urbanization in recent the household head is the single most important con- years. The rural poor account for about 77 percent tributor to the observed variation in household wel- of the poor (Table 1.2). Other poverty measures fare. show the same order of magnitude. Within rural areas, povertyis largelyagriculture-driven. Xile ag- 1.10 The traditional characterization of the poor riculture-dependent households represent only 40 is that the poorest of them are the landless and those percent of the total population, the sector accounts dependent mainly on wage incomes (see for ex- for over two-thirds of the poor, simply because ample, Hayami, et. al., 1990). Surprisingly Table 1.3 povertyincidence is higher in agriculture than in any shows that the depth and severity of poverty among other sector of the economy Agriculture accounts the self-employed are at least as high as "wage" for an even higher share of the depth and severity households. In agriculture, the poor self-employed of poverty (Table 1.2), heads of households include primarily lessees, ten- ants, and small owner-cultivators. They account for 1.8 There are pronounced regional differences over 50 percent of the country's poor population. in poverty rates reflecting only in part differential Any serious effort aimed at addressing the poverty levels of urbanization and reliance on agriculture for problem in the Philippines must grapple with both income. The poverty headcount ranges from 3.5 the fundamental causes of underdevelopment in ag- percent in Metro Manila where 14.1 percent of the riculture and rural areas and the relatively slow pace country's population resides, to 87.5 percent in Sulu of structural transformation from an agriculture- province in ARMM (with less than 1 percent of the based-economy to one which is more reliant on the population). Among the regions, Bicol hosts the larg- higher productivityindustrial and service sectors. est number of poor although poverty incidence is somewhat higher in Eastern Visayas and ARMM. 1.11 It is interesting to note that while 12.7 per- cent of the population live in households where the Household characteristics head is unemployed or not working, povertyin this segment of the population is substantially belowthe 1.9 Household welfare vanres systemnaticallywith national average; the headcount index is 25 percent certain demographics, includg the household head's for the country as a whole and only 12.1 percent for Table 1.2: Who are the Poor? Table 1.3: Poverty by Class of Worker, 1997 (Data from 1997) Share among Share in total Contribution to the poor (%) population (%) Population Poverty total poverty' Households living in: Share Incidence Depth Severity Incidence Depth Severity Rural areas 77.4 52.5 Wage earners 52.7 17.6 4.2 1.5 37.2 34.6 34.4 Metro Manila 2.0 14.1 (0.36) (0.11) (0.05) CentralLuzon 5.4 10.3 Agriculture 7.8 43.8 11.7 4.4 13.7 14.3 14.9 Bicol 12.8 7.1 (1.25) (0.47) (0.24) EastrMMisya 60.0 3.1 Non-agriculture 44.9 13.1 2.9 1.0 23.5 20.3 19.5 (0.34) (0.10) (0.04) Houiseholds whose headis: Se/f-employed 46.7 33.5 8.9 3.3 62.6 64.6 66.8 Employed in Agriculture 67.8 40.1 (0.46) (0.16) (0.08) Self-employed 62.6 46.7 Agriculture 32.0 42.1 11.4 4.3 53.9 57.0 59.8 Elementarygraduateorless 75.6 51.1 (0.59) (0.21) (0.11) Male 92.4 87.8 Non-agriculture 14.7 14.8 3.3 1.1 8.7 7.6 7.0 Age 30-50 65.2 55.7 (0.62) (0.17) (0.08) Age 60+ 10.5 15.5 Note Figuresnpaentheses are robos standard errors correcledforsaple desa p effect) Source: Basedon 1997FlES data; Ba/isacan (1999a). Source: Ba/lsacan (1999a) basedon 1997F/ES 4  1: PROFIt F OF THE POOR flects the importance of private transfers for house- Table 1.4 Poverty by Sector of Employment, 1997IM holds with unemployed or elderlyheads. Regression Popultion Poverty Contribution to analysis of deterrnminants of transfers using 1997 data Share Incidence Depth Severity Incidence Depth Severit finds that having an unemployed or elderly head of EmployedHHhead household has a large and significant positive im- Agriculture 40.1 42.3 11.5 4.3 67.8 71.9 74.5 pact on transfers received bythe household, almost (0.53) (0.19) (0.10) all of which are from private sources. With regard Mining 0.6 30.0 10.0 4.5 0.7 0.9 1.1 (4.21) (2.02) (1.15) to unemployment, while the relativelyhigh rates may Manufacturing 7.0 13.5 2.7 0.9 3.8 2.9 2.6 signal certain inefficiencies in the labor market, they (0.90) (0.24) (0.10) do not appear to present an important povertycon- Utility 0.7 9.5 2.4 0.9 0.3 0.3 0.3 (2.17) (0.62) (0.28) cern, in part because informal/private transfers may Construction 7.7 23.1 5.0 1.6 7.1 6.1 5.4 be playing an important safetynet function.7 (1.03) (0.30) (0.13) Trade 8.8 13.5 2.9 0.9 4.7 4.0 3.5 (0.76) (0.20) (0.08) 1.12 Private transfers may be dampening pov- Transport 8.0 13.7 2.8 0.9 4.4 3.5 3.2 ertyfor two additional categories of households that (0.82) (0.23) (0.10) Finance 1.9 3.0 0.5 0.1 0.2 0.1 0.1 are commonly targeted through public programs, (0.70) (0.13) (0.04) especiallyin developed countries: households headed Services 12.5 9.9 2.2 0.7 4.9 4.4 4.0 byfemnalesandtheelderlyPovertyis higherfornmale- (0.59) (0.16) (0.07) HH head not 12.7 12.1 2.9 1.0 6.1 5.9 5.3 headed than for female-headed households in the employeot (0.61) (0.18) (0.08) Philippines, irrespective of the povertymeasure and Total Population 100.0 25.0 6.4 2.3 100.0 100.0 100.0 . . (0.29) (0.01) 0.05 age of the household head. Similarly the elderly Note: 'Includes unemployedoas well as those not working Figures in parentheses are robust (households where the head is aged 60+) have a standard errors (corrected for sample design effect). lower than average incidence of poverty (Table 1.2 Source:- Ba/sacan (1999a) based on f997 F/ES. and 1.5). This positive association between house- those not employed (Table 1.4). While available data hold living standards and female/elderly headship do not allow us to distinguish the unemployed from holds even after controlling for other characteristics those not in the labor force, it is possible to split the (Table 1.6). Both results may be reflecting the im- non-working heads categoryinto younger and older portance of private safety nets in reducing poverty (those above and below the age of 60) cohorts. The in these segments of the population. Regression non-working older cohorts are more likely to be analysis of the determinants of transfers suggests outside the labor force while the younger non-work- that female-headship has a large and significant posi- ing cohorts are more likely to be unemployed. tive impact on transfers received bythe household. However, the poverty incidence for both groups Similarly (private) transfers increase significantlyfor turns out to be very similar: 11.9 percent for the households headed by individuals aged 60+ after younger non-working cohort and 12.3 percent for controlling for pensions. This however should not the older non-working cohort. This is consistent with be construed to imply that poverty is not an issue two observations. First, it is in line with the oft-quoted for women and the elderlyin general, because both statement for low income countries that "the poor these groups often belong to poor households and cannot afford to be unemployed." It is also consis- also because intra-household allocations could be tent with the finding that the rate of unemployment biased against them even within non-poor house- in the Philippines increases with the level of school- holds. ing, and peaks among those who reach but fail to finish college. In January 1997, the unemployment 1.13 The educational attainment of the house- rate among those with elementaryeducation was 5.6 hold head is negatively correlated with poverty sta- percent while it was as high as 12.8 percent among tus, as expected. The poorest households are those those with some college education. Second, it re- whose heads did not receive any formal schooling, 5  PHIL IPPINES POVERTYASSESSMENT although these contribute less than 10 percent to national poverty. It is the households whose heads Pf p W had no more than elementary education that con- ' 50 tribute the bulk - about 75 percent - of total s1.0 0 =. poverty when poverty is decomposed by the edu- 3 x =0. , . . *